Finance Crosswinds: other tech stocks The sell-off in mega-cap tech has created opportunities in other technology stocks. But the opportunity varies across the sector. Many hardware companies source their chips, components and assembly lines from China and Southeast Asia, exposing them to tariff-induced supply-chain problems. True, the U.S. administration has recently signalled that many of these components will be exempt from tariffs, but who knows for how long. Meanwhile, tech services (software, cybersecurity, AI, etc.) are currently exempt from tariff action but, as countries consider the best way to hit back at U.S. tariffs, they may turn up tariffs on Silicon Valley software in retaliation. As we said about the Magnificent Seven, there’s no doubt that many tech stocks are excellent businesses. But if you’re looking to buy the dip, be prepared to do your research, and zero in on those businesses least exposed to the tariff noise and relatively immune to recession-related IT cutbacks. That will likely serve you better than taking a broader, sector-wide approach…at least for the next little while. Headwinds: the Canadian dollar These are tough times for the Canuck buck. U.S. trade tariffs, tit-for-tat trade retaliations and the threat of a long, deep recession have put tremendous pressure on the Canadian dollar; the longer such uncertainty persists, the greater the pressure may be. If the Bank of Canada responds to a weak economy by cutting its trend-setting overnight interest rate in an effort to stimulate domestic growth (which it’s expected to do), it’s possible that the dollar might struggle even further. Will things get back to normal if the threat of tariffs or recession suddenly abates? Let’s hope so. But international currency movements are notoriously difficult to predict and, currently, there are simply too many variables to accurately predict what will happen with tariffs. What we can predict, however, is that there will likely be a lot of turbulence in the Canadian economic picture for the foreseeable future, and that will likely create headwinds for the loonie for some time. Tailwinds: the “boring” portfolio If there’s one area of the stock market that has stood up pretty well in the current tariff turmoil, it’s the steady-eddy, old-economy companies that have been the backbone of the economy for years. Think of your local hydro provider, your cellphone service provider, convenience and discount stores, grocers, railroads and similar “boring” companies that sell hard-to-replace products and services to local customers. Those who made the decision to allocate a portion of their portfolios to such boring companies probably regretted their decisions as high-flying tech stocks soared to the stratosphere. But they’re certainly smiling now. Will these boring stocks be immune to a broader market decline? Don’t count on it. But they’ll likely be far less volatile than the export-oriented businesses such as cars, aluminum, lumber or consumer appliances. Will they make you rich? Probably not. But their slow growth and steady dividends will likely make them a relatively safe port in the storm. CSANews | SPRING 2025 | 27
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