Preparing for War: Central Banks & Trade Tensions

In a rare occurrence, both the Bank of Canada (BoC) and the U.S. Federal Open Market Committee (FOMC) provided guidance on their respective monetary policies today. Adding to the hype, the effects of a pending trade war were front and center.

In short, the BoC cut rates as expected by 25 bps and tilted toward the dovish side, while the FOMC decided not to change their benchmark rate, citing risks to inflation “remain somewhat elevated”.

The BoC mentioned lower Canadian borrowing rates are working, but the labour market remains soft. The added threat of tariffs muddies the water for the near future and keeps the BoC on the back foot. The BoC has guided for one more cut in 2025, but the Wealhouse team sees the risks of more cuts skewed to the upside if a trade war does ensue. Digging deeper, we note a couple key points from the BoC meeting:

• The BoC is to end quantitative tightening (QT) and resume asset purchases on March 5, thus providing further stimulus to the domestic economy.
• The GDP outlook was lowered while the inflation outlook was raised in both 2025 and 2026, igniting fears of stagflation.

With markets adjusting to shifting central bank policies and the looming risk of stagflation, Wealhouse strategies are well-positioned to navigate these uncertainties. Our flexible, long/short approach across equity and credit markets allows us to seek opportunities in both rising and volatile environments. The Amplus Credit Income Fund is structured to capitalize on dislocations in fixed income markets, while the Lions Bay Fund’s tactical positioning helps manage risk amid heightened inflation and economic slowdowns. In a world where macro forces are shifting rapidly, active management remains a crucial tool for investors looking to preserve and grow capital.

With growth trajectories and interest rate paths likely to diverge globally, the Voyager Fund’s global mandate provides further diversification by seeking out investment opportunities beyond North America. Its flexibility to allocate capital across different regions and asset classes gives it an edge in navigating uncertainty.

At Wealhouse, we are vigilant, so you don’t have to be, actively managing risk and positioning our portfolios to capitalize on opportunities in an ever-changing market.

Disclaimer

This Commentary expresses the views of the author as of the date indicated and such views are subject to change without notice. Wealhouse has no duty or obligation to update the information contained herein. This Commentary is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Wealhouse believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.