As investors in Canada look to maximize their returns this year and beyond, experts say it’s important to closely monitor the economic situation south of the border as it will have an outsized influence on global equity markets, for better or worse.
Andrey Omelchak, president and CIO at LionGuard Capital Management, told BNNBloomberg.ca in a December interview that in 2025, Canadian investors should look to get exposure to U.S. markets.
“U.S. market dynamics are very positive and I’m of the view that they’ll probably continue, although we don’t have a crystal ball… there are very big developments coming up with the forthcoming new administration,” he said.
“They’re going to lower taxes. That’s of course a direct benefit to the profitability of pretty much all U.S. companies. There’s deregulation coming, that’s a huge help to various industries; financials of course, and other industries in general.”
U.S. president-elect Donald Trump will return to the White House later this month, and market sentiment around U.S. stock performance during a second Trump presidency has been on the rise ever since his re-election in November.
But John Zechner, chairman and founder of J. Zechner Associates, told BNNBloomberg.ca that investors should be careful not to be swept up in the frenzy that’s shot U.S. valuations up in recent months.
“My issue always is that when you pay for something that hasn’t happened yet, what’s your risk if it doesn’t happen? And we’re getting that in the stock market,” he said in a December interview.
“You’re already paying. I mean look at how much of a rally you’ve had in the companies that would be beneficiaries of this; the financials… you’re already paying for it, so I guess that’s my issue a little bit – now it comes time to deliver.”
Investing in Canada
Zechner said that when it comes to investing in Canadian equities in 2025, companies may have more attractive valuations as they tend to be tied to the global economy to a larger degree than many U.S. firms.
“Maybe we’ve seen the worst in some of the economies outside of the U.S., or they’re starting to bottom out, and if they don’t get any worse, that’s sort of a positive for Canada because we are a global market,” he said.
Omelchak, meanwhile, said the Canadian stocks he favours in 2025 tend to be companies that have exposure to U.S. markets and can take advantage of the pro-business tailwinds brought about by the Trump administration.
“My investments in Canadian stocks, many of them have huge exposure to U.S. market dynamics, and they’ll benefit from that,” he said.
“I would say Canadian investors… if they want to invest in Canadian stocks, there are a lot of interesting Canadian companies, but you want to make sure you’re not caught on the wrong side of the tariffs, and on the opposite side, you’re exposed to the positive dynamics.”
Greg Newman, senior wealth advisor and portfolio manager with the Newman Group and ScotiaMcLeod, said in a statement to BNNBloomberg.ca that Canadian banks and insurance companies could perform strongly this year as long as inflation “can continue to be tame.”
Omelchak shares that positive outlook for Canadian banks, particularly for those with strong capital markets businesses, as he sees an overall increase in North American dealmaking in 2025.
“Royal Bank of Canada has a very sizeable capital markets business, both in Canada and the U.S. They’re certainly going to benefit from that. TD Bank has a quite sizeable capital markets operation so they’re going to benefit from that as well,” he said.
How to invest in AI
When it comes to investing in artificial intelligence (AI), Omelchak said there are parallels to be drawn between the excitement that surrounds the technology now and the investment hype around internet companies 20 years ago.
“It’s a very similar playbook. Usually, there is initial hyper excitement and then it dies off and people kind of say, ‘OK, well it’s not as good as I expected,’” he explained.
“And then, over the longer term, the actual impact is as big if not bigger than what you initially expected, so it’s the same playbook here and I think time-to-market might be even faster than during some of the past (technological) developments.”
Omelchak said he believes AI will be “transformational” over the long term, and that he sees many companies trying to find ways to adopt the new technology into their processes in order to optimize their operations.
Newman said that AI “continues to be a theme that can benefit the productivity of more traditional companies” such as property or casualty insurers in 2025.
He said AI could also help boost the productivity of non-traditional lenders by improving their underwriting and precision marketing capabilities.
Zechner said that despite the current enthusiasm around AI and how the technology could transform countless industries around the world, he’s still waiting to see what impact it will have on everyday tech users in the near term.
“Everybody’s excited about the growth and the potential and I’m sort of waiting… I haven’t really yet seen the applications that I am going to have as a user that are going to make a difference,” he said.
“So, I’m a little skeptical. We’re spending a lot to do it, and everybody seems very excited about it, but I don’t know yet that the wins are going to be as big as everybody expected or as quick.”
‘Be a little more prudent’
Omelchak said that while there was a lot of market uncertainty before November’s U.S. election, Trump’s re-election has provided a lot of “clarity,” giving Canadian investors a “very clear” playbook for how to invest in 2025.
“So, unlike some others who are saying, ‘You know what, you have to be careful, the market had a great run’ – and I agree with all that – I don’t have a crystal ball,” he said. “But for individual businesses, the clarity for how that business is going to unfold in the next 12 or 24 months has increased a lot, so that makes me very comfortable and excited frankly for what can be done from the stock picking standpoint.”
Zechner, on the other hand, warned against getting swept up in investor excitement and said he’s “seen enough of these bull markets go in the other direction.” He also warned against going all-in on trendy stocks.
“I just see people doing things that don’t make sense to me. You have people call me for potential clients coming in, and they’re coming in and basically, they’ve got all of their money in Nvidia right now. You can’t put 100 per cent of your money in one high-flying stock,” he said.
“I just think people need to be a little more prudent in how they put their portfolio together and what their expectations are. But, you know, people don’t learn that – they only learn that in the down markets.”
