The Trump trade

If you own a ETF holding the Canadian market (and you should), you’re ahead more than 7% this year. And it’s only July. That beats the Dow. It bests the S&P. For that you can thank Bay Street’s overweighting in financials (TD is up 30%) and golds (bullion gained 35%).

The loonie? Not bad.

The currency sat at 69.5 US pennies in January, and today is worth 73.2. That’s a gain of almost 5.5% during a time when Canada-bashers said we were headed for fifty cents. For that you can thank a big dump taken by the American dollar.

Source: New York Times

The country’s doing well, considering our largest trading partner went rogue. Yes, we have troubles, but everybody should be holding maple in their portfolio because we might just end up being the most fetching end of North America.

In case you missed it, there’s a been a ‘sell America’ vibe since shortly after the orange guy came to power. At first, yes, Trump looked like a load of gas for the USA fire. Tax cuts, reindustrialization, deregulation, protectionism – all feeding a pro-business, pro-growth that energized the stock market.

But, alas, that didn’t last. Stocks wobbled. The dollar declined. So far this year it’s lost over 10% of its value while ours has gained. It’s the worst showing in half a century.

What about Trump’s policies has investors’ shorts in a twist?

Lots, as it turns out.

Like the Big Beautiful Bill now back in the House for ratification before going to the prez for his signature – perhaps tomorrow. It chops taxes, removes heath care for a lot of irrelevant poor people, rewards wealthy corporations and, most importantly, will add between $3 and $5 trillion to the national debt – already a staggering $36 trillion. Mr. Market is unhappy with that. It suggests a budget crisis and higher interest rates to come.

Then there’s that attack on the Fed and its boss, Jerome Powell. A nation’s central bank is supposed to be above political influence, but not in Trump’s America. He is constantly belittling Powell, telling him to crash interest rates by a massive 2.5%, and appears ready to name a replacement months earlier than the expiration of his term, a year from now. This threat to the CB’s independence and the possibility of Trump controlling rates is chilling the world.

Meanwhile the economy under Trump has stopped growing. The latest private forecast for the labour market (published this morning) shows payrolls dropping last month and job gains dwindling. Inflation is stuck at too-high levels, unlike in Canada where it has plopped to just 1.7%.

Of course, there are those tariffs. Nobody ever imagined the absurd spectacle of ‘Liberation Day’ when he held up a chart of ridiculous levies on most of the planet’s nations. Markets crashed. Then he chickened out and called a pause. Markets rallied. Now he’s reversing course again – erratic, unpredictable behaviour rendering it impossible for businesses to plan or trading partners to respond.

So a crazy 19th Century economic strategy, a runaway increase in government debt, persistent inflation, slower growth, fears for monetary policy, growing American isolationism (punctuated by some recerational bomb-dropping), mass deportations hitting farming and hospitality and the capricious, unreliable tenor of American governance has brought us here. Dump America. It’s a thing.

What’s it mean for you?

The sell America trade is unlikely to stop anytime soon. Across the world there’s been a movement to unload US assets and move capital into home markets. European equitiess have benefitted. South Korea is hot. Bay Street is on a roll. As stated, against a basket of currencies including the loonie and the euro, the greenback has tanked. Trump is scary. He’s wild. He constitutes risk now, not opportunity.

Having said that, maintaining a third of your equity exposure to the US remains wise. This is the world’s largest, richest economy. Nine of the ten greatest companies on the planet are America-based. Don’t bet against Apple.

The other two-thirds of growth assets should be in Canadian and international ETFs. Own the TSX, plus maybe a dividend fund – and some REITs. Internationally, hold a broad equity fund, a dividend fund, plus emerging markets. Europe. Korea. India.

America will survive Trump. Make sure you do.

About the picture: “Grateful for this day, and this Blog!” writes JVD, in BC.  “We woke up this Canada Day to see one of our neighbors looking in the bedroom window. (Shot him! Evidence Attached). Nosy neighbors are increasingly poking around, their homes on the mountain behind us burnt to the ground. Trust we are not breaking any CRA rules letting our regular summer visitors use the ‘cabin’ rent free in exchange for the pest control they provide. Sometimes it’s wise to remember we don’t know what we don’t know.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2025/07/02/the-trump-trade/