Trade War Impact & Recession Risks

Interviewer:
Well, we've got a lot to talk about in terms of markets. And joining us now is Wes Ashton, senior portfolio manager at Harbourfront Wealth Management. First, Wes, let's start with the trade war. What kind of impact is this having in terms of consumer spending and sentiment? 

Wes Ashton:
Jenna, thanks for having me again. It's always nice to catch up. Yeah, you know, the last 30 to 60 days, we've seen a rapid change in just the overall outlook on the economy, consumer sentiment, and so on. The most recent data that we've actually seen come out regarding consumer sentiment, it's actually near one of the lowest we've seen actually in history. We've had a fairly significant drop. And I believe it'll continue to get worse actually moving forward simply because we just haven't seen the effects of the tariffs trickle down to the consumer yet. And when we've seen these sentiment levels in the past, the consumer continue to spend. Back in 2022 and years before, we had a fairly robust job market. It didn't really affect the consumer too much. So we saw the economy continue to grow. Or what we're seeing this time around is we are seeing consumers getting a little bit more financially strained as we closed out last year and into this year. So it'll be really interesting to see how it trickles down over the long run and whether that will unfortunately potentially lead us into a recession, which is top of mind for a lot of folks now. 

Interviewer:
Yeah, what are you seeing in terms of the odds of a recession? 

Wes Ashton:
I mean, you mentioned more tension and things potentially getting worse moving forward. Yeah, I mean, I think the recession is definitely more top of mind than what it was at the beginning of the year. Trump and his administration, they inherited a fairly good economy. They inherited a really good stock market that was coming out of strong earnings. And the anticipated earnings growth looking forward was positive. And in a short 100 days is coming up to the 100 day now, it's deteriorated quite quickly, actually. So I would anticipate the likelihood of a recession has dramatically increased. Now, what we have to remember-- and we talked about this in 2022 and 2020-- is that markets tend to lead us into recessions and then lead us out of recessions. And what I mean by that is by time we actually potentially see a recession in the economy, the market is likely has probably long priced it in. And because the recession when they announce it is backwards looking. And it's the same as true as when we come out of a recession. The market's generally this out. So we'll see what happens. Like I said, I think there's a lot of positives that can come out of. What's happening with the administration? I think they can write this ship with proper direction. But time will tell whether they'll make the choices that will really help the economy. 

Interviewer:
And in terms of navigating the media, there are so many headlines flying around. And I know that that can evoke a lot of emotions and investors. So what would you advise in terms of tuning out the noise and how should investors be thinking about markets and their spending?

Wes Ashton: 
Yeah, you know, media-- it's difficult now. We're so attached, whether it's through social media, or I mean, it's just at our fingertips. And what we've learned over the years, they've done studies. Negative news stories, they sell more than positive news stories. And so we're much more heightened from an emotional standpoint. And when we see negative news, we generally react to it. And so what's important, I think, with navigating it is recognizing that we do see negative stories. And really trying to sift out what's really happening. I think it's really important that recognizing that humans are four times more motivated on the fear of loss than the potential gain. And so that goes back to when you talk about investing, or when we're looking mid to long term with our finances, we keep the big picture in mind. The short-term noise, you can really derail your financial situation if you're making knee-jerk reactions based on what we're seeing in the media. And in the last week, two, three, four weeks, we're actually seeing-- every day is something different in the media. That's somewhat of a jolt. We've seen that a lot with the different policies and the trade wars that we're seeing, and the decisions that are coming out from the administration down south. 

Interviewer:
Building off of that, what kind of investor trends are you seeing in light of this West? 

Wes Ashton:
I think definitely, I think folks are a little bit more heightened. I think people are reevaluating whether they're on the cusp of retirement or what have you. So I think maybe some of their habits are changing. Perhaps they're not traveling as frequently. They're starting to save a little bit more. But that being said, if you go back in history where we're seeing dips in the market, no different than what we're seeing today, those that have a discipline plan and they stick to it generally have really good outcomes, because we recognize this noise does go away as things work through the system. So I think investors, again, that can stick to the plan, both in good times and bad times, like you said, we'll definitely have a better outcome than ones that make knee-jerk reactions. 

Interviewer:
Well, Wes, anything else you'd like to leave with our viewers today? 

Wes Ashton:
No, like I said, I think we've summarized it quite well. If I were to give any kind of feedback, I would say it's always a good opportunity when we go through periods like this in the market or the economy is to maybe go back and re-evaluate perhaps what's important to you. Because what's happened is we came out of actually fairly robust markets for the last decade, and perhaps people haven't really evaluated their financial profile. And so these are opportunities to go back and have a look at them and maybe make some adjustments. I wouldn't make wholesale changes, but perhaps tweaking it and maybe making it more in line where you are in your stage of life. But again, I would just say, go back and be disciplined, and over the long run, you'll do okay. 

Interviewer:
At time to potentially rebalance or? 

Wes Ashton:
Yeah, I think that's a great point. I think rebalancing your existing or perhaps reshuffling maybe some of what you've done in the past, a really good example, we're coming at a really high interest rate environment. So people allocate a lot of dollars to GICs or interest bearing investments that were paying 4% or 5%. But today, you're getting roughly 2.5% to 3% on short-term money, and it's 100% taxable. Whereas you can look at some companies, especially in Canada, that are paying between 4% to 6% in dividends, so good cash flow, and the tax preferred. So I think not only rebalancing for risk, but perhaps reassessing maybe some of your cash flow, your tax management, I think would be ideal as well. So again, you could actually do a full holistic review and perhaps get your portfolio or perhaps some of the investments pointed in a little bit more efficient direction than when it has been in the past. 

Interviewer:
Well, Wes, a lot of great points there. Thank you so much for joining us. 

Wes Ashton:
Thank you for having me, Jenna. Have a great day. 

Interviewer:
You too, and thank you to everyone out there watching. Once again, that was Wes Ashton, Senior Portfolio Manager with Harbourfront Wealth Management. And I'm your host, Jenna Dagenhart with Asset TV.