Given the recent tariff-driven market mayhem, we wanted to take a moment to share our take on what's happening, how we're positioned, and where we’re headed.
For years, we've been discussing the structural changes unfolding in global markets at OUTLOOK. What we’re saying now is simply a continuation.
At OUTLOOK 2025, we highlighted last year’s extremes, excesses, expensive and unprecedented concentration (U.S. market represented >71% of the MSCI World Index by March-end), and highest foreign investment in the U.S. market — with outflows to Europe and Asia starting to show the cracks in February. The unveiling of Deep Seek was a turning point. Tariffs served as the next catalyst.
We’re witnessing the monumental structural transitions we identified in OUTLOOK 2019 — The Next Decade taking place at a rapid pace. Two key trends we’ve been expanding on in 2024 and 2025 are:
- A Changing World Order — From Unipolar to Multipolar
- Artificial Intelligence — The 4th Industrial Revolution
These shifts are not mere staging posts — they’re expected to be the most disruptive forces of our lifetimes. Their scale and duration far exceed those of typical economic cycles, representing a permanent change that will reshape the global landscape for generations to come.
CREATIVE DISRUPTION:
POSITIVE OPPORTUNITIES IN TIMES OF CHANGE
New innovations or technologies can radically transform existing industries, challenging or replacing established players or products. These disruptions change the way things are done, creating entirely new markets or ways of thinking. For example, the rise of smartphones disrupted the mobile phone industry, and streaming services like Netflix disrupted traditional TV and movie rental businesses. While these disruptions can be painful in the short term, they also create opportunities for innovation and growth in the new landscape.
We’re seeing the rapid acceleration of a new world order and the necessity for new trading alliances. After the U.S. election, markets initially responded positively, anticipating tax cuts and a more business-friendly regulatory environment. Tariff talks were mostly centered on China and whether the new administration will choose to confront, cooperate or compete with the world’s second-largest economy. But that all changed when Trump imposed tariffs on America’s allies, and now the rest of the world. The impact was decisive.
Global stock markets experienced a sharp downturn on heightened fears of recession and an economic collapse on a scale reminiscent of 2008. One of the most alarming aspects of this “correction” was its speed and severity. The S&P 500 plunged 10.5% in just two days. Historically, such steep declines over consecutive days have only occurred three times since 1952: in October 1987, November 2008, and March 2020. In each case, these sharp declines marked the early or middle stages of major bear markets in the U.S. Trump’s tariffs will be the biggest tax increase since the 1960s, possibly even World War II, representing an estimated fiscal tightening of 1%-3% of U.S. GDP.
We’re not surprised by the current commotion. Trump has said from day one that tariffs would bring short-term pain. What gets lost amid the noise is the U.S.'s massive and unsustainable deficit, along with his aim to rectify it.
In the short term, capital could face downward pressure. That’s why it’s crucial to stick to the basics: it's not just about time in the market, but about what you pay. The price you pay at the time of purchase plays a crucial role in determining long-term success.
The current environment is filled with uncertainty around trade policy and the potential for prolonged geopolitical and economic disruptions. It’s unpredictable. If we look back to the 1973-74 bear market, it lasted 90 weeks — a slow bleed. In contrast, 2020’s downturn was much quicker, lasting just a month. Each bear market is different, and conditions may evolve in unexpected ways. We cannot underestimate the current administration’s transactional approach. For Trump, it’s about the best deal. America First. He’s moving fast and breaking things. We are witnessing a once-in-a-lifetime event. While it’s normal to feel scared, it’s during times like these that we must stay the course and keep emotions in check.
We remain committed to evaluating every single position carefully, monitoring global markets for potential breakthroughs. As we’ve said before, we are preparing for — not predicting — the future by focusing on what we can control: building a diversified portfolio of high-quality companies.
PORTFOLIO PERSPECTIVE
We’re pleased to report that, despite recent turbulence, the portfolio has held up relatively well. The average portfolio yield across accounts currently stands at 4%.
Some of our thoughts:
- Our global diversification — a headwind in 2024 but steady anchor over the long term — has provided some resilience in mitigating volatility (i.e. private debt, cash, etc.).
- We sold our position in Vietnam before the market cratered, which proved to be a prudent move as tariffs will hit them hardest. Countries like Malaysia, Vietnam, and Thailand are among the most exposed, while Indonesia, Singapore, and India are more independent where we are invested.
- We raised a healthy amount of cash in February and March (over 15%), ready to deploy as attractive opportunities arise.
- We expect Bird to have reduced exposure to tariffs. They are strictly Canadian, a beneficiary of strong infrastructure spending, 100 years old (lots of experience!), and have a strong pipeline of projects.
- China’s retaliatory stance shows they’re not weak or crawling to the negotiating table. They appear to be willing to endure some pain if it means a better position in the future.
- We’re currently observing the index tracking/passive piggy bank effect in the U.S. market decline: Concentration risk is good on the way up, but not on the way down. Sharon and Brent discussed this in our latest SANDSTONE SPEAKS.
Where are we going?
- We expect to see a continued decline in the USD.
- “Platform companies” are most at risk during this global change. (I.e. Companies that leveraged the internet boom to enhance their profitability. They usually carry out R&D in the U.S., have production facilities in China, generate global sales, and pay taxes in countries with favorable tax agreements with the U.S. Examples include Apple, Amazon, and Microsoft.)
- As we covered at OUTLOOK, we are sticking to short-term local bonds and private credit.
- We are deploying to certain emerging countries, our favourites being Indonesia and Singapore.
- Dividend growth at the right price remains paramount. Dividends provide a stream of cash flow to portfolios. While capital volatility is expected, income will continue.
- Infrastructure will continue to be a focus area.
- Now, more than ever, it’s important to cut out the noise and focus on the fundamentals. It’s what you pay!
Bottom Line
As you start to see a rebound in many of the indices, don’t be fooled. This is standard human behaviour. These are structural, global transitions that many of us have never seen before. Actively managing diverse portfolios while continuing to collect yield and avoid pitfalls will be imperative to success.
As always, we appreciate your continued trust. Rest assured that we are monitoring all market developments and staying focused on navigating this environment thoughtfully on your behalf. If you have any questions or would like to discuss your portfolio in more detail, please don’t hesitate to reach out.