BMO Capital Markets’ chief investment strategist says Canadian investors, many of whom are focused on the macroeconomic backdrop and the fallout from a potential trade war with the U.S., should pay more attention to the positive fundamentals in markets.
Brian Belski told BNN Bloomberg that while the discourse has been dominated in recent weeks by tariff threats made by U.S. President Donald Trump against many of America’s trading partners, “you don’t know until you know” if and how those threats will materialize.
After Trump was elected last year, he threatened to impose 25 per cent tariffs on all Canadian goods entering the U.S. on his first day in office. Trump has since repeated the threat, proposing after his inauguration that tariffs on Canada could be put in place as soon as Saturday.
Belski said that so far, the posturing around this issue from officials on both sides of the border reminds him of a trade dispute between the two countries during Trump’s first presidency, which was ultimately resolved with a trade deal.
“From a broader perspective, this is very similar to what happened in 2018 with respect to the original negotiation of the USMCA (United States-Mexico-Canada Agreement). We think that the same kind of template follows through,” he said in a Monday interview.
“If you take a look at the Canadian and U.S. relationship longer term… we need each other. Much of this is jockeying back and forth. What we’re saying is: control what you can control.”
Belski said that despite the uncertain economic backdrop, Canada’s benchmark stock index is coming off a strong 2024, and fundamentals for Canadian companies continue to improve.
“Canada had a fantastic year in terms of performance with respect to the stock market last year, period. And everybody missed that because they were way too focused on macros,” he argued.
“Now we’re too focused on potential tariffs out of the U.S.”
Belski added that even if tariffs are put in place, it could lead to increased production on both sides of the border in industries like energy.
“From a tariffs perspective on the energy side, why are we worried about energy tariffs if… the whole platform is to create and produce more energy across both countries,” he said.
“Again, we think most of these reactions are emotional in nature, we don’t know until we know, and that’s how we think we should invest going forward.”
Belski said he thinks the Canadian financial sector, which makes up roughly a third of the S&P/TSX Composite Index, is poised for another strong year led by Canada’s largest banks.
“We think the financial sector, particular in Canada, especially the big five banks, plus National (Bank of Canada), are going to continue to exceed expectations on the earnings front for a couple reason,” he said.
“Number one, analysts have been very negative on that, so their earnings projections are too low, and number two, the economy in North America is going to continue to be strong and we know that many of these banks in Canada are more North American-centric.”
Belski also said investors should be overweight in the tech sector, noting that Ottawa-based Shopify Inc., which has seen its stock rally more than 35 per cent in the past year, is “one of the greatest technology companies in North America.”
