Our reports: Economic Impact

Hello, everyone. Welcome to Economic Impact. Today, it's June 11th, 2025 and as usual, I am with our Chief Economist, Stéfane Marion. Hello, Stéfane, a little bit different today, a lot of structural change and we want to talk about it.

Well, we hope to keep people interested, but you're absolutely right that we'll mix a bunch of stuff that's cyclical versus structural, which makes the story more interesting, I think. But let's start with the cyclical dynamics that we've seen, we're seeing in U.S. so, well, we've said many months ago that, maybe US corporations would start reacting negatively to the uncertainty created by the tariff structure in the U.S.. And what we've seen in the latest jobs report in the U.S. is that corporations are still hiring if you look at the redline Denis, but they're not hiring full time. So, they're not committing their capital full time, whether it's human capital or physical capital, not investing right now. So, it's not just Canadian corporations that are struggling to understand the new dynamics, but we're seeing it in the jobs report. So, this sets the stage for slower growth in the U.S. in the second half of this year.

This is what you call uncertainty for the future. And you don't want to have a full-time employee, you prefer to have a part-time employee that, if things are going bad, you know, it's easier to lay off people.

You don't want to commit until you actually understand what your business model will be like say the next six months or next year.

But the equity market is doing well, not new high, but despite of that, you know there's good news.

So, let's put things in perspective. You're right, not doing badly in recent weeks. It's a recovery, but U.S. stock market is one of the only ones that's not back to its previous highs. So, there's still this level of uncertainty created by, there's high valuation in the U.S., we're talking about structural adjustment to the supply chain. Companies are not committing capital right now. So, the U.S. market is coming back, don't get me wrong, but it's one of the few markets that's not back to an all-time high.

Yeah, but that performance is probably only linked because of U.S. investors. Because when you look at the greenback or the U.S. dollar, it's not doing well at all and keeps going down.

So, it's been driven by U.S. investors, the recovery, because foreign investors, you're absolutely right, they're still shunning U.S. assets, whether it's the U.S. bond market or U.S. equity markets. It's not that they're not buying, but they're not buying as aggressively. And that's clearly apparent on the exchange rate in the U.S., which is struggling this quarter. It's one of the largest depreciations in over five years, down 3.5%. So, it means central banks are less active in buying U.S. assets, but also private investors. So that's, you're absolutely right, you know, the perception of U.S. investors versus U.S. economy explains why the U.S. stock market has struggled so far this year.

Yeah. And if you go up north in Canada, the story is totally different. Our stock market is at a new high right now.
Despite the fact that we have a 7% unemployment rate now and which is a massive difference with the U.S. at 4.2%. The stock market in Canada is at new highs. And Denis, I think that's a reflection that everybody understands that we are challenged cyclically right now with the uncertainty on tariffs. But at the same time, what we understand also is, since the federal election, the Prime Minister, well the throne speech was actually read by King Charles. But there's a commitment from the federal government to focus on the Canadian economy on the scale that we haven't seen in many, many years. So, people are saying, well, if I don't really like U.S. assets, I don't understand. I clearly understand that the federal government in Canada wants to be pro-growth. And that's, you know, there's, you know, there's this wind of optimism that is blowing north of the border.

And for this time around, it's not just oil and gas that's doing well, it's a bit widespread in the economy.

Yeah, so when we saw the stock market doing very well in 2000, it was mostly the energy sector. But, with this commitment of the federal government to reindustrialize the nation, that means, you know, more corporate lending, attracting capital, we're open for business. Then obviously, under these circumstances, you can understand that, you know, the financials of the Canadian banks are at a new all-time high. Having said that, it's still not a one trick pony with only the banks. We have industrials doing well, materials, consumer discretionary. People believe that there will be new structural policies deployed in Canada to close the valuation gap that we've endured with the U.S. for over a decade. So again, Denis, this is a structural change. Understand, we are cyclically challenged. Let's be careful in the months ahead. But structurally, there's something different happening in Canada. That's how powerful this can be when policymakers decide to become pro-growth.

Yeah, and the consequences of that, Canadian dollar is going higher because now you have probably Canadian investors, but foreign investors buying in Canada.

Well Denis, that's the flip side. I think if people are interested in your assets, the currency will do well. So, the Canadian dollar's appreciating about the most in four years. So, we were concerned earlier this year about Canadian dollar depreciation. But with the throne speech that we saw, the commitment to be pro-growth for the Canadian economy, these are words until now, but maybe the actions will speak for themselves in the next few quarters, but this is very powerful and it's driving a stronger Canadian dollar. So, might be a source of frustration for exporters, but clearly there's demand and that's an improvement in our terms of trade right now.

And you know, on the same path, Mr. Carney says that I want to invest more money in defense and, and that's kind of good military expenses because you have to build the economy around that. But it's not only building tanks, and it's helping the whole economy.

So, the commitment is to grow the economy, but at the same time to be an active participant within NATO because right now we have the lowest military expenditure in the G7, which means that we are struggling as a nation. Now, the commitment to increase our military complex is very, very important. So, to me, that speaks volumes to the government's commitment to do so. But if you do so, and with a Buy Canada Act, all of a sudden, I have more leeways to improve our industrial structure.

And the next slide will show that we need to invest in our economy. You know, you've been saying that for months and years now. And when you compare ourselves, there's a lot to do.

Oh, Denis, you know, on manufacturing, we've been atrophying our manufacturing so much that, you know, now for the first time ever, our manufacturing sector is smaller than Ireland, which is a population of 5,000,000. So, we need to do a lot better there. And I think that I can be hopeful that with this new procurement system, we can actually kick start manufacturing, and that means reindustrializing our nation.

And you've been discussing that in the past. You know, there's so much regulation in Canada. But once again, the next slide, you know, speak by themself, we need to do something.

It's a big slide, but all you need to know, Denis, is that the federal government is responsible for 320,000 regulations, in manufacturing alone at 110,000. So, it doesn't cost much for the federal government to show the example and say, in order to deploy private capital in Canada, I'll make it easier. I will slash the regulatory requirements that we have, which are one of, some of the most punitive in the industrialized world.

And that's excluding provincials and municipalities.

No provinces, no municipalities on that. So, but if the federal government shows the example, all of a sudden, Canada becomes more investable. So, to me, that's a structural change that would be extremely conducive to this growth and evaluations, the discount that we've been dealing with for the past decade can go away. This is, you know, structurally speaking, as I said, I mean, these are probably the most, the best news we've had from Ottawa. If we can tackle regulations as well as the other commitment that you have, I can only be more optimistic for our country going forward.

Well, Stéfane, this is a change from the past few months and not only few years about Canada, but it's the first time we were seeing your optimism about Canada. And it seems that also, you know, the investors and the foreign investors are, then more to come I believe.

The next challenge Denis is the upcoming G7 meeting. If Mr. Trump, if Mr. Carney can show that he gets along with Mr. Trump and then it looks like we can commit to a trade agreement in the next few quarters, I think people will become even more interested in Canada. So, you know, the words have been put out there. Now we need to see the actions and if there's a commitment to come up with these actions and after G7 meetings, all of these things could make us even more positive for Canada so hopefully when we see each other later this summer, we'll have better news for the Canadian economy. But things look up right now despite the fact that we are cyclically challenged, there's good news, structurally speaking.

Well, thank you very much, Stéfane. Thank you all for listening to us and we'll see you in a few weeks. Thank you.

Hello everyone. Welcome to Economic Impact. Today is May 2nd, 2025 and as usual, I am with our Chief Economist, Stéfane Marion. Hello, Stéfane.

Hello, Denis. It's been only two weeks since we saw each other, but it's been volatile in markets and actually, outside the U.S., people remain pretty confident. So every asset class, pretty much every asset class is up year to date now. It's a big change from early April, except one.

Except one.

Except one, which one?

South of the border.

It's U.S. equities, are still down 8% year to date. Still the uncertainty about the global economy, and particularly what the White House wants to do with this whole tariff structure.

And talking about tariffs, where are they now because they move quite a lot. The last time we were around 32% and now I think we're a little bit down, but not as much as probably we would hope.

I can tell you that, in my entire career, I've never seen tariffs move like that or moves like that. We went from 2 to 5 to 10 to 7 to 36 to 24. Now we stand at 23% as of today. So down from 26%, which was where we were just two weeks ago, but still overly punitive for the U.S. economy. So, I think that this needs to be settled. Everybody thinks it will come down, but how soon will they come down will dictate the U.S. economic performance and the performance of U.S. profits.

Yeah, because those tariffs are still pretty high, now we're starting to talk more about stagflation. And the ISM showed that inflation expected is high, but productivity is down too at the same time, which is not good.

Yeah, many corporations don't even provide guidance right now because they don't know what the tariff structure will be just in the next few weeks. So, what you see in the U.S., GDP was negative in Q1 for the first time in over three years. In manufacturing, production is down, which echoes what we saw on GDP. But notice Denis, the red line, prices are up. That could squeeze your profit margins. You're selling less and your input prices are rising. So, will you be able to sustain your earnings guidance under these circumstances? People don't know. Corporations don't know, they're dropping earnings guidance. And unlike the pandemic episode, if you want, the government is not sending cheques to households to allow prices to be fully reflected on the CPI. So, this means uncertainty about profit margins and profit growth and obviously the performance of the S&P 500.

Yeah, today we had the employment numbers in the United States. Quite stable, despite everything we saw the past few weeks.
And the White House was complacent and they're saying that this is the proof that tariffs are not hurting the U.S. economy. I think we have to be careful with that assessment Denis because historically, corporations don't layoff people as soon as production comes down. They wait a few months to say, is it improving or not? So, what we're seeing in the U.S. is, yes, the unemployment rate has been stable since the second half of last year, but will it be the same in the next few months? I would venture to say that, if production does not pick up, and I'm not so sure it will pick up, the unemployment rate is likely to go up in the second half of this year. Now, from the Federal Reserve perspective, can you really cut interest rates if inflation is still rising? That's a big unknown. The market is very aggressive right now, pricing in four rate cuts for the Federal Reserve. But if it's a stagflationary component to U.S. economic growth they won't be able to cut rates as aggressively, and that could fragilize the stock market. So, this is very important. In the next few months, will the U.S. see rising unemployment rates? And that will be the critical element that will allow the president to be a lot less aggressive on tariffs.

Yeah, but he was happy this morning for sure.

Yes, but that means he can remain aggressive on tariffs, so I want him to be less aggressive.

Which is bad for that number.

So, exactly. So, the unemployment rate will be critical in the next few months.

If we come back in Canada. In Canada, you know, we had also the GDP number. GDP number is positive, you know, compared to the U.S., which was negative, but it has a bad trend right now.

So, yes. So, we're not going to be down on growth in Q1. So that's great news when you consider that. However, so we have positive growth, lackluster growth, you know, maybe 1.5%. But notice Denis that population is going at 2.8%. And this is the issue from a Canadian perspective: the blue line is supposed to grow faster than the red line, not the other way around. So, this is a critical development that needs to be addressed by our politician. We just had an election in Canada. We have a new Prime Minister that said that, you know the economy is a priority for him, so we need to fix this. Absolutely. This is not normal. We need to put policies in place that will foster an environment where the blue line grows faster than the red line.

And then, you know, talking about that, we need to talk about investment because at some point, you know, we still have that lag between the U.S. and Canada in terms of business investment, and that has to change.

So we need.

Mr. Carney has to tackle that one.

So basically, what you're telling me, we need to improve productivity and we can't just grow on population growth. And that means we need to bring business investment. I think you're right on that one. You're absolutely right on that one. And we haven't had, you know, business investment that has been stable or stagnant for the past decade. And that's unprecedented in Canadian history. So, the U.S., you know, business investment is more than doubled over in the U.S. over that period. So, this is the critical element. This needs to be, this has to be a priority for Mr. Carney. So he won't be staying home very long. So, this is a priority.

He's going to the White House next week.

You're right. So that's number one. So, in order to grow business investment, you need to attract or retain investment in this country or attract foreign direct investment in Canada. So, I need visibility on my access to the U.S. market. So that's point number one. You're absolutely right. The other one that we spoke too often is domestically, we need to abolish these interprovincial trade barriers in order to foster East-West production or trade.

Yeah, and we have to react on that because we keep talking about it, but we haven't seen anything yet that is coming and saying we drop that. We drop that. No, it's just words right now. And election.

You're right. And with the currency that continues to appreciate. So basically the Canadian dollar is appreciated more than tariffs have increased on Canada. So it doesn't really help our businesses. So not only do we not know if we have market access to U.S., the currency is appreciating, which is not necessarily great for earnings. So, this needs to be settled, and if the currency appreciates, why don't we show a little bit more, let's be a little bit more pragmatic. Let's reduce the regulatory environment because, you know, the Prime Minister says we need to spend more to invest more in the country, but it won't help if you have this very prohibitive regulatory environment that needs to be tackled. And, corporate income taxes as well as energy policies is a big unknown. So, these are all priorities that need to be addressed. Unfortunately, you don't have much time. So that needs to be addressed over the next three to six months.

Yeah. And we know that corporations will probably go South of the border because of everything going on right now. They want to produce product there to get access to that big market. Then having those foreigners coming to Canada, we're going to be, or we're going to need to be very, very attractive. Then he mentioned it, fiscality, you know, regulation, we need to do that fast. And you said it, Mr. Carney, will have a big agenda in the coming weeks if we want to see that curve moving up for the first time since a long period of time.

You're right that you can't coast just business investment. You know, the private sector just with government spending. It's more than that. It's the overall environment, the business environment. Are you business-friendly? Are you open for business or only so? So, yes, the priority is, as you said, renegotiate USMCA and tackle all the regulatory environment that reduces business investment in this country. And who knows Denis, if you do all this, I'm optimistic that they would reduce the valuation gap between the S&P TSX and the S&P 500. I think there's hope to be optimistic provided that the Prime Minister acts swiftly on all of these fronts.

So what do we do as investors? You know, we've been very prudent. We ask people to be very prudent, rightly so. Now we're seeing in some assets are doing better except the U.S., but we know that never good to short U.S. because that economy is very resilient.

You're absolutely right. However, I would say that there's probably a, you know, investors are probably looking at, is it normal to deploy so much capital in the U.S. if I have alternatives elsewhere? So, I think Europe is starting to provide an alternative. I want Canada to provide an alternative. So, from a relative performance standpoint, I still think that the U.S. is likely to underperform unless Mr. Trump backs down very aggressively on tariffs. So, but having said this, Denis, we have yet to see this happen. So, for that reason, still prudent in terms of our asset mix at this point in time.

Good. Thank you, Stéfane. Thank you to all of you to listening to us. And above all, don't miss our next meeting next June. Thank you.

Welcome everyone, today, April 15th, 2025 Economic impact videos. We've been reaching out to you for the past five years. Today's a special day, marks our five-year anniversary. We started these in April of 2020, just at the beginning of the pandemic and today we're in the middle of a tariff war. It's important. We are a financial institution. We reach out close to 8000 of our clients on a monthly basis. We have a responsibility. We need to share our opinions, our views on the economy. Today are unprecedented times. We are facing an American administration that is trying to change the world, which brings all sorts of challenges and concerns over the world. So, these are a way for us to reach out to you to tell you what we're seeing, our opinions. So, we're going to keep doing these. But today's a special day, five-year anniversary. And I'm going to pass the mic to Denis Girouard, who's been doing this for the past couple of years, and our Chief Economist, Stéfane Marion.

Thank you, Laurent. So Stéfane, where are we on those tariffs now?

And by the way, I need to thank Laurent too, you know, remind us that we're five years older after all of this. It's action-packed Denis, just like it was five years ago for different reasons. So, tariff structure on its way up, way up, way, way, way up. So.

They keep moving though.

They move all the time. It moves all the time. So, we went from 2 to 5 to 10 to 36 to 32. Now we're at 26 as of April 15th. If you want me to give you some historical perspective on this, you have to go back to 1901 to see 26% effective tariffs on U.S. imports.

Well, with those tariffs, there's an impact on an inflation expectation.

Oh the U.S. consumer is so much bigger than it was in 1901. So therefore 2/3 of the economy, tariff structure 26%, while consumers are concerned, and it clearly shows in the numbers, inflation expectations. It doesn't mean it will be realized, Denis, but consumers are potentially fearing the worst inflation since the 1980's, 6.7%.

Yeah. And because of that, the consumer sentiment is way, way low.

There's one thing you can do to really make consumers feel mad is it's inflation. We've seen it during the pandemic, right? Case and point. We have consumer sentiment right now as low as it was during the pandemic. Again, this inflation thing really is annoying to consumers. So that does not necessarily bode well for the US economy in the months ahead.

Consumers are not happy, but also the equity market.

Well, yeah, if you're, if you're going to hit 2/3 of U.S. economy, you're going to hit financial markets, and U.S. equities are being hit big time. The S&P 500 went as low as 19%, so we did not enter a bear market territory, which would mean reaching- Pardon me?

-20%?

Yeah -20%. So we went to -19%, we're at -12%.

Technically, we're not there.

We're not there, but we're still, you know, in correction territory in a sense. We're still below -10%. Denis, surprisingly, people have been asking, you know, how's the Canadian stock market going to behave? We had lower valuation to start off with. So, we've been hit less hard than other places. And right now we're down 8%. So, some relative resilience if you want. Everyone's down, but some countries are down less than others.

Yeah. At the same time, the U.S. dollar also is getting hammered.

Well, that's part of the reason that Canadian sector is more resilient. People are buying into Canadian assets. We can speak to that in the next few minutes, but clearly the U.S. dollar is not very popular right now. It's not popular within central banks. It's not popular with foreign, foreign pension funds. So, there's been a shunning of the U.S. dollar. And this is very unusual. Historically, when the stock market goes down, U.S. dollar should be going up, not down. This is really a change in correlation that reflects the uncertainty created by the tariff war.

Yeah, we have the stock market being quite volatile, but also the bond market, but also the spread on the corporate credit. It's widening quite a lot in that period of time.

Yeah. So, people are shunning the U.S. dollar. They're not very happy about U.S. treasuries. But one thing they don't like right now is the corporate debt market, which is very important to, as a source of liquidity, for U.S. corporations. So right now, corporate spreads 148 basis points. Right now it's way up 150 basis points up since the start of the year. Denis that's a big deal because if you're a high-yield corporation right now, your financing costs, your effective yield. If you're going to issue bonds, you got to pay 8%.

That's a lot. OK, there's a lot of people talking about stagflation. Are we going in a recession right now?

Slow down? Definitely. So much so that we have brought back to life our Recession Risk Monthly Monitor, which is available on the website for people interested. I'll spare you the details of all of these numbers. Suffice is to say, there's a lot of yellow in here, some red. If you put it all together, odds of a recession right now is 40%. Not the baseline scenario, but clearly there are some concerns that, in the months ahead, if you don't reduce tariffs, while I think these probabilities are likely to increase. So let's be careful right now. Financial markets rebound, equity rebounds, a lot of volatility, but these odds are likely to continue to rise unless Washington decides to lower tariffs. Not the case right now on a substantial level.

And there's maybe a pleasant surprise and all those news, Canadian dollar, which is bizarrely up.

So historically, if I get these probabilities to rise, you don't want to own the Canadian dollar. But, a lot of things are different this time around and Canadian dollar is actually behaving quite well, 5%. Our model says you should be 5 to 10% cheaper than what we are right now. But there seems to be some interest in the Canadian dollar or Canadian dollar assets.

Yeah. And what's really the effective rate, you know, on those tariffs in Canada? Because, you know, we have that that agreement between Mexico, United States and us, which is supposed to be at 20 something percent. And but we're all mixed up here, OK, because it's tough to follow and understand where we are.

So, there's a lot of confusion. So people are buying Canadian dollar assets because foreign investors believe that we're less impacted. Well, less impacted negatively versus other countries. So let me illustrate this and, and the confusion to try to help with the confusion. If we had no free trade agreements with the Americans, given what they have in place, we would be facing an effective tariff rate of 24%. But we do have a free trade agreement called USMCA and a lot of Canadian corporations are USMCA compliant. All the energy producers are now USMCA compliant. Put it all together right now Denis, so the effective tariff rate on Canada is 5.7%. The confusion out there is to say, well, everyone is a minimum 10%. No, not the case. If you are USMCA compliant, particularly if you're an energy producer, 5.7%. Now if more firms become, Canadian corporations become USMCA compliant, between now and the year end, we could be at 4.2% or even lower if Washington reduces tariffs on aluminum software lumber. So right now, 5.7%, you can understand that foreign players or foreign investors saying, well, I'm going to invest in the place where the tariff structure is less punitive. We are part of that group.

Then don't show that to President Trump because he wants everybody at 10%.

I think he's aware of that because he's calling the exception that he knows that if taxing Canadian energy would just make inflation expectations worse in U.S., so that's why we are where we are.

And we showed that Canadian dollars earlier that is going up, but not only the Canadian dollar is going up, but also the reserve for the Central bank are going up in Canadian dollar.

I think the central banks are partly to blame. You've got that right, Denis. And people forget that we are the 5th largest foreign currency held by central banks. We're at 3% of the total right now. We started from nothing in 2012. We're at 3%. There's more people, foreign banks or you know, investing in Canadian dollar than in, you know, in the Chinese renminbi or the Swiss franc or the Australian dollar. So at 3%. Now you might say 3% is still small Stéfane, but the dollar amount is huge to need $450 billion. It's never happened in Canadian history that central banks own such a large part of Canadian assets or the bond market if you want. So that keeps a bid on the Canadian dollar, it explains why we are stronger than we would otherwise be. But that reflects the tremendous uncertainty facing the global economy in this punitive tariff structure that could undermine the U.S. economy in the months ahead. So.

So Stéfane, you've been telling us for many months that we need to be prudent. What do we do now?

At 26%, you're still prudent. And these tariffs got to go down. They need to go down to 10%. Seriously, Denis. So, let's be careful out there. I can't justify a stock market valuation or U.S. equities that are trading at, you know, 18 times forward earnings. I think the surprise will come from a significant deterioration in corporate earnings in the months ahead. Financing costs are up. You're selling less to the rest of the world. Clearly, that's not good for profits. So again, it will be volatile again for the next few months. So, let's be prudent out there.

Thank you, Laurent. Thank you, Stéfane. Thank you to all of you for following us for all those years. Hopefully, it's going to last many months or many years. Until then, we'll see you beginning of May. Thank you.

Hello, everyone, welcome to Economic Impact. Today is March 11, 2025 and as usual, I am with our Chief Economist, Stéfane Marion. Hello, Stéfane. A lot of change since the last time.

Good morning, Denis. We're– I guess we're getting closer to the eye of the storm here with economic data that suggests that even the almighty U.S. economy is being impacted by the potential of the tariff war. And we saw that for the first time in two years there might be a service economy that shows contraction. And that Denis, is important because that's 2/3 of the US economy, so if you hit the service sector, which was not so much exposed to the so-called tariff war, but uncertainty has done its job. This bodes for a weaker U.S. economy in the months ahead.

And above that we have the bond market that are sending us a message now.

Things are in sync now, remember when we had a discussion a few months ago, the economic data was sometimes so so but now everybody seems to be thinking the same. And from US bond market perspective, the yield curve, which is the difference between a 10-year Treasury yield and a 3-month T-bill had is now flattening again. So historically Denis when they have a flatter or an inverted yield curve that would suggest weaker growth, not faster growth. So the bond market is clearly getting a little bit more worried.

Yeah. And at the same time, we're seeing a different signal on the equity market. If you're looking at Europe versus North America,

The equity market rarely inverts, actually the beginning of a flattening of the yield curve or potential inversion. And we've seen that things have changed quite significantly since we spoke last month in the sense that the equity markets are down, way down, particularly in the US. Notice too, that might be surprising, but, you know, some parts of the world which are threatened by US tariffs, emerging markets or Europe, are actually still up on a year to date basis, whereas the US is down significantly. So there seems to be a change in mindset from investors with the uncertainty related to what the global supply chain may look like in the months or years ahead.

And you want to put also in perspective, you know, the external sector, the export in the US versus what people think really.

Yeah. So there's been some denial in Washington by politicians, but also some economists who were claiming who cares if there's a tariff war, exports account for only 11% of the US economy. My answer to that is fine, that's on the economy. But what about the US financial markets, what about the S&P 500 where 41% of sales are realized overseas? So if you threaten the tariff war and you've had a strong U.S. dollar up until recently, then obviously you will threaten the performance of the US stock market. And that's part of the reason of, you know, what I showed you before of this lack, this underperformance of the US stock market versus other parts of the world.

And talking about that, not all sectors will be affected the same. And the one that will be, we know them very well.

Yeah. And we've all heard about the Magnificent 7 for the past two years generating most of the outperformance of the US stock market. So it's the IT sector, but the IT sector generates 56% of its sales from overseas economy. So imagine that, I'm threating you with a tariff war, there might be retaliation, what's going to happen to profits of the IT sector in particular? Well, it's not going to go well and that's fully reflected in we're seeing. So what we said before the US stock market down 9% from its recent peak, but the NASDAQ you know IT sector down almost 14% Denis. Note U.S. banks down more than 16%. Why is that? Well, if you decide that you're going to get, you know, a big change in the global supply chain, presumably that would entail also that maybe it will be yes, less exchanges in U.S. dollars and 92% of global trade happens in U.S. dollar. If people say I don't want U.S. dollars under these circumstances then U.S. banks are under pressure. So again, that does suggest weaker growth in the US in the months ahead.

And because everything is in sync right now, U.S. dollar is going down too.

Yes, so if you have these– if Europe is going up while the US is going down, clearly somebody is shunning the US dollar and U.S. dollar strength has vanished in the past four weeks and you're already down 4% to 5% year to date. So people are saying, you know, having second doubts about the rationale where the only place to be with Mr. Trump was to invest in the US. People said no, maybe I need to make sure that I–

Have bigger diversification.

More diversification, geographical diversification might make sense.

Yeah. If we come back in Canada, the external sector they did quite well in the last report.

Yeah, so we did well because US corporations decided with this tariff threat we will be importing like there's no tomorrow and that probably also impacted the US dollar. Whereas in Canada well it's the mirror image, if the US were import quite aggressively, we were exporting quite aggressively. So much so Denis hat we might have the trade contribution to our economic activity in the first quarter of this year, that will be the largest since we came out of Covid, so almost 5 percentage points. So think about this Denis, I might be seeing a negative GDP in the US in the first quarter and a positive one in Canada despite that we are the one threatened by a tariff war.

But that's going to be temporary.

I don't want to be complacent. You're absolutely right. People are trying to front run the impact of the tariffs. So that won't be carried into the second-half of this year. So I think that under these circumstances, despite the fact that GDP will be stronger than expected, I think that the Bank of Canada has no option but to cut rates at its next meeting, which will be tomorrow on Wednesday, March 12th.

And there's 2 words that we know very well now, "tariff" and "regulation". And when we talk about regulation in Canada, this is something that probably we should tackle right now.

Yeah. So we make a lot of fun about the president claiming that "tariff" is the most beautiful word in the dictionary. I would say, well, don't laugh too much because it seems that in Canada, "regulation" is the most beautiful word in our policymaker’s dictionary. They have their own dictionary sometimes Denis, unfortunately. So the point I'm trying to make here, Denis, is to say you know, did you know that regulations– we now have 320,000 regulatory requirements that are impacting our corporations and the manufacturing sector and loans is 105,000. It's up 40% over the past two decades. And what that does Denis, it limits our job growth our economic activity, but more importantly, our business investment would be 9% higher were it not for this increase in regulation. So, you know, we have a new Prime Minister in Ottawa, you know, leader of the Liberal Party. We'll see what happens. But you know, as you contemplate putting tariffs against the Americans retaliation, why don't we retaliate by getting rid of these regulation and kickstarting more economic activity in our country by helping a companies. And you know what that doesn't cost so much for governments to reduce regulation when you think about it. So maybe that's the way to go or an option for us to consider.

Yeah. And the timing is perfect right now to do that, you know.

You get an opportunity like an opportunity like this once in a generation. So let's seize that opportunity.

Stéfane, what do we do now? You told us to be very careful many months ago. Now. What's the next message?

You know, I admit Denis that we told clients to be careful maybe a little bit too early. But I think at this point in time, let's – before we go in and decide to buy the market more aggressively – let's be prudent, let's you know, have a balanced portfolio and maybe start thinking about potential geographical, you know, allocation to our diversification to our asset mix. So let's be prudent for the time being. We need to confirm what the new policies will be and the tariff war, if it continues, it won't be pretty in the second half of the year. There might be more downside to equity markets.

Well, on those not so good words. Thank you Stéfane. Thank you for being with us. Hopefully you're gonna be there next month, April, and until then, be safe, be careful, and hopefully things will go better. Thank you.

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