Finance Crosswinds: energy There are a lot of things to like about Canadian energy, even in the face of the current turmoil. Most of Canada’s major oil and gas companies report that they are compliant with existing trade agreements, which should limit their tariff exposure. Many of them have also spent the past several years paying down debt, which puts them in a good position to weather any economic storm. And, of course, the weakening loonie is positive news for most energy companies: while their production expenses are in Canadian dollars, their product is priced in U.S. dollars and the spread flows directly to the bottom line. On the other hand, the threat of a tariff-induced recession has put pressure on oil prices, which has sent the price of energy stocks tumbling. Other parts of the energy sector have been hit hard, too: renewable energy companies have seen a sharp sell-off in the face of diminished support from the new American administration. Uranium-related stocks have also hit a bump in the road, as increased supply and the re-jigging of demand assumptions have led to weaker prices. What does all of this mean for investors? Well, there’s no doubt that the recent market turmoil has created opportunities across the Canadian energy sector. But it’s difficult to know how much the threat of recession will cloud the horizon. At the very least, investors will need a long-term plan and a stomach for volatility if they want to add to their energy weighting over the months to come. Crosswinds: food and agriculture You’d think that agriculture might provide some safety from the tariff trouble: after all, no matter how high tariffs go, people have to eat. The reality is, however, that different areas of the agriculture and food industry will respond very differently to the threat of tariffs. For investors, this presents a rather mixed picture. Tariffs on the base inputs that go into food production (potash, phosphate, nitrogen) will be relatively low, making companies in this business a solid defensive play. But the picture looks decidedly less positive for farmers, seafood processors, the dairy industry, packaged food manufacturers and other food producers: they’ll likely face a wide degree of tariff levels, as well as lower spending levels if we enter a recession. Meanwhile, over in the grocery aisle, grocery chains are relatively insulated from cross-border tariffs because they deal locally and have the ability to pass on price increases to their customers (as many of us have noticed over the past couple of years). Bottom line: this is another area in which investors need to tread carefully and do their homework before committing any new money: some sub-sectors may indeed live up to their reputation as safe harbours, while others will likely be among the very hardest hit by hurricane-force economic winds. A final note on tariffs ... The tariff situation remains exceptionally fluid and uncertainty about the final form of any tariff regimen remains exceptionally high. Changes to the list of goods and services seem to be occurring on an almostweekly basis, and rumours about potential changes can send the stock market soaring or plunging on a dime. It’s likely that this state of uncertainty will persist for some time (indeed, some have suggested that this may be the entire point). It is, therefore, exceptionally challenging to make any long-term predictions about the effect which they may or may not have – in fact, some of what we’ve written here may be out of date by the time you read it! Whatever happens, however, it’s important to remember the old adage about crisis and opportunity: for those willing to put in the effort and do their research, times of economic crisis often present an extraordinary opportunity to build wealth. While tariff troubles certainly will create economic turbulence, for those investors willing to understand the change and adapt their portfolios to take advantage of it, there may well be smooth sailing on the other side of the current storm. CSANews | SPRING 2025 | 29
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