One question to ask in any market is: “how long can it continue to go up?” As the US market continues its run to new highs, the question is whether it is ready for a healthy pullback. We are in unprecedented times: tariffs, heavy spending within the market, and the use of artificial intelligence and technology to, ideally, make our lives better. The real question is where it all ends.
The US market has long been dominated by large technology companies, with a true divide between growth and value. Canada’s market, by contrast, is dominated by value, and we are navigating political issues with our largest trading partner while wondering where future growth will come from.
With GDP growth under 1% and inflation sitting around 3%, is another Bank of Canada rate hike in the cards? What is our long-term plan to grow as a country, and perhaps to diversify?
Resource revenue has been, and always will be, part of that conversation: is it used to create future growth, or to help fund society? There has been a lot of talk lately about pipelines, natural gas, and mining, about truly using the natural resources we have and, ideally, refining them here into something more valuable.
All of this takes investment, whether internal, external, or government-based. Perhaps it is time to invest in Canada in a meaningful way and diversify both our trading partners and our customers. If a strong plan moves forward, there is a great likelihood we are left with a stronger Canada that can stand on its own and weather more storms. As Canadians, we need to stand together and ensure we leave this situation stronger than we found it.
Returning to artificial intelligence and market highs, much of what has happened in the US has been built on debt. The Magnificent Seven and other companies have issued billions of dollars of debt to fund infrastructure and data centres, and many of the companies receiving those contracts have risen significantly in price. The hope is that this spending generates revenue later. The risk is that the capital outlay does not produce the expected return.
I have written in the past about pricing metrics and the overall value of the economy. Beneath the surface of the US market, there has been a rotating decline in stocks, counteracted by the large technology companies. If those companies do not keep up their pace, and smaller technology, goods, and component companies do not continue their rise, is that when the market has the correction it normally has?
Caution is always warranted when you look at the money you will need over the next 12 months, 24 months, or few years. A well-diversified portfolio, with investments that are not fully correlated, will help each of us meet our long-term financial goals.
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