Amid escalating concerns of a trade war, Canadian investors are turning to gold and companies producing goods with limited substitutes, like uranium, to safeguard their investments while also leveraging a weaker Canadian dollar and anticipated market volatility.
With the U.S. President threatening a 25% tariff on most Canadian imports in March, followed by potentially more severe levies, Canada, heavily reliant on exports, faces significant economic risks.
Although sectors such as financial, telecom, real estate, energy, and materials dominate Canada's main stock market index, the S&P/TSX Composite, and may not bear the brunt of direct tariffs or could benefit from exemptions, analysts warn of potential indirect impacts if the economy falters.
The uncertainty surrounding trade tensions has spurred renewed interest in gold, as stated by Greg Taylor of Purpose Investments, who emphasized the need for protective and growth assets in portfolios.
The materials sector, including metal mining shares, has been buoyed by a surge in gold prices, offsetting losses in trade-sensitive companies since Trump's presidency, reflecting the ongoing trade uncertainties.
In this environment, the focus on sectors like uranium and metals, crucial to the U.S., prompts attention from investors like Ben Jang of Nicola Wealth, highlighting the strategic importance of Canada’s resources to its southern neighbor.
Market players are also capitalizing on the currency advantage of firms trading in USD but incurring costs in CAD, amidst trade-related pressure on the Canadian dollar.
Despite the challenges posed by the trade climate, market participants like Taylor foresee investment opportunities arising from the prevailing volatility in the market.