Wayne Baxter
Hello and welcome to the Three Questions podcast, where we dive deep into the world of wealth management and connect you with industry experts. I'm your host, Wayne Baxter, senior executive manager at One Capital Management. If you are someone close to, you are wondering how to navigate the complexities of investing in 2025. Stay tuned. Our topic this week, the three questions Crossborder investors should ask about investing in 2025.

Wayne Baxter
Thank you for taking time to check us out, and if you enjoyed this episode of the Three Questions podcast, please consider liking this video and subscribing to our podcast and YouTube channels. Joining me on this episode of the Three Questions podcast is Steve Colley, Chief investment officer here at One Capital Management. Steve is the chairman of One Capital's investment committee.

Wayne Baxter
He's also a chartered financial analyst, and he's a member of the Los Angeles Society of Financial Analysts. And what we're going to do today is we're going to explore the three questions. Cross-border investors should be asking about investing and 2025. Steve, thanks again for making time to join us. Join us here on the podcast. Great to see you again.

Steve Cowley
Always good to be here. Great to see you, Wayne.

Wayne Baxter
Great to yeah. Great to have you see, lots of you know, I will say this right off the bat. We are not at a loss for topics to cover. And I will say this. We haven't started. I have no idea how long we're going to take. But for those who have just started listening, this is probably going to be one of the longer podcasts we've done.

Wayne Baxter
We have a lot to cover. I think we could do the, the 33 questions podcast today, although we won't do that. But I we have a lot of content to cover, and we probably should just start right off the bat here with the even before we get to the questions with the elephant in the room first. And we all know what that is.

Wayne Baxter
We have a new administration in place here in the United States. We have a Republican president, President Trump. We have Republicans have a majority in the House and the Senate. So putting the question to you, because I know my clients are going to be listening and watching, is, how does this dynamic excuse me that this is a sign Amic impact on CMS investment strategy.

Wayne Baxter
How what is the investment committee talking about, you know, for 2025 that maybe they weren't talking about last year or the year before?

Steve Cowley
Well, and the other thing, Wayne, is you have a little bit of, mini elephant in the room with, Prime Minister Trudeau, stepping aside and, new elections probably coming up in Canada. So it's not just south of the border. We're also seeing it north of the border. And that's going to change the dynamics not only here, but it will change the dynamics there.

Steve Cowley
And depending on who wins and depending on what happens in Canada, it'll probably change the dynamics of some of the things we're going to be talking about, such as tariffs and things like that. So it's not just one elephant. There's two elephants. One might be a little bigger than the other one, but that that one. That's definitely it.

Steve Cowley
So, you know, going to your question about, you know, how does the new administration affect our investments? The simple answer is it doesn't really affect our investments in the sense that we're always analyzing. We're always looking at what's going on. I mean, that's our job is to to continue to monitor situations, you know, be trying to stay on top of all of those things and make adjustments as, as needed.

Steve Cowley
So it's not just new administration. It's, you know, it's tax laws, it's regulatory policies. You know, it's it's it's even a little things such as the fire. Sure. I'm not little huge down here, but little things such as the fires in California. And what does that due to the dynamics of, you know, not only the local economy but but the national economy as well.

Steve Cowley
So the simple answer is not a lot the more complex and and the more reality of it is you have to take into account this is a very big change, especially from the past administration. However, as you and I, when I've talked just privately, I, you know, and back and forth as you come down in my office when we talk, the, the things that people are probably not capturing and we talk about this a lot more is that, yes, there's a change.

Steve Cowley
Yes. There's a, there's a majority in both the House and the Senate, but there's slim majorities in the House, in the Senate. Things don't happen overnight. We have a, you know, checks and balances, as we've seen with the executive orders that are being signed, you know, they're already being challenged in the courts. There's a lot that has to happen before the things that we hear about and that we see in the news actually come to fruition or don't.

Steve Cowley
And so that's where we have to stay on top of things is not just, not just listen to the, the, the, the hyperbola, not just listen to, you know, what people think, but we actually have to see the dynamics and, and what's going to happen. And we have to plan for different contingencies. So so that's why I say the simple answer is it doesn't change a lot because that's what we're always doing.

Steve Cowley
The real answer is Trump's a big deal. And it's a big change. And so we have we're just more on top of the things than we might otherwise be.

Wayne Baxter
I remember one thing, the thing that you reminded me of before, I guess it was right after the election, was that, you know, the fact that the Republicans have a majority, a slim majority is relevant because as a general rule, the Democrats will typically vote as a block on, large bills, and Republicans are a bit more, that's the word divided and.

Steve Cowley
Splintered, little more fragmented, a little bit.

Wayne Baxter
More fragmented. So so it's not easy to round the herd up on that on the red team, to get anything across against anything passed. So the fact that they, if they had a large majority would make a big difference by where we are now. Some of the things that some of the things that need to go through the house might have a harder time passing one.

Steve Cowley
And. Absolutely. And you know, that that still holds true. And I think they're going to be fragmented. The difference between this, election and the last time he was elected is the Republicans were far more fragmented, and there was a whole contingency there that were, you know, Never Trumpers, as they called it. This time, over the last four years, the Republican Party has come more in line.

Steve Cowley
So I do think he has a better chance, even with the slim majority this time, than even.

Wayne Baxter
With the Freedom Caucus. Even with that, he didn't.

Steve Cowley
Even with the Freedom Caucus. They're hurting those cats a little bit better this time around than they did last time.

Wayne Baxter
As they say, you know, more shall be revealed. Okay. So, Steve, we kind of get right to it here. The other elephant, of course, as you know, we have a lot of folks who are listening and watching in Canada, and we have clients here in United States that have Canadian dollar denominated investment accounts. You know, the the, that big nasty word tariffs coming to the, coming to the forefront.

Wayne Baxter
And we're hearing a lot more now. There's a lot of there's a lot of people pounding their keyboards on this topic in both countries. Wall Street Journal had a big article about it yesterday. A couple actually, read an article this morning in the National Post. It was almost like an essay. On all of this. You know, I have clients emailing me of obviously saying, you know, how does this affect our investment accounts?

Wayne Baxter
35,000ft level here at this point, what is your what's your initial take on all of this?

Steve Cowley
The initial take is that there's a lot of, bluster. There's a lot of talk, there's a lot of postulation, there's a lot of speculation of what's going to happen. Interestingly enough, with the executive orders that he signed the first, first couple of days here, tariffs are not included in any of those. Yes. That's that's that's a real positive sign for those that are concerned about the tariffs.

Steve Cowley
They're coming. Don't don't get me wrong. They're coming. He's using them especially in Canada and Mexico. You know, the threat of a 25% tariff. And, you know, I, I've read some analysis on that. If he actually instituted a 25% tariff against the Canadian imports, that's recession time for for Canada. I don't think we're getting there.

Steve Cowley
If you were to if I you know, if you were to ask me my opinion, I don't think we get there. I think it's just a big stick trying to get the Canadians and, and and the Mexicans to come to the table, really negotiate that that us.

Wayne Baxter
Us. Yeah.

Steve Cowley
Yeah. So I think it's really a lot about that. A if he institutes a 10% across the board to everybody, which is one of the things he's talked about, which includes everybody in the world. It's a it hurts the Canadian economy, but it doesn't push them into a recession. It just slow some things down. At the end of the day, it's too early to tell.

Steve Cowley
It's too early to say. I can tell you what I think. I can tell you where I think it's going. I don't think it's going to be the the really onerous. I don't think it's going to push the economy into a recession in Canada. I don't think any of that's going to happen. But even a little bit of tariffs on Canada will probably weaken the currency a little bit.

Steve Cowley
And and we've talked a little bit privately, you and I about currency. And, and I do think that that would and that actually it as interesting is, is if the tariffs go into place and the Canadian dollar weakens, it actually offsets the effect of it to both countries. U.S. consumers won't be paying more because the the US dollar's worth more in Canadian dollars.

Steve Cowley
Canadians will still be selling at the same because it's like I said, it's an interesting thing that if the currency right now is affected today because occurrences already moved about 5% in Canada, a 10%, tariff would only affect the Canadians, marketplace by 5% of that. So it's a relatively small piece that would happen. So again, a 10% tariff would probably be this is my my thinking probably short term.

Steve Cowley
I don't think he wants to punish Canada. Canada's our biggest trading partner. And they're super important to us. And we're important to them. You know, a lot of it's interesting because a lot of the goods that go across the border, you know, Canadians exporting to the US are stuff we send to you in the first place. You worked on it and then send it right back to us.

Steve Cowley
And so I guess.

Wayne Baxter
It they send you off materials that you've worked on and send it back to us.

Steve Cowley
Exactly.

Wayne Baxter
As being accurate. This is me with my putting my Canadian hat on here right.

Steve Cowley
So so there's there's such a symbiotic relationship there that it's not in anybody's interest to be adversarial. In that sense. Now, again, as I mentioned, the small elephant in the room, the Trudeau administration and the Trump administration would butt heads.

Wayne Baxter
Yeah, they're not going.

Steve Cowley
To have we're not going to have that. It's actually it doesn't matter who gets elected, conservative or liberal in Canada is going to be a better relationship than it would have been had Trudeau not stepped aside. That's just the way it is.

Wayne Baxter
I think there's a perception thing where the president is saying that the US is subsidizing the Canadian Canada because of the of the of the difference between and exports that.

Steve Cowley
Yeah, that.

Wayne Baxter
That that's a, that's a bit of and that's, that's I read an article about that today. And on the Canadian side in there, they take quite a lot of offense to that perception.

Steve Cowley
As they should, as they should.

Wayne Baxter
But you know. Yeah yeah. Yeah.

Steve Cowley
So and again there's really there's really three things that he's worried about. It's it's the deficit. So Canadians are, are you know, in a surplus to the US. Right. He'd like that to balance out a little bit. Again, that's neither here nor there because, you know, capitalism and where were the best product is should be.

Steve Cowley
That's that's what you're supposed to do. I mean, if we're buying more from Canada, that means you're producing. Canadians are producing more that we want, and that's a good thing. The other thing is, is, you know, he really does want to stop, the immigration, again, it's more of a southern border, but there's still some in the northern border.

Wayne Baxter
And also the fentanyl is also.

Steve Cowley
Yeah, the fentanyl is coming across, but also.

Wayne Baxter
The Chinese saber rattling too.

Steve Cowley
Exactly. And the third piece is, he doesn't think the Canadians are spending enough on defense.

Wayne Baxter
And he's not because of that.

Steve Cowley
Because they can they can rely on the United States for for a defensive pact on that. And I read a piece and somebody said, you know, the next administration up in Canada could wipe all that out by, spending more on, on, their military by buying U.S. goods like that, that, like, in one fell swoop.

Wayne Baxter
You could kill two birds with one stone. You increase your military and increase your imports at the same time.

Steve Cowley
And you now have more, you know, capability of monitoring the border. Like I said, it's it's it can be a win win. That's why I'm not as concerned today. And we need to monitor it. Like I said, you never know what's going to happen. These are mine. But I don't look at it as a long term real negative because I just don't think the 25 that's a that's his big stick to negotiate a that that's who he is.

Steve Cowley
That's what he does. And the 10% would probably come off shortly thereafter as they work out some agreements and, you know, increased spending and buying some U.S. military hardware and things like that.

Wayne Baxter
Okay. Well, you know, we're just getting started here. I know we're going to talk more about about portfolio management here in a moment. So,

Steve Cowley
Those a part of the 33, those are part of the 33 questions you're going to have.

Wayne Baxter
Are you ready to. Yeah.

Steve Cowley
We're almost.

Wayne Baxter
There. Almost. It seems yeah, I would, I would I read an article in the Wall Street Journal last night just before I, shut things down and, for the night. And, the comment was that it would appear that they want to get the, Usmca negotiations started early. Yeah. And, you know what's really in play on that?

Wayne Baxter
Apparently, from what I read and again, I guess the Wall Street Journal is a fairly reliable source. Was the, was the auto auto agreement was a part that they seemed to be very eager to address, which.

Steve Cowley
And it's it it's interesting because that that that piece of it while Canada and the US trade quite a bit back and forth because Detroit's right there in that piece is really more focused on the Mexican side of things. There's he's more worried about the the auto side in Mexico than he is in Canada. I mean, it all comes together, but that the Usmca has to be I mean, the negotiations going to take place in 2026, with or without a change.

Steve Cowley
He's just going to try to do it now. He just wants to push it ahead of here. Yeah.

Wayne Baxter
All right. So enough on tariffs for now. We solved nothing, but I hope we gave our, our listeners, our clients, a little bit of a sense of ease here. On that note, for an hour at least, said I get more shall be determined here. So on another episode that we did last year, Steve, we discussed the benefits and the risks of owning Bitcoin ETFs.

Wayne Baxter
I'm sure you remember that episode. I will note that, you know, President Trump is talking about taking a lot more of a favorable stance on crypto ownership in general than, you know, the Biden administration. And Gary Gensler, head of the SEC, you know, not really crypto friendly, say the least. So does the president's view on crypto change how one capital will approach including crypto in our clients investment strategies going forward?

Wayne Baxter
He is currently we have no exposure.

Steve Cowley
Right.

Wayne Baxter
So your thoughts, we haven't even get to the three questions yet, by the way. We're just we're just priming the pump here.

Steve Cowley
Exactly. On the crypto side of things, the answer, well, crypto's complex, as we talked about in our meeting, and there's a lot to that. And I would refer people back to that episode as well, because, there's a lot of good topics that we talked about that, it doesn't affect how we think about cryptocurrency.

Steve Cowley
Again, the concerns we had before are still valid. The notion that, you know, it's going to be a more friendly environment to crypto, that's that's probably a given. That's what, you know, Trump has talked about. It's the people he's putting in place. But but the value of crypto hasn't changed just because somebody likes it versus somebody who doesn't like it.

Steve Cowley
You know, they're, I'm a free market guy, and I'm, you know, I have a tiny bit of libertarian bent to me, which is what I like about Bitcoin, as we talked about last time, but at the same time, I'm very pragmatic and it's not. Getting that value proposition is not there for me and not there for us.

Steve Cowley
Because, you know, what do you have at the end of the day, you've got, you know, you've got this algorithm which is, you know, a Bitcoin or Ethereum or, you know, one of these other, these other, cryptocurrencies. And, and there's not a store of value, there's not a fiat currency behind it. You know, as we talked about currency, typically, what do you want with a currency.

Steve Cowley
And we talked a lot about with the Canadian currency versus the US dollar is you actually want stability so that so that a dollar U.S is worth, you know, $1.40 Canadian today. But you don't want that dollar 40 to go to two or to go to, you know, 90 and, and bounce all over the place because then all of a sudden it's, it's very difficult to do trade when the prices are bouncing around like that.

Steve Cowley
So as a currency it's not a great store of value. You know, where people are using it is, you know, again, a hedge against uncertainty, a hedge against governments head against fiat currencies because we're running a massive deficit in this country. You know, we've got what you said. I get why people are nervous about the US dollar.

Steve Cowley
And, and other you know, again, what's happening in Europe, what's happening in Russia, what's happening. I get why cryptocurrencies have an appeal to a lot of people because you're outside of that realm. You're you're less exposed to the to the volatility of governments and, and regulatory agencies and things like that. But as a, as a true store of value is us as investors.

Steve Cowley
It's not there for me. It's a speculative instrument and it's a hedge against other things that we're not, you know, putting in our portfolio at this point again. And, you know, again, I suggest they go back to that podcast because, you know, how you buy crypto is you buy the actual crypto or do you buy an ETF? Do you buy and remember an ETF?

Steve Cowley
You're not owning the crypto. You're owning somebody else, who's putting a basket of them together. And it's just like a lot of, you know, hard, hard asset ETFs. What's behind the crypto ETF. You know, is it really crypto or is it is it futures and options on those cryptos. And then if you do go into the crypto market yourself, if you're buying less than a single coin, you're actually having to go to a third party to buy a partial.

Steve Cowley
So somebody else owns the coin, splits it up for you and sells you a partial. So you've always got a middleman in between there. So crypto gets pretty complex and pretty complicated and and and like I said, it's not a market I want to be in because it just adds a layer of complication, complexity that, that we don't need in the portfolio because it's not serving us.

Steve Cowley
What we're trying to do because, again, the store of value, which I don't see, the, the I don't have the, attraction to it that so many others do.

Wayne Baxter
Well, I think the term that you use, I think is, from my, my sort of stance is, you use the term speculative, and that's my take on it. I'm sure there are advocates that have a different point of view and they're certainly entitled to that. But for the type of portfolio management service that we provide, I think we just adding a speculative element to the portfolio, at least at this point in time, you know, time passes and things change, Steve.

Wayne Baxter
And we never know. We could be sitting here five years from now going, you know, we need to have, you know, two, three, 4 or 5% exposure because how the, how the circumstances change. But I think at this point it's purely speculative. And whenever a client comes to me and ask me, you know, what I think about it at the high level, I say, well, you know, you know, if you want to put ten, 15, $20,000 into, and into some kind of crypto, go ahead.

Wayne Baxter
But, you know, be prepared. You know, it could drop double, triple or it could go to zero. I mean, you had to be prepared for all possible outcomes.

Steve Cowley
Right? And that's what we talked about as a matter of fact, last time at, I agree with you there 100%. Again, one of the things and you actually hit it, you know, three or 4 or 5 years down the road as it as it develops, just as things do, as investments develop, as, you know, as stability comes into it and, and it works itself out, maybe we do at it, but, you know, one of the things I'm notorious for around here is being being slow because I like things that work and they always work.

Steve Cowley
I don't like things. One of my sayings is I don't want something that's going to work and tell. It doesn't work because I don't want to be holding on when it doesn't work. Yeah.

Wayne Baxter
Thank you. Another term uses the greater fool theory. I think that's when I've heard that one bounced around the office more than once. Okay, Steve. Guess what? We finally made it to the segment. My questions of all three questions here. And these are the three questions Crossborder investors should ask about investing in 2025. I say cross-border because we're talking about Canadian domiciled and US domiciled investors.

Wayne Baxter
And in our case, we're a unique one. Capital is really unique in that we're have we have the ability to trade securities in both Canada and the US and in both US and Canadian dollars in both countries. So definitely cross-border. So here we go. Question number one for my friend Steve Kelly. Question number one. Are you as large cap stocks overvalued.

Wayne Baxter
And if so is it time to take some profits. And if so, will the rebalancing approach differ for qualified versus non-qualified portfolios in the US and registered and non-registered accounts in Canada? I know it's a mouthful, but the floor is yours.

Steve Cowley
So we'll start with it. We'll start with the overvalued, undervalued. Think. On the mean, one of the one of the ways people value stocks is a price to earnings ratio. So it's the price versus you know, it's how many multiples of the earnings as a company have. So company earns a dollar and the stock is trading at 20.

Steve Cowley
That means it's trading at 20 times that dollar that it's turning. That's what a price to earnings multiple is. Historically the and I'll use the S&P 500 as our, as our benchmark and as our proxy. Historically the for the last five years, the S&P 500 has traded right around 20 times earnings. If you take that back a little bit longer, you go 15 years versus the last five years.

Steve Cowley
That number is more like 17.5 to 18 times earnings. Currently the S&P 500 is trading at about 26 times earnings. So when you look at that you say oh it's up there. It's the valuations are higher than the norm or the average over the last five years. But it's not outside of you know we talking standard deviation just statistics.

Steve Cowley
It's not outside of the norm. It's at the higher end. But it is not outside of the normal valuation ratio. It's just at the high end. But here's where and I think we've talked about this in one of our other podcasts, you know, the magnificent seven stocks that have been, you know, have been really the great performers, you know, Nvidia, Microsoft, Amazon, you know, those companies that have done really well, if you take those seven stocks out of the S&P five I.

Wayne Baxter
Changes that equation significantly on valuation.

Steve Cowley
Goes from 26 times to 20 times earnings, because those seven on average are running around 38 times earnings. So you can see how they have. And there's reasons why stocks traded higher multiples than others. You've got higher growth rates. You've you got prospective new customers. There's lots of reasons why a company trades at either end times earnings or 30 times earnings.

Steve Cowley
So I'm not saying that they're out of bounds either because they're high but on average. So you take those out and also sudden the S&P 500 right back to where it should be. Well I shouldn't say should be. Then that the average over the last five years at 20 times earnings. So it's not as overvalued as it might at first blush up here.

Steve Cowley
That said, not lots of stocks have done really well. We own I think we own six of the seven stocks.

Wayne Baxter
I was going to say, except you took the words out of my mouth. We own six, so we have six.

Steve Cowley
To seven and they're the only company we don't own is Tesla. But everyone else we own within that magnificent seven. So some of those are run. And we were we were early, as we've talked about on another episode, we were early with Nvidia. So we've got just massive gains on Nvidia. So the answer is should we take some profits.

Steve Cowley
We do on a regular basis. That's what part of our rebalancing process where we're trimming off the winners looking for opportunity. You know, for that money to go in that's I mean it's the old adage of buy buy low, sell high. So when they run, stocks run, you take a little off the top, you're actually selling high and you're looking for where the value is now.

Steve Cowley
And it's usually buying low. So that's what our rebalances are doing. Now. We're not to the point where we would take, you know, a a massive restructure or a really hot our back, our holdings if we did. And it actually kind of is the second part of your question, would it be different for registered versus non-registered qualified versus non qualified accounts?

Steve Cowley
It's actually a great question. And it's one that we've discussed many times here. You know internally at One Capital Management with our portfolio managers. Because if you've got and I'll use Nvidia as an example only because everybody's.

Wayne Baxter
More so it's the most incredible growth story.

Steve Cowley
Exactly.

Wayne Baxter
And then we started off at one. We started off with like half a percent over. And it's like two and a half or something.

Steve Cowley
Yeah it's it's it's it's out there in some accounts and we've got, you know on the, on the high end, we've got, you know, 2 or 3000% gains in this stock. So it's a huge gainer. So now here's where a registered versus non-registered or a qualified versus a non-qualified, you might have a little bit difference in your in your strategies.

Steve Cowley
Because when you've got a big gain like that it's going to be all capital gains. It's 20% in the US. It's it's half the rate of the your ordinary income in Canada. So you've got a favorable rate for capital gains. But if you think about it, I mean in the Nvidia case, you know, you're basically is 100% the hundred percent gain on that.

Steve Cowley
So if you sell a $100 it's mostly all taxable at that point. So if the stock's trading at 100 and it's not it's trading much higher. But if you're starting at 100 because of because of taxes it would have to drop below 80 for you to, to have made a good trade. So if the stock goes from 100 to 90, which is a 10% loss and then rebounds, you're better off holding it in a taxable account.

Steve Cowley
In a nontaxable account where taxes don't matter, you can be a little bit more aggressive on those those trades. So it's actually a great question. And most people don't ask that because they only think about, you know, what do we trim stocks. The answer is we we will and we are more aggressive on the trading side of things.

Steve Cowley
Trimming on those non-registered are the top of the register or the qualified accounts because there's no tax consequence. Immediately it's down the road. So you can be a little bit more aggressive at realizing gains there because there's no tax consequence of it. If it's in a taxable account. We look at the you know, what is the difference between and I use Nvidia because again the gain is so large that it's it's the stock has to drop over 20% to break even on your trade.

Steve Cowley
Now another company that had, you know a 100% gain. Now you only have 50% of it. This is taxable. So if it drops 10% you've got to break even trade. So you can see how it depends on the size of the capital gain, whether you're going to change how you trim or not. So again I'm not saying we're in for a 20% correction or even a 10% correction.

Steve Cowley
If we were, that conversation would actually come into play. Where do we trim? How do we trim? What do we do?

Wayne Baxter
If we want to keep an eye on what's going on over in Taiwan? Steve.

Steve Cowley
Exactly.

Wayne Baxter
How could be an interesting story. Okay. Thank you for getting that one cleared up. Question number two. And I'll just say right off the bat, you know, one of the things I really appreciate my clients is, you know, they pay attention. And one particular client review meeting I had at the end of last year pointed out to me, before I get a chance to point out to him about how, overall, small and micro-cap stocks seem to have underperformed in 2024.

Wayne Baxter
And I was, I was suitably impressed that he was following along as closely as he was. So, with that being the case, what is the strategy? For the for the micro and small caps? And also I'm going to throw a second part into that. What role do you see alternative investments at play in 2025. And and add on to that not just here in the US but also for clients in Canada.

Wayne Baxter
Now, what how do you see all of this unfolding?

Steve Cowley
So your client was very astute. Yes.

Wayne Baxter
That was really that was a good one. That was an eyebrow raiser. Like somebody actually paying attention to them, to the minutiae that.

Steve Cowley
Yeah, to the components of the at the investment portfolio. And again, you know, one of the things that I want to talk about first is you the reason that you own multiple asset classes and sizes and things is for diversification because you want low correlated assets, meaning they don't move at the same time. So so owning something that underperforms is not necessarily a bad thing.

Steve Cowley
As long as it's going to at some point outperform so that you get the benefits of the diversification. So, so the reason that you own different stocks and, you know, you don't own just large cap U.S growth stocks, which have been the top performer is because they do have corrections and sometimes they're not so top performers. So that's what diversification is all about.

Steve Cowley
It's it's spreading the risk and and having assets that don't move at the same time. So you want to have asset again having a piece of your portfolio that doesn't perform as well as another piece. That's okay because that's part of diversification because at some point they'll reverse positions.

Wayne Baxter
Reversion to the mean, I think, is the term that we've used. Right, Steve.

Steve Cowley
Exactly. There'll be a reversion to the mean. And so so you'll make that up. And over time, that diversification gives you a, a smoother ride and a, you know, less bumps in the road, if you will, less volatility. So when the market goes down 20%, you don't go down quite as much. When the market goes up 20%, you're not going to go up quite as much as well.

Steve Cowley
But because you smooth that right out at the long run, you actually have a better, total return outcome. Yeah. So so I wanted to put that in there first because there's a reason why you own these things. Now, it's a great question because one of the things that we did in this last year is we pulled the Micro-cap out of our portfolios when we sold them out, across the board, because those companies.

Steve Cowley
Long answer. Because what's happening is companies are staying. And it actually goes to your second part of this question. Where does private equity come into play? You know, the small companies, historically, the way a company would raise capital is you, you know, you build something in your basement, you go to your friends and neighbors, you'd ask for money that help fund it, and then you get to a certain size and you just needed capital to grow your company.

Steve Cowley
So you would go to the so the public markets, the capital markets, and you do an initial public offering, and you'd offer those shares to the public. We buy them in the, in the initial public offerings, and the slow, slow cash would come into the company and they would be able to be grow. And again, going back 20, 30 years, that's the way things worked, you know, regularly.

Steve Cowley
And and 70% of those companies failed. But it was part of the mechanism of getting capital into the hands of entrepreneurs that were building new companies and things like that. Well, the world has changed over the last 20 years, where there's so much more private capital available that you don't have to publicly, issue your stock. And on top of that, the regulatory environment has gotten way more onerous.

Steve Cowley
So if I'm if I'm a company starting out, I don't want to be public because I don't want to be under the scrutiny of the SEC, of the FTC, of the you know, I you said there's the regulation has gone gotten so expensive for these public companies that it's hard to do that. So they're staying private far longer.

Steve Cowley
So what's happening with the small and mid-sized, the small cap and the micro-cap companies that are public. And it's not a knock on on all of them, but there's a lot of them that aren't very are very profitable. They got they're they're just not doing very well. And that's why they've underperformed because so many of those companies are now private.

Steve Cowley
And so they're.

Wayne Baxter
Just staying private.

Steve Cowley
Long staying private. They're staying private longer. Now it used to be that they stayed private for about 6 or 7 years. Now they're staying private for 11 to 14 years. You can see that's up. And their.

Wayne Baxter
And their.

Steve Cowley
Their.

Wayne Baxter
Market and their, their their value. I mean, back in 1990, the typical company that went public was like 450 million, a 450 billion or 400.

Steve Cowley
And 50 million.

Wayne Baxter
50 million prior to me. And now it's all okay. So they're 200, 2.5 billion before they go public.

Steve Cowley
Exactly, exactly. So, so that has changed the nature. And so, so one of the things we're doing at One Capital is again, we took the micro-cap out this last year. On the small mid-cap size, we're actually in the process of, of launching a more actively managed ETF that we'll be using in the portfolios. That's going to be coming shortly.

Steve Cowley
So that we're, we're going from a more passive approach, which is what we did. We just were using the indexes before in the small and mid-cap size, and we're going to become a little bit more active. We're going to have active management actually selecting companies. And that way we can weed out a lot of these unprofitable companies that are just in the index.

Steve Cowley
So so we're making some changes at one capital that will add active management to that, so that we can weed out the companies that we don't want that aren't profitable. That will be coming shortly. The reason has been a little bit slow in coming. And it's because we can do it. What's called a 351 exchange, where we can exchange existing holdings that have capital gains into the new ETF without having to realize any capital gains.

Wayne Baxter
Okay. Hey, I have a question. Just a follow up. Now we're going to talk about alternatives. Now we added alternatives. Now this is a solution that's accredited investors are eligible to invest in and as a rule, accredited investors, as an individual who has, I guess, an income of over $200,000 a year or $1 million plus of liquid assets, or I think it's a fact.

Steve Cowley
It's $1 million excluding their home. So, I mean.

Wayne Baxter
Excluding, liquid assets like liquid assets or I think it's a for a couple, it could be 350 and, and say, I think $1 million of liquid assets now that has already been in place if you're in the US.

Steve Cowley
Yeah, we've added it, we've added to the U.S. So that's the other side of the Microcap that we took out. The reason we took the micro-cap out is because we added the private equity, those companies that are staying private longer, we wanted to be we still wanted to participate because those that's where there's a lot of growth coming in the private equity fund that we that we brought out, it has private equity, has private credit, and it has some private, infrastructure all within that.

Steve Cowley
It's,

Wayne Baxter
I've run the state.

Steve Cowley
Exactly.

Wayne Baxter
So, so is this something we're going to be adding? Is this something we're going to be adding to our Canadian.

Steve Cowley
Yes.

Wayne Baxter
Accounts.

Steve Cowley
Yet we're we're just finishing up the negotiations to, to open it up to Canada. It'll be the same qualified investors that the, that, that qualify for it. It should be. We're just finishing up the regulatory and the and the filing fees. I, you know, we just we're negotiating a few things with them, so that is imminent.

Steve Cowley
It's coming soon. We'll be able to add that to the portfolio for the Canadian domiciled investments as well. So we've got it for the US domiciled. We'll be adding it to the Canadian domiciled investment shortly.

Wayne Baxter
I'm going to really go out on a limb here, Stephen, and put you on the spot, and you're completely off the hook here if you can't confirm. But I was just curious. As you know, we have clients in Canada with with a Canadian custodian that have U.S. dollar investment portfolios. Will that small cap, ETF you've been talking about be eligible in those Canadian portfolios?

Steve Cowley
Yes.

Wayne Baxter
U.S. dollar Canadian.

Steve Cowley
It will be a U.S. actually, both of them that the the private equity fund and the small mid-cap will be U.S. dollar. We will be able to again, we'll be able to hedge some of that if we need to, because again, we'll talk a little bit about currencies.

Wayne Baxter
Well, yeah, we're going to get to that.

Steve Cowley
Yeah. Exactly. Part of our process is also to, you know, make sure that, you know, we don't overload U.S. dollar for Canadian investors. You know, right now it's a great thing. It's been it's been it's been fantastic for us in the last couple of years. At some point reversion to the mean. Right. Reversion to the main the Canadian dollar is going to strengthen at some point.

Steve Cowley
Not that I are we not tomorrow, but at some point the Canadian dollar will strengthen again.

Wayne Baxter
I am telling you, I remember well, I was back in my days in Canada, with my, back at IPC day days. Our portfolio models were 20% Canadian, 20% US, 20% international equity side. Right. For a 1640 portfolio.

Wayne Baxter
And this one particular year, the Canadian dollar went through the roof. That year, the S&P 500 did 14%. And a pardon me of stand corrected did 7%. Our our U.S. equity portfolio is at 7%. And the return that year -7%. Yeah because of the forex. Yeah. So I know exactly what you're talking about. So adding a hedge on I would have solved that issue.

Wayne Baxter
And so that's a anyway we'll get to that in the side.

Steve Cowley
I just I could I know that very well because we were we were really just starting our Canadian investments at the time. And there were, there were some opportunities that I fortunately did not take. There was a big spread between us, interest rates and Canadians and rates at the time. And had we gone U.S. denominated interest rate, and that was how it would have been.

Steve Cowley
It would have been quick. We never would have got off the ground in Canada. Unpleasant. So currency is something that, you know, you have to pay attention to. So these are going to be US dollar denominated investments, but we will have the ability to put hedges on them if we need to. Okay. When the time is right Steve.

Wayne Baxter
Excellent. Great job Steve Kelly's with us. He's the chief investment officer here at When Capital Management. And we're answering the three questions cross-border investors should ask about investing in 2025. It's not I don't know, I guess you could say in a way it's usual by a bit of an unusual year, what's going on? So we're going to get to our third and final question here, Steve, what is having the most impact on the Canadian equity market on Canadian equity investors?

Wayne Baxter
Is it the lower Canadian dollar? Last I checked, it was below $0.70 US hovering somewhere around, 69.6 cents. The last I checked is it the lower Canadian dollar? Is it the lack of investment opportunities? And, I have a follow up question on that, but we'll get to that question and sort of a sub question. But let's that'll be first time for you.

Wayne Baxter
Let's get to the first part of this and then I'll, I'm going to come back and hit you with another one here. Before you wrap up.

Steve Cowley
Okay. Well, the, I'll give you the super simple answer, and that is. Yes.

Wayne Baxter
All of the.

Steve Cowley
Above. All of the above. Yes. Yeah. So the the the weak Canadian dollar. And part of that is not necessarily Canada's fault. It's just that the U.S. market has been stronger, the US dollar has been stronger. The threat of tariffs has has pushed the US dollar up. So that US dollar strength is not a negative to Canada, nor is it a negative to the Canadian dollar, because historically we're, you know, with with oil prices where they are, with, you know, the energy exports are coming down the US, the Canadian dollar would be higher.

Steve Cowley
So again, if you just use those two to variables, which historically we used to be able to say, well is doing well, Canadian dollar is doing well. Well it's doing poorly for, you know, use.

Wayne Baxter
We had a petrodollar way. We had the petrodollar.

Steve Cowley
We we don't have that anymore. And so.

Wayne Baxter
At least for.

Steve Cowley
Now exactly. At least for now. And so that that weak Canadian dollar is not helping. Because historically it would be a little bit stronger today than it, than it is. You've got Trump coming in, which again strengthens the US dollar based on multiple things. And then you have a very strong U.S economy relative to the rest of the world.

Steve Cowley
Again, strong is a relative term because in Europe the economies are there. You know, they're eking along in Canada. You know, Canada really flattened out and their economy was fairly flat for, for a big part of last year. And it's now picking back up, but it's growing at about 1% based on the last quarterly numbers. So the Canadian economy has you know, it's it's slower.

Steve Cowley
There's not as many opportunities into it. Again, the multinational you know, the global effect is having a you know, there's so many U.S. companies that are buying Canadian companies, Canadian companies buying U.S. companies. And so there are less investment opportunities in Canada than there were just a few years ago. Some of those companies have, I mean, because in Canada, companies have merged and there really haven't been new companies that, have filled the void, if you will, of those companies.

Steve Cowley
And so you're actually having fewer Canadian companies that are investable than we had just even ten years ago, 15 years ago. So all of the above is happening. And I'm I'm thinking that Shoppers Drug Mart and, was the other one that merged with Shoppers Drug Mart. Was it Loblaw and shoppers that merged?

Wayne Baxter
I will defer to you.

Steve Cowley
I can't recall 2 or 2 of the big Canadian, you know, food stores merged and it became one when that took out a whole, you know, one company completely gone out of the investable universe, and nobody filled the gap by having another grocery store come up and take their places. You know, so there's consolidation has happened in Canada, and it's shrunk the base and the pool of securities that you can buy.

Steve Cowley
So there's actually been an increase in securities in Canada, but it hasn't been new companies. It's been ETFs that have filling in the void. So you're getting more and more ETFs or you're getting more companies or investment opportunities. But they're just pooled funds not individual companies. So there's a little bit of that as well. It's happening in Canada.

Steve Cowley
You're just losing a little bit that opportunity to invest in some of those things.

Wayne Baxter
You know. So to follow up with that, I guess the question I would I know we talked about this again, going back to our somewhat frequent conversations that we ended up having, the thought of potentially, you know, reducing within our client portfolios overall for our Canadian domiciled accounts, the idea of potentially reducing the Canadian equity exposure, or is that something you're considering seriously considering?

Steve Cowley
Yes. Yeah, we are, because a lot of the things I just talked about, there's there's more opportunity, other places. And again, like I said, not a, not a knock on Canada or anything else, but there's there's more growth other places and multinational companies, than, than there are in Canada. So there's a little bit more opportunity outside of Canada.

Steve Cowley
And if you, if you stick with the, you know, with our full investment IRR, the amount of investment that we have in Canadian dollars in Canadian companies, we're missing out on some opportunity. So the answer is yes. We're we're seriously considering shrinking the allocation that we have to Canadian, large cap companies and increasing our, you know, to us and multinationals.

Steve Cowley
What we'll do. And again, this goes back to the currencies that we talked about, is when you do that, you expose yourself like we talked about, you know, that year that you said where the S&P was up seven, but the Canadian investor was negative seven? I mean, that currency can have that big of an effect. So even though we will do that and we we have the ability to hedge that back, we have the ability to use hedged ETFs.

Steve Cowley
We have the ability to put hedges on ourself. So so the answer is yes. We will probably move shrink our Canadian large cap exposure a little bit, increase our U.S and our your multinational a little bit. But we won't sacrifice that the currency for that will be very very mindful of the hedge so that we don't get caught in one of those where the Canadian dollar runs and all of a sudden we have great performance, but we can't get it.

Wayne Baxter
You get you get down to the benefit. Right.

Steve Cowley
Exactly. We gave it all the way because the Canadian dollar got stronger.

Wayne Baxter
Okay, I am going to go in a little bit deeper into the weeds here. So we have, as you know, many clients that own U.S domiciled investment accounts in Canada. Now, we have a lower Canadian dollar. Most of these cases are exception, but most of these cases are IRA accounts registered. The right qualified accounts. The people who've lived in the United States for many years have moved back to Canada.

Wayne Baxter
They have these, significant amounts in IRAs, for those types of clients. Is this an opportunity to start thinking about converting to CAD? In other words, going from our US dollar model strategy, individual positions to our Canadian model strategy, we can do. That's one of the great things about capital. So we can have a US dollar, you know, account at a US custodian.

Wayne Baxter
We could use a Canadian model. There is this is a time for that. In your opinion.

Steve Cowley
That's a great question. And if I had a crystal ball that was super clear and like, you.

Wayne Baxter
Were Carnac the Magnificent.

Steve Cowley
And then I would hold that and hold the card to my head. I can answer it for you. But that said, the Canadian dollars is is really cheap relative to the US dollar, so it's not a bad time to at least start that process. I wouldn't flip 100% because I think there's still more opportunity to come.

Steve Cowley
I think with tariffs, I think there's a few things that that might, you know, hurt the Canadian dollar relative to the US dollar might push it down a little bit more. Again, those are short term events. I wouldn't I'm not I wouldn't try and time it because you can't time it. So what I would do is I would say it's a it is a very good time to start that process.

Steve Cowley
I would not flip the portfolio 100% today, but I might start working it that way. You know, add a little bit in, add a little bit and as as we go forward, we're the the macro dynamics still favor the US dollar over the Canadian dollar. The macro dynamics still favor the US market over the Canadian market. So that's where I wouldn't flip it today.

Steve Cowley
We still have a run ahead of us. But at some point people are going to recognize that, hey, those Canadians are doing it right. And they've got some pretty cool stuff and they're selling us an awful lot of oil. And, that currency is just undervalued. Not today, but it's coming.

Wayne Baxter
You know, I think what you just said very last kind of leads me to, pardon the pun, Trump, the, the decision and, you know, I wouldn't be rushing, given what you just shared there. I wouldn't be rushing out the door to, you know, as you said, flip the portfolio from us to Canadian. Yeah. Maybe.

Steve Cowley
Yeah.

Wayne Baxter
Yeah. Okay. All right. We talked you mentioned in a minute ago, I got minutes ago about us and international. Any what's your opinion of international large caps.

Steve Cowley
So here's another thing that we're, we're tweaking in our portfolios at One Capital Management is we've used individual names. And the reason we've done that is because we really care about the, you know, the quality of the company and the value of the company. So we don't own Toyota, but I'm used Toyota's my example. If I want the best car maker in the world, I want to own Toyota.

Steve Cowley
I don't want to own Ford. I don't want to own, you know, GM maybe I want to own, you know, Porsche, Audi and Toyota. So it doesn't matter where they they domiciled. I want to own those companies because they're selling the best cars in the best places and things like that.

Wayne Baxter
So Mr. Blasphemy.

Steve Cowley
I know, I know.

Wayne Baxter
And guilty as charged, by the way. Anyway. Carry on.

Steve Cowley
So so that's what we've expanded in. So we're our international holdings. We've we've added more of those global international names. That's why I kept saying multinational versus, you know, foreign or international stocks as we want. And a lot of those companies are selling, you know, 40, 50, 60% of their assets or their products in the US dollar anyway.

Steve Cowley
So they may be domiciled someplace else. But a big chunk of it is coming from the U.S. economy, where U.S. dollar investments and things like that. But we also have a passive component within that, international holdings that we have. That piece we're addressing will probably again, same thing. We'll probably shrink that at individual names, whether they're U.S or multinational names.

Steve Cowley
So we are going to shrink that large cap international a little bit small cap international a little bit. We'll be taking that weighting down because again, the the future is is pointing to a strong stronger American economy. And again, it's not just America because remember the Americans are selling all over the globe. It's like I say it's the multinational that's happening.

Steve Cowley
You know, they may be domiciled here, but they're selling all over the globe. And and we just have a better business environment in the US than we than there are in a lot of other places. The business environment in Europe is not as favorable as it is in the United States. The business environment in Canada is not as favorable as it is in the United States.

Steve Cowley
It's good. It's just not as favorable. So the the future still looks very bright for for us domiciled companies that are selling in the US and globally, because it's a very business friendly. And again, with a new president, a new I mean, there's going to be regulatory reform in the US and that's going to actually just make it or we expect it to make it stronger and stronger as a as a domicile for businesses in the United States.

Steve Cowley
So the the opportunity is still with us domicile companies that are selling around the globe. So we're going to take advantage of that and expand that piece of our portfolio by shrinking a little bit on the fringes. Some of the other holdings that we have.

Wayne Baxter
So let me see. This is the thing, you know, where this is in the context of a client that may have a 60% equity portfolio, 40% fixed income. We're not going to change the allocation. We're going to maintain that strategic strategy. But within that we're kind of like a duck, Steve, you know, a very common top of the water.

Wayne Baxter
Lots of lots of paddling underneath. Yeah.

Steve Cowley
Is that's actually a great that's a great analogy of of what we do, what clients see as they see the duck.

Wayne Baxter
But they don't see the investment committee smoking out there and seeing it see, you know, the sawdust burning out of the office here. Okay.

Steve Cowley
You get to see that because you come down to my office.

Wayne Baxter
Yeah, yeah, yeah. Well, that's that's our five minute meeting, our five minute quick discussion. An hour later, I'm at the door. Okay. Okay, finally, before we wrap up, just before I would wrap this up here, where do you stand regarding owning fixed income right now? Back here, I remember 20, 21, you shortened the overall duration of our client's bond portfolio to right around, like, three years.

Wayne Baxter
Now, that was the good news. We lowered the volatility. Right. But, you know, the yields weren't below 2%. As we sit here today, you know, early in 2025, where's that sweet spot on duration. And what is the expected yield for both the US and Canadian fixed income portfolios.

Steve Cowley
So just kind of give you a little history. As you said, we had shortened our our our duration. We actually we're down around two and a half back in 2021. And then remember that's when inflation took off. That's when interest rates. And so it was a really good call on our part. We did a great job again. Not to, you know, pat ourselves on the back but but again we just looked at I think.

Wayne Baxter
It was worth a pat on the back. See, we saved a lot of pain, if you ask me.

Steve Cowley
But we did. But but what we do is, again, it's that it's that churning. And, you know, we're looking for risk reward. And and at that point, when interest rates were so low, remember a 30 year Treasury bond was 2%. Yeah, yeah. Why take the risk for a 2% return when I can have almost no risk and get a 1.5% return?

Steve Cowley
I mean.

Wayne Baxter
I think we saw what happened to those long term bonds right now.

Steve Cowley
They just it was it was so it was just it was you know, we were looking for value. So in 2023 we started extending that duration out. So right now our durations are right around four and a half a five. I, I don't think we need to go any farther. We probably could I think interest rates, when you look at the US and the Canadian interest rate yield curves, they're still relatively flat.

Steve Cowley
We do have an upward sloping, but they're still relatively flat. And part of it is because the central banks haven't lowered rates as far as I think they will. Canada will probably be a little bit faster than the US, which they have been.

Wayne Baxter
I think they will be for sure.

Steve Cowley
And believe me, if there's a tariff coming on, there's a lot of incentive to lower rates again. So so the Canadian markets and the Canadian fixed income market's going to have a much deeper, much more normalized yield curve. The US is getting there. It's just a little bit slower. So I don't think you're going to see you know people always say where interest rates going.

Steve Cowley
And we always say well interest rates are coming down. But you really have to explain that. What they're usually talking about is what our short term interest rates do and what are fed funds rates doing. What are the, you know, Canadian central bank rates doing. They're coming down. Once you get out into the, you know, past that immediate fed funds rate and everything else.

Steve Cowley
Now you're talking about, you know, treasuries both Canadian and U.S. and you're talking about, you know, their issuance of those securities. Well, the the the five year, the ten year, the 30 year, there's they don't have to come down in interest rates. I mean, if we've got an economy that has a two and a half, 3% inflation rate, and we've got it growing it, you know, 1 to 2.5%, rates where they are today is probably where they should be.

Steve Cowley
There's, you know, they don't need to come down. And if the economy actually heats up significantly, I use a little Trump's rhetoric here. It's the greatest economy that's ever been. And we're going to have the best growth we've ever seen.

Wayne Baxter
Golden era, the golden.

Steve Cowley
The golden era. Like, okay, if that happens, not that it will, but if it happens, then we do get higher growth rates, which we can, you know, again, lower regulatory burden lower. Like there's a lot of reasons why we could get faster growth than what we've had. If we get that rates problem on those longer term interest, they're not going to come down.

Steve Cowley
They may actually go up slightly because you've got this growing economy, you've got, you know, demand for it. So, so the the intermediate to longer rates are probably where they're going to be maybe a little higher, maybe a little bit below, but not a lot. So you're getting your best value at that ten years to, you know, 5 to 10 year with that steepest part of the slope is where you're getting your best value on the fixed income.

Steve Cowley
You're so and that's for Canada in the US. So the beauty is we're actually getting paid to own fixed income.

Wayne Baxter
Exactly. Again, what was it like in the coming year. What do you think it's going to look like this year?

Steve Cowley
I think it's probably going to be fairly similar to what it is today. I don't think there'll be a lot of change. At the end of the day. I think there'll be some volatility around it. And I think news will affect it more than actual economic activity if the economic activity comes in, which what we think, which is a good economy and, you know, a growing it like there's no reason for race to the, the, the intermediate to long rates, there's no reason for them to come down.

Steve Cowley
You can make more.

Wayne Baxter
And a half 5% range would be.

Steve Cowley
Really they do. I think that's where we're probably going to stay. And.

Wayne Baxter
That and that money that when, when we earn that money in our clients portfolio, we get to put in for those who are not taking, you know, district distributions, we're putting that money.

Steve Cowley
To work. Exactly. And that's part of that rebalancing process where we build cash. Where's the best value? Is it equities or is it fixed income. And you put it to work there. And and that's part of your rebalancing. Sometimes you don't have to sell anything to rebalance you just accumulate enough cash that you can put the money where it needs to go to rebalance your portfolio.

Wayne Baxter
Yeah. Okay, Steve, before we wrap up this episode, and I know we probably got a little bit longer than normal, but I think it was well worth it. Is there anything that we didn't cover that you want to address? I want to give you the last word or the last word, if you will.

Steve Cowley
I think that that the only thing I, my my word of caution is to be patient, which the markets are not very patient, and we've seen that since October, November. You know, with the Trump win, especially in the US, markets have gone crazy. Crazy. You shouldn't use that term. The Marxist gone up, they've been very excited.

Steve Cowley
There been exuberance over what's coming.

Wayne Baxter
Last in volatility. They're in the midst of all of that I say exactly.

Steve Cowley
And so they're they're they're they're missing that it doesn't happen overnight. You know, they they think the market participants investors got really excited that, oh it's going to be lower. Taxes can be less regulation. It's a slim majority. We talked about this. It's a slim slim majority in the House of Representatives. If you get legislation passed it's going to be very difficult.

Steve Cowley
It's going to take negotiation. It's going to be butting heads. You know, the media and and the opposition, will be saying lots of things. There'll be a PR campaign around it. It's not going to happen overnight. So I think better times are coming. I mean, we're already in a I mean, it's the economy is doing well. It's going to continue to do well if we get better regulatory environment and better meaning more business friendly.

Steve Cowley
I, you know, now the other thing that goes along with that, and I was telling this to a client just yesterday is, is don't assume that this new administration is going to just throw all the rules out the window. And, you know, it's a free for all. And, you know, because that's what the opposition would love to to paint.

Steve Cowley
But he put Robert Kennedy Jr in his cabinet. I mean, drug companies are going to be held to a very high standard, which they should be held to. We've already seen, you know, red dye number five. The FDA finally came out and banned it. Red dye number five is in everything. I mean, there's a real retooling that's going to happen.

Steve Cowley
So it's not an it's not an administration that's just going to say, hey, do whatever you want. These are guys that are going to they're going to hold people's feet to the fire. They're going to there's going to be accountability, but it's going to take some time. It's not the Wild West. They're not throwing, you know, do whatever you want.

Steve Cowley
Like this is going to be a far more disciplined administration than it was the last time he was in office. The people he's put into his cabinet are going to hold people accountable, but it takes time for this thing to happen. I think we're probably going to see some disappointment in the next month or two when they actually get down to negotiate and fighting and screaming and yelling and the media and, you know, chiming in.

Steve Cowley
So it's okay that there's going to be a little bit of volatility in the markets right now. Be ready for it. Be patient. The economy was moving along pretty well. It's going to continue to move along pretty well. That will bode well for the the financial markets eventually. But we might have a little bumps a few bumps in the road.

Steve Cowley
So I'm just maybe tamping down the exuberance a little bit with with my closing comments. Okay.

Wayne Baxter
And on on that note on the closing comments and great job and thank you, for those who, you know, hopefully stay with us for the entire podcast. You know, we talked at the very beginning of the episode about tariffs. Now to kind of like to leave on that note, two, if you don't mind. So in your view, what we said is that most likely that there are terrorists probably looking at a 10%.

Wayne Baxter
And it was not dire impact on the Canadian economy. If there was a 25% tariff, it would be significant. And the good news, I would say, to add to all of this is that you guys are watching this so closely that you'll be able to adjust. If that were to take place.

Steve Cowley
Yeah, we would definitely be the again.

Wayne Baxter
The odds we think are low. But if that were.

Steve Cowley
I yeah, I work in a world of probability and we assign probability to things. I think the probability of a 25% tariff, is is low. The probability of him using it as a, as a negotiating stick high. And the probability of a 10% tariff is, is fairly high because he may do that across the board and then back him out as he wants to.

Steve Cowley
I don't, but I don't even know if that's the case, because again, what's really interesting is with the first three days and with all the executive orders, there were no tariffs included. So that's telling us that while he's talked a big talk, he has people behind him that are in his ear saying, hey, let's if if you're going to do something like this, you've got to do it right.

Steve Cowley
It's got to be disciplined. It can't be just with emotional. And so I have a, I have a my probability is high that the tariffs are a minimal impact on, on everybody and especially the Canadians.

Wayne Baxter
Well, I guess at some point during the year we're going to have you back and do a review. You know, you're.

Steve Cowley
You're going to do you're gonna take notes and then hold me,

Wayne Baxter
To let you know we're editorialized out. I mean, we've been moralize this conversation. It's there for the world to listen to. So, some point at some point between now and, probably the fall, we'll circle back and and see where we were. So, Steve, thank you so much. I always enjoy our conversations. Appreciate you making time for us today.

Steve Cowley
All right. Great seeing you again. And come on down to my office and we'll have their. Yeah, our one hour.

Wayne Baxter
Another another five minute conversation. I look forward to bringing you the three question podcast, and I hope you find them educational and informative. Please consider liking this video and subscribing to our podcast and YouTube channels, and to receive notification of when our latest episodes have been posted, please click on the notification bell. Lastly, to schedule an online consultation with me to discuss your wealth management needs, please click on the link in the description box below.

Wayne Baxter
www.onecapital.com/meetwithwayne. Thank you and we'll see you soon.