Transcript
Hello and welcome to The Download. I'm your host, Dave Richardson, and we are joined by Canada's hardest working economist who's working particularly hard this week. So we thought we'd get him on. Eric Lascelles. Eric, welcome to the podcast.
Thanks so much, Dave. I normally balk at that mantle. I'm not that hard working, but you know what? The last couple of weeks have been quite something, obviously grappling with all the possible policy permutations from a Trump White House and the tariffs in particular focus right now. So I'll take the mantle and happy to talk about that.
I mean, speaking of that, Eric, I told you earlier, if you didn't come on the podcast more often, I was going to slap a 25% tariff on you. And because you didn't listen, now I'm a lot more serious about it, and you're going to have to change your name to Eric Richardson.
Makes sense.
You're going to have to join my family, right?
I'm just trying to figure out what financial flow is happening on which one could put a tariff. I think we're just doing this in a friendly way. But anyways, okay, good to know.
Yes. Well, we're saying this very much in jest, but again, we had talked about this a month ago or somewhere around that time frame, and you had a view, and I think you've gone away and done, as you say, a lot more work on the potential impacts of tariffs. But again, we've seen in the interim a very particular situation with Colombia. Unhappy with something that Colombia is doing, threaten tariffs. Columbia changes course, tariff taken off, still always sitting there in the background. Same thing with Canada and Mexico. But again, brought to the fore yesterday with the announcement that seems a little bit more firm—and I don't know, you'll correct me on this—of a 25 % tariff against Canada and Mexico. How do you analyze all of this of what's going on and what's going to likely happen and how we think about this as Canadians?
Yes, it's moving fast. We actually are now distributing an internal note just to summarize changes in plans and changes in tariffs just to the investment teams. We sent it out yesterday at about 4:00 or 5:00 PM. It's already horribly out of date. We probably should have held it back. That's just to say things are changing pretty fast and any even perfectly reasonable, fairly intelligent claims made today might well be different tomorrow. So we're alert to that. I would say it's not a bad idea to start with what I call first principles and say, okay, how does Trump think about tariffs? And so I would say, he thinks about them in two different ways with maybe different implications. One is very clearly as a tool to secure American objectives. And so you mentioned that Colombia experience. Colombia didn't want to take some migrants back, and Trump put a 25% tariff on. Colombia said, okay, we will after all. And the tariff is gone. Further to the idea that you make this big threat and if countries can comply with what Trump is looking for—and it's largely in a non-trade capacity, by the way—you stand a fighting chance of avoiding tariffs or at least not being hit as hard as you might. And so when you think about what Trump is demanding of his North American neighbors, of course, it’s border security which is really the big one here. And so these countries are well-advised to listen carefully and make some big splashy announcements to that effect. I think they're going down that path. There's probably room, to be honest, to do a fair a bit more. And so border security in the context of illegal immigration and in the context of the flow of illegal drugs as well. And of course, I think it's well appreciated that the great disproportionate share of that happens to be coming across the southern border, not the northern border, but the northern border is not completely immune to those sorts of flows. And so he has put to both those countries that they need to do something about it. And so that's certainly worth saying. Maybe the other thought would be, famously, right back to the «Art of the Deal», Trump is all about making that maximalist demand. And then really what that does is it normalizes less extreme positions that are still Trump favorable. And so you recognize that he probably doesn't actively look for a 25% tariff on everybody at all times. He's probably thinking about a somewhat smaller number but wants to have that threat out there to get concessions from other countries, essentially. And so I think that's worth thinking about. As you say, the Colombia example certainly speaks to this as being a negotiating tactic, not purely that tariffs are a good response. The fact that despite some claims to this effect, that there would be tariffs on day one in January 20th and so on, they weren't implemented. That suggests to me that Trump likely recognizes that big tariffs probably aren't in the best interests of the US economy or in the best interests of keeping inflation down. So that's, I think, interesting. We're seeing some waffling on date. So you didn't get the January 20th. We've heard the February 1st threat. This is January 31st in the afternoon, for those wondering, and there was something earlier today where Reuters had reported that indeed that February 1st tariff threat had been shifted to March 1st, and that was interesting. Trump has since said no, it's February 1st. We're going to find out pretty darn soon on that front. That's tomorrow. So I guess we'll find out which of those is correct. Do note, of course, that Trump also commissioned a study into trade and into tariffs. And on that front, the idea was that the study would be completed by April 1st. And so you argue that that would be a logical time frame. And so really, it's impossible to say whether February 1st is going to be that big day or not. But in general, you do see this idea that they do need to create a little window of negotiations here to extract concessions from other countries without having to put up with the full damage of the tariffs. Now, is that to say that tariffs are all one big bluff? I don't think so. And I don't think so in the context that Trump has also talked about tariffs as being a revenue-raising tool to fund tax cuts. And I can express some measure of skepticism. I mean, empirically, you do pull money into the government coffers directly by doing that, but of course, if the economy is weaker, you're bleeding money in other more subtle ways. It's not clear you end up that much further ahead. It's pretty clear your overall economy ends up somewhat behind. But keep in mind, Trump is looking for a way to essentially finance tax cuts, and part of that financing is having enough money. But the bigger part is actually just having a plausible proposal by which you can say this is a revenue-and-expense-neutral initiative and whether the tariffs actually do what they're supposed to do is beside the point if you can justify several hundred billion dollars of tax cuts, and that's job one as well. We walk away from this very much of the view that we need to take these tariff threats very seriously. There may well be tariffs within 24 hours, depending on how things play out exactly. We'd be surprised if there were big blanket comprehensive tariffs that stuck around for a sustained period of time. I think more likely is smaller, more targeted tariffs and indeed, defending certain American interests wouldn't be a surprise. And of course, steel and aluminum tariffs were precisely implemented last time around. And so it wouldn't shock me if there were targeted tariffs of this nature, which, of course, would be unwelcome as well from an economic standpoint point, but does a bit less damage. I could ramble on, but I'll stop for a moment and just say we have run five different tariff scenarios. Happy to talk to those if you think that's of interest.
Yeah, but I do just want to come back on a couple of things that you said. One thing I'd really want to clarify, just for all the listeners, is just an assessment of whether Canada has done enough or has not done enough at the border or could do more. There'd be a lot of opinions around that, and we saw a couple of provinces come out with different statements around what they're doing on the border, and we know that the federal government is doing some things around the border. But this is one of these cases where you have a single judge, jury, and executioner, and that would be the President of the United States. That's really the only opinion that's going to matter here. Clearly, that is the gamut if we talk about what's the likely specific trade-off this time around. I'm also very interested that you were on the initial volley from the US that they would have a 25% tariff on Canada and Mexico. Again, it was just over a month ago. Can't remember the exact timing of it. But at that point in time, you had said that your thought would be that it would be much more targeted. I think we talked about some specific areas of concern that the US has about Canada, which tends to be in steel, autos, lumber, maybe dairy, some areas like that. It's interesting that you still think, even again with this second volley, that it is still unlikely that you get to that big blanket tariff. This is, again, just as much as anything, as you said, a negotiating ploy to come back to get Canada to move in the direction that he wants. And as long as he's satisfied with that movement, we’ll go back to a much more modest and measured tariff assessment against Canada.
I think so. I would say there are quite a range of possibilities. It's not impossible that we get huge tariffs to just stick around. I think it would be so extraordinarily damaging, including to the US. It's hard to fathom that that would be consistent with his desire to lower inflation and have the economy strong and have the stock market feel good. And with all of these C-suite advisors all around him, it seems pretty unlikely to my eye. In fact, we're saying we think there's about a 10% chance that you do just get 25% blanket tariffs and that's that. And that would be a recession for Canada, just to be perfectly honest. But we think that's a 10% chance. We assign another 10% chance or so to some other form of big grand tariffs that stick around. And so maybe it's 20% cumulative that we end up in a worst-case scenario in terms of a lot of economic damage being done. But the other 80% chance in our mind is something less damaging. And so at the opposite extreme, there’s a 10% chance we don't actually get tariffs that do much or stick around for long. It's possible. Not a perfect analogy to 2017 to 2020, but okay, there were still aluminum tariffs for a year. I don't want to minimize the suffering to those sectors, specifically. But there wasn't actually lasting tariff damage that stuck around. And other than to China, we didn't emerge from the first Trump term with a materially heavier tariff burden on the world than before. So it's not completely ludicrous to suggest there's maybe another 10% chance that we just don't get any tariffs at all, or at least not ones that stick around. I should say on the blanket tariff side of things, and the information is really swirling here, but I read today that Trump was talking about excluding Canadian energy from the blanket tariff. Just let the record show that Canadian oil and gas—and hard to say whether electricity was in the mix or quite what the definition there was—but just oil and gas is 28% of Canadian export. So over a quarter just got the blessing it would seem to be excluded. And by the way, we were saying this before, which is just you don't want to tax four million barrels of oil a day that the US is importing. And it just doesn't make the average car driver all that happy. And so here we are seeing some carve-outs suggesting it isn't likely to be fully blanket. We don't really know what else might be carved out, even if there is a 25% tariff. I know there have been aggressive words connected to the auto sector and so on. Do note that there was a 25% tariff threatened for the North American auto sector in 2018 as well, and it didn't happen. This is a very integrated supply chain. Yes, I'm sure Trump would like to deintegrate that over a period of time, but the short run effect would be, I think Wolfe Research estimated the average American car would be US $3,000 more expensive if you suddenly apply 25% tariffs that zing back and forth as these products are going across the border, in some cases on several occasions. So it wouldn't shock me whatsoever, even if there was a big, bold tariff planned, if that sector got excluded. Guess what the second biggest source of Canadian exports to the US are? Just that. You're now up to 40% of Canadian exports not being exposed to tariffs. Obviously, there are still risks and so on. But I think the point being, you pretty quickly can talk yourself into the idea that it would be targeted tariffs doing less damage. And so the way we think about this, to run back to those probabilities, 10% chance we actually don't get any sustained tariffs. Maybe you do for a little bit, but not sustained. 10% chance that we get the full 25% killer tariffs; not so happy. 10% chance you go back to the original plan. This all feels very dated, but the original plan was a 60% tariff on China, 10% on the world. I'll admit we're not hearing a whole lot about that right now, though he did say something about «I'm not ready yet to apply a 10% tariff on everybody». So maybe that hasn't completely left his mind. So that's a 10% chance. That'd be problematic. So that's 20% chance of a pretty problematic outcome. A bunch of numbers are missing there, though. So there's 70% that's missing from this discussion so far. And so we think there are two scenarios, collectively a 70% chance, that would be mild tariffs, mild economic damage. One of those would be, actually, maybe we do get the scary tariffs tomorrow, but they only last for a month or two, or worst case, a couple of quarters. And so there's damage, but the damage is contained because it doesn't stick around for too, too long. Or—and this is what I think is the most likely scenario, and we've given it just individually its own 45% chance, which annoyingly means it's also less likely to happen than not, but it's as high as we can get when we're dealing with five different scenarios—and that's the one actually we've been talking about since the November election, which is just partial tariffs. Which is probably not 25%, maybe on a sector or two, but some tens in there, some fives in there, much more targeted in a way that just limits the cumulative economic damage. And if it's either of those two lesser scenarios—again, together about a 70% chance, we think—it's unfortunate, it's undesirable, lots of uncertainty, lots of fear in the short run, of course, as well. But it chops a third of a percentage point off economic growth or something like that, which we don't love, but it doesn't make a recession. It's unfortunate, but it's not the dominant theme for markets this year and that thing. So we still think that's most likely. Certainly, there's room for being wrong. There's room for having to revisit some of those probabilities. But I think that, again, back to first principles, he likes some tariffs. He probably doesn't want the full hit just because of the damage it extends back to the US. And just that maximalist initial demand is the classic strategy. And just take a look at Colombia and take a look at the 2017 to 2020 experience, where, again, the 25% tariff threat on autos didn't happen. Mexico was threatened with a 5% tariff that would go up 5% every month until it hit 25%. That didn't happen. Sort of interesting, the Treasury Secretary, Bessent, has talked about a 2.5%, I think, blanket global tariff that would go up in theory over time till it hit 20%. If you thought tariffs were a good thing that generated revenue and made your economy stronger, you wouldn't do it in a tiered fashion. You'd do it right up front. It would be, why not get the good thing as soon as I can get it and as much of it as I can get. To me, this implicitly suggests that, okay, they know that high tariffs are not particularly desirable. The idea that you ratcheted higher over time is that you're looking for countries to make concessions to you, essentially. And when we think about maybe from a Canadian standpoint, what Canada is likely to be asked to do, and you flagged some and I flagged some, border security is the clear linkage being made here. And so go waste a few billion dollars if you need to, but go make a big show of just how much you're doing on that front. Defense spending is a pretty serious one, to be honest. Canada is not punching at its weight or where it's meant to be spending just according to NATO, let alone US desires. And so 1.3% of GDP, and it's meant to be 2%. And Trump says it should be 5%. And 5% is not a practical number, but 2% is something that Canada should be working hard and fast toward. And so that's not an unreasonable demand and one I think that's going to come up. And Canada probably does need to make some concessions toward that digital services tax. Dave, I don't know if you remember, 2024 Canada put this. US didn't like it. It basically hits big US tech companies when US tech companies are using their knowledge of us to make money, but not claiming it in Canadian tax documents. And so I wouldn't be surprised if that's under pressure to go away. The supply management we talked about, dairy and eggs and so on, generally get a bit of a hit, or at least some targeting softwood lumber has tariffs, but they're always in the mix, too. It's just funny the way the stumpage fees work, and it just looks like it's a non-market force thing as much as it may well be perfectly fair. Recall what China promised to do to the US last time, which was to buy a whole bunch of US goods? I don't think they actually did. And so maybe that idea is off the table. But nevertheless, it might be, listen, there's a significantly sized $45 billion trade deficit the US has with Canada. You got to buy $45 billion worth of goods. I mean, who buys them? How that works? What's being bought? I don't know quite how that works, but it wouldn't shock me if there was talk just as to they promise they're going to shrink the trade deficit or some variation on that. By the way, it's not $200 billion. It's $45 billion. We're not quite sure where the 200 came from. And then just clearly, in a Canada, Mexico, US context, the USMCA trade deal is going to be reopened. Whether that's in 2026, which is the formal reopening, or whether it immediately is unclear, but I would say that's pretty obvious. And fortunately, I suspect most of US complaints apply more in the Mexican direction in terms of cheap labor costs undermining the US, and in terms of Chinese trans-shipments working their way through Mexico to the US and evading tariffs. A little bit less Canada, but nevertheless, that negotiating is likely to be central as well. Then if Canada can really pull, I don't know, a judo move or something, use the energy of the opponent against them, you can make an argument for something, and this has been done for Fortress Am-Can or some variation on that, which is just the idea that, hold on, if Trump is so keen on securing the resources of Canada and Greenland and this regional sphere of influence and so on, there's no better way to do that than to minimize trade barriers and encourage the flow of goods that access and allow companies to operate across borders and so on. That's an opportunity to deepen the ties between the countries, and that would be, presumably, to the advantage of Canada. All right. I've been going on for a while, so there is room for concessions.
On the energy and materials front, that just seems quite logical. But, Eric, if anyone ever wants to debate around you being Canada's hardest working economist, they just need to listen to that soliloquy. That was brilliant stuff. Absolutely brilliant stuff. From a very selfish perspective, I was out with some investors for lunch yesterday in Montreal. C’était une fantastique experience avec les investisseurs and I was saying to them, don't worry too much about the tariffs. Again, it's a lot of bluster, it's s negotiating ploy. Then, of course, from your comment that this is moving so fast. As we as we speculate and look at all the different options and possibilities and things that might happen, the back and forth, that you could say something at one point in time, say at a lunch in Montreal, and look very foolish 2 hours later when a 25% tariff is announced. Well, this is exactly what can happen. This is a very fluid situation. But again, I think if people just listen to that last little bit, and I learned a lot from that, just in terms of the detail and some of the very specific areas where there's a gripe or there's something that the US can point at and say, hey, we'd really like you to move on this front or that front. But also importantly, Canada has got some cards here, too, in terms of things that Americans want. And we still do 78% of our trade with the US. There are a lot of mutual interests at play here. If the ultimate objective is to have the US economy growing, that's generally going to be good for the Canadian economy longer term. You're not going to optimize the growth of the US economy by willy-nilly slapping massive tariffs on all of your trading partners all around the world.
That's exactly right. These are siblings having something of a spat. I don't think it's a forever situation. That's also the other perspective, which is if tariffs get put on, I don't think they're on 10 years from now. Not that that's a consolation in the short run. And you're quite right. Canada has options. It's not just about making concessions, though, a fair bit, I think, unfortunately, might be. But of course, you've got that tit-for-tat tariff response option, which was pursued last time, which Colombia tentatively pursued. And then I woke up in the morning and they were all gone. But nevertheless, loosely equivalent tariffs, maybe not on the same things. In a Canadian context, I gather they have a list, and the question is just how far down the list you have to go depending on the scale of the US tariffs. I mean, logically, you would think you'd be targeting things that are politically sensitive to Trump, where it's a source of pain for him or for his supportive politicians. Whereas Canadian demand is highly elastic. So that is to say where Canadians just say, I guess I don't need that thing. It's a discretionary item, not an essential. And by the way, that's not just convenient in the sense that it feels less painful, but that then reduces the risk that the price gets passed up or down the supply chain to the Canadian consumer. It's more likely to be passed in the opposite direction. And so you want optional things. And then, again, ideally where there's a viable non-US substitute, whether it's ketchup or mustard or whatever the thing is, you want to target things where people can say, oh, well, I guess I'll just buy the Canadian equivalent or this other international option. And so, again, it minimizes the pain to Canada. So that's an option. And then I guess the other one would just be from a backup plan perspective. And I wouldn't say this is actively expected by me, though it has been discussed. And so export taxes, export restrictions that's been mentioned. Essentially a tariff is already that. So US puts a tariff on Canadian goods. It feels weird that, oh, we're going to do even more. But the idea there would be, well, if they're going to exempt oil, well, how about this? Canada doesn't export oil, and suddenly the US is missing a third of its oil per day it needs to run the economy. I'm not expecting this. I think it's pretty unlikely. Alberta has expressed a clear disinterest in that particular solution. But if it is 25% tariff, if it's been several months, if the US seemingly is not appeased, there are some backup plans, and they relate to restricting certain strategic exports, electricity, minerals. You could think of potash or canola I've seen cited, water, apparently. You certainly would be well-advised to be flirting with other spheres of influence in the world. Now, whether they're realistically, you could pivot on your trade to China or Asia or Europe or something, I'm pretty dubious. We've seen efforts before. It takes a long time. It never actually really seems to fully happen. Don't underestimate just the geographic force that exists when you're a close neighbor. But you'd want to make the US a little jealous and recognize there is something at stake here. Other people wouldn't mind those Canadian resources and products instead. And then you've got unconventional options. I don't expect any of these things, but you could limit US airplanes from accessing Canadian airspace. Guess who travels over Canada on the way to Europe and Asia most of the time? And limit transhipment of US goods across Canadian ports or non-tariffed barriers in the way that you could essentially limit certain American products. And really, it's almost an endless list. We don't want to see any of it. I'm not expecting, to be honest, any of that either. That's the worst case, open in case of emergency options. For now, it's tit-for tat-tariffs and you negotiate, essentially.
Yeah. And on the electricity front, as I said, I was in Montreal yesterday, and I hear some talking in Quebec circles about electricity, and I think the Premier of Ontario has also talked about electricity in that. And electricity and water are two things that Canada has got an awful lot of and that the world needs an awful lot of as we move forward with artificial intelligence and so many other things. I will say, though, in a sibling spat, Eric, my little brother is not little. He's about 6'5, 300 pounds. If I got him riled up enough, he could rough me up pretty bad when we were kids. You don't want to awaken the beast too much with too much pushback. By the way, at that lunch in Montreal, we had a few people who listened to the podcast regularly. We'd love to have more subscribers. If you like what you're listening to today—and how can you not, with Eric's analysis; it's actually blowing me away as I'm listening to it. It's fantastic. He's on the top of his game, and he's here regularly despite what I talked about with a threat of tariffs against Eric. But please subscribe, follow the podcast, follow us on YouTube, give us a five-star review. Keep the marketing folks happy because when they're happy and Eric's happy, we do lots of good podcasts. And by the way, the folks at lunch really are particularly big Eric Lascelles fans. So they had a lot of nice things to say about you and your appearances here. So let's talk about currency because I think that's a nice transition between the two topics for today, which is the possibility of tariffs, and then what the Bank of Canada and the US Federal Reserve announced and talked about earlier this week. A lot of times, when we see these battles back and forth, you first see the impact in currency markets; big, deep, liquid, volatile. We've seen since the election, the Canadian dollar is off, we have gone from about 73 to 69 cents US. You've seen an impact in currency. The overall US dollar index is sitting around between 107 and 108. It was down around 101 around the election date. You've seen the US dollar appreciate versus most other currencies. As you look at the Canadian dollar, tariffs are obviously a bit of an issue, or the US flexing the way they are is a bit of an issue for the Canadian dollar.
Yep, for sure. When I think of that softer Canadian dollar, tariff threats are a big part. Bank of Canada rate cuts that are not reciprocated in the US are a big part. And I guess within that central banking decision set would be: Canadian inflation is lower, Canadian economy is weaker, that unemployment rate is high in Canada, whereas it's pretty low in the US. And so I can't really argue with the fact that the currency is weaker. Certainly, that’s appreciated by a lot of people, most of you probably thinking of it through the lens of investors. And so, of course, it does affect the calculus of where investment money might go. I would say forecasting currencies is pretty hard, and it's fairly rare that that's the dominant factor when it comes to investment return, a little bit like tax considerations. Okay, don't totally ignore them, but you might not want to make your central investing thesis based on tax efficiency or based on currency thoughts. Usually, bigger fish to fry. But nevertheless, it wouldn't shock me if the Canadian dollar softened a little bit more first in the sense that here we are with, presumably at some point, some tariffs that do get applied, whether it's February 1st or March 1st or April 1st, and whether it's big or little, the economy is still notably softer. Indeed, we just got some negative GDP numbers for November, though there's some mitigating factors and it looks fine. But bottom line is, it wouldn't be a shock if the Canadian dollar softened a little more. Equally, I think it is worth remembering for all those long-term investors out there that the Canadian dollar is pretty darn weak by its historical standard right now. We do think there's a lot of pessimism built into this thing. We think a Canadian dollar that's weak is very helpful right now. I mean, weaker currency is a competitive advantage. It's what the doctor orders when your economy is not where you'd like it to be and where tariffs are a threat and all these sorts of things. It's actually a very helpful thing, we think, economically, and it should be part of the story of getting the Canadian economy somewhat back onto its feet over the next year. Again, presuming we don't get the big worst case tariff scenario. And so I guess that's the outlook for it. But in the meantime, to me, the currency market, as much as it's moving a lot, is extremely well-behaved. It's extremely well-behaved in the context of Canada needs that weaker currency. We have a weak economy. We may need help from tariffs. US economy has too much inflation. The US economy arguably has too much growth. The US economy, actually a stronger currency would help it absorb some of the tariff impact to the extent that you don't need to see all of the effects show up in the price to consumers if the currency is handling some of the adjustment. You do a 10% tariff and your currency goes up by 10%—not expecting that magnitude of response whatsoever, to be clear—but just illustratively, the Canadian producer, or the foreign producer, can still earn exactly the money they always earn in their local currency. The US consumer can still pay the exact normal amount they pay. The currency can handle the whole thing. Not expecting exactly that, but the currency plays a role as a shock absorber, as a buffer and all that. So actually feeling pretty good about how currencies are doing, both in terms of their support for economic objectives and in terms of how rational the response has been. Bank of Canada obviously did cut rates. It made sense, I think. A little bit coy as to where things go. I shouldn't say coy, acknowledging radical uncertainty in the context of tariffs. So it's just hard to say what the right next move is. But I can say the market is pricing in, I think 70% chance of a cut at the next opportunity in March. And so it looks like there is room for a bit more cutting. In the US, of course, there wasn't a cut. It was an unchanged policy rate after three consecutive cuts. And with inflation that's around 3%, and with growth, that's been pretty strong, and again, with maybe some threat of tariffs or even the opportunity of tax cuts and so on, it's not the worst decision in the world to sit on the sidelines for a bit. And we're going to need more information before the Fed should feel comfortable cutting rates, even if we didn't have tariff uncertainty, just the fact the stock market's been so strong. There's a pretty big wealth effect here. And every rate cut unleashes more stock market gains. And of course, we personally all love that in the short run as investors. But you don't want to create a bubble here needlessly. You don't want to overheat things. And so I think it makes sense for the Fed to stop for a bit. And I'm of the view that it's conceivable they get back to cutting later in the year. Our formal view is certainly shifting away from cuts, though, reflecting just these altered circumstances.
I should mention, we're here on January 31st, and unless something dramatic happens here at the tail end of this Friday, the S&P 500 is going to end the month about 4% up for the month of January, which is a really fantastic start to the year in terms of stocks. Then, again, as we talk about currency and the investment impact of that, if you are a Canadian, picking your Canadian dollars, converting them to US dollars to buy US stocks, not only do you have that 4% gain, but you've got another about 1% on top of that in terms of currency gains through the month. Just to summarize, because I think you've covered in everything else you've talked about the tariffs, what could happen, what might not happen, all of the uncertainty around that, weakness of the Canadian economy relative to the US economy and currency, and how currencies offset some of these events that may or may not happen. You're left with a fairly logical decision from the US based on the good growth. We're going to see the employment numbers. We've got you on next Friday to talk about the jobs reports in both countries. But given all that backdrop, not surprising the US holds where they are, not surprising that markets do not expect as many rate cuts as they were just three months ago in the US and in Canada, as long as we're not seeing dramatic changes in the currency markets. You'll likely see the Bank of Canada continue to push the envelope on a somewhat divergent policy, short term rate policy than the US.
All correct. That's right.
Oh, good, good. I nailed it because, again, I know how hard you're working right now. I'm trying to help out a little bit with the heavy lifting here in terms of that information and summarizing the information, although I can never do it as well as you. But Eric, thank you. Thank you again for hopping on today. I'd never slap a tariff on you. You're too good a guy.
You'd have to pay me first or vice versa. Anyways. Yeah, my pleasure, Dave. It's always fun.
Well, no, don't forget, the most valuable thing someone can give you is their time. You give us lots of time, and it is extremely valuable time. And that's what we appreciate. So Eric, have a great weekend and we'll talk to you next week. Looking forward to that jobs report. It may be a market mover.
And there may be a lot of market movement before then, too, depending on what we get this weekend. We'll see. Thank you.