Here’s how you can Trump-proof your wallet

When U.S. President Donald Trump launched a trade war back in February, Canadians had plenty of questions about how it would affect their finances. Months later, those questions keep coming up. In this time of uncertainty, people want to know the best way to manage their portfolios, household finances and lives. Below, our reporters have answered the crucial questions that our readers have asked again and again (and again).

Should I sell my U.S. stocks?

The patriotic backlash to Mr. Trump’s anti-Canadian posturing has some investors reconsidering their U.S. holdings. Others simply want to escape the turmoil engulfing U.S. equities on a near-daily basis. But there are a few potential problems with unloading one’s U.S. stocks, one of them being capital gains. Lots of Canadian investors have piled into the bull market in U.S. equities in the past few years and are now sitting on big gains on paper. Selling them off could result in a hefty tax bill. It’s also difficult to maintain a diversified portfolio while excluding U.S. stocks, which account for around half the market capitalization of all publicly traded companies worldwide.

Should I increase my cash holdings?

It depends on your personal circumstances, including how stable your job is, your short-term financial needs and your long-term financial goals. If you plan to go to college or university, buy a house, start a family or retire in the next few years, having more cash available is probably a good idea. Another important factor is your risk tolerance. If having more cash helps you sleep better at night, then it’s a good idea to increase your holdings. However, try to be savvy about how much cash you really need. Pulling all of your money out of the markets and into cash is almost never recommended unless you need all of it immediately.

What’s going to happen with interest rates?

They’ll probably decline, eventually. The Bank of Canada has slashed interest rates seven times over the past year, bringing the key rate down to 2.75 per cent from a recent high of 5 per cent in April, 2024. This was hardly surprising: Inflation, the main reason for raising rates in the first place, fell sharply over this period. The central bank held rates steady this April, though, as it digests the inflationary implications of U.S. tariffs and the prospect of declining economic activity or even a recession. But economists believe that economic deterioration will ultimately outweigh inflation concerns, paving the way for more rate cuts later this year.

When will my portfolio recover?

With the latest market rebound, it probably already has. But it’s anyone’s guess whether the turmoil is over or just on pause. Major sell-offs can linger for years, as was the case with the global financial crisis. Or they can end as quickly as they begin, as we saw with the COVID-19 pandemic.

But the great thing about the stock market is that it is a near-infallible compounder of wealth over a long-enough time frame. Over spans of decades, stocks tend to generate average annual returns of around 7 to 9 per cent. That goes for Canadian and U.S. markets. Contained within that upward trajectory is a whole lot of volatility. Think of this as the price of participating. If you can stick to an investing plan through thick and thin, the market will reward that fortitude.

Will annuities be a more secure income source?

First, a brief refresher: An annuity is an investment product that provides individuals, usually retirees, with a steady income stream over a specified period or for the rest of their lives. Annuities are sometimes compared with pensions, where you put up the money in advance and then receive a series of payments down the road. They are often used by retirees seeking to supplement their income and protect themselves from financial risk. With an annuity, the annuity provider (usually an insurance company) shoulders the risk of market fluctuations.

While an annuity is more secure, the capital isn’t liquid, which means you can’t access it if you need more funds. Also, annuity rates fluctuate in response to changing interest rates. The best time to buy an annuity is when interest rates are high. However, experts note that time is usually when inflation is also high, so your cost of living may rise.

Should I add alternative investments to my portfolio?

Alternative investments are financial assets that fall outside traditional investments such as stocks and bonds. Some examples include private equity and debt, real estate and commodities. Alternative investments used to be more common for institutional investors, such as pension funds, but have become more mainstream in recent years. More investment firms are adding alternatives to their client portfolios for diversification and the potential for higher returns.

While alternatives can help diversify your portfolio, they also come with risks. Some private alternatives, such as real estate or private equity, may be less liquid than stocks or bonds, meaning you may not be able to access your money as quickly. So, should you add them? Once again, it depends. What other assets you have in your portfolio? What’s your risk tolerance and your investment time horizon?

Is it too late to buy gold?

You’ve certainly missed out on spectacular gains since October, 2023, when the price of gold began to stir over economic concerns related to high U.S. interest rates and heightened geopolitical tensions over Russia’s invasion of Ukraine and war between Israel and Hamas. Over the past 20 months, through May 20, gold has risen 78 per cent, outperforming the S&P 500 by about 36 percentage points (and that’s including dividends).

But if you’re worried about buying gold near the peak, some observers believe that the price could rise even more. Mr. Trump’s erratic policies are raising inflationary pressures, weighing on the U.S. dollar and clouding the global economic outlook – which could be good for gold. What’s more, the bullish case rests on the expectations that central banks will buy more gold as they diversify their reserves beyond the U.S. dollar, adding long-term demand for bullion.

Is the U.S. market in a long-term decline?

There have been long stretches of time when U.S. stocks underperformed those in the rest of the world. International equities generated better returns during the 2000s, for example, a decade marked by both the dot-com crash and the global financial crisis. But ever since, American exceptionalism has been the dominant force. Is that era over? It’s a big question. On one hand, Mr. Trump’s efforts to reshape global trade in America’s favour will have lasting effects. On the other, the companies that make the U.S. stock market the world’s greatest remain unmatched.

Can I rely upon dividends?

Most money managers will say that dividends from well-established companies are reliable in both good and bad economic times. For example, Canadian banks and utilities have consistently paid dividends for years, and have been increasing them regularly.

However, dividends can be lowered or even eliminated in difficult economic times. For instance, many Canadian companies cut or stopped paying dividends during the 2020 pandemic-induced market meltdown as well as the 2008 global financial crisis. In many cases, those dividends were brought back, but it’s not guaranteed. Bottom line: Dividends are reliable, until they aren’t.

Are Canadian banks facing hardship from the trade war?

Canadian banks are affected by the trade war because any economic shocks will affect consumer and business activity. The banks recently cautioned that consumers could be hit harder by tariffs than other groups, as layoffs loom and businesses pause their expansion plans. A February report from Morningstar DBRS Inc. cited “clearly negative repercussions for the Canadian banking sector” if the tariffs, as originally devised, were implemented. It said a trade war could push Canada into recession, putting pressure on loan growth and potentially leading to higher delinquencies, loan losses, and credit provisions.

That said, despite the potential effects the trade war could have on banks, the sector is well-positioned to deal with an economic downturn “with adequate liquidity, stable funding, and sound capital levels,” according to the DBRS report.

Should I be worried about a recession?

Most experts would say it’s healthy to be concerned about the future and a possible recession, while ensuring you manage your money wisely. You may want to consider how a recession could affect your job, family and expenses, and plan accordingly. For instance, if you don’t have an emergency fund, now might be a good time to start one. If you have investments in the stock market, don’t do anything rash like panic-selling, especially if you don’t need the money immediately. Also, remember that we have been through recessions before, and while they are not easy, especially for those who lose their jobs, they don’t last forever.

Are stocks cheap now?

Depends on the market. By most measures, U.S. stocks are cheaper than they were when the year started, simply because most indexes have sold off meaningfully. But cheaper doesn’t necessarily mean cheap. Interest in tech stocks – largely driven by enthusiasm for artificial intelligence – has driven U.S. markets higher over the last couple of years and Bank of America recently said U.S. stocks remain expensive according to 19 of 20 metrics.

Outside the U.S., investors can find stock prices more in line with historical averages, such as in Canada or Europe. But there’s a big caveat there, too. Valuations are typically expressed as a ratio of a stock’s price to that specific company’s earnings estimates. And corporate earnings are bound to take a big hit if a global recession lands. There’s so much economic uncertainty right now that even the pros are finding it difficult to quantify risk or price risky assets, like stocks.

How do I manage fluctuations in the value of the Canadian dollar?

If you need U.S. dollars to travel to the United States or own U.S. property, Brent Joyce, chief investment strategist and managing director at BMO Private Investment Counsel Inc., recommends two tactics: 1) If you have the financial means, build a portfolio of U.S.-dollar-denominated assets that generate income in U.S. dollars, which can serve as a continuing source of funds in that currency. 2) For most people who aren’t in a position to build a U.S.-dollar portfolio, he says the trick is not to be in a position where you have to purchase a large amount of U.S. dollars at any one point in time, which exposes you to the volatile currency market.

Plan ahead, if possible, by determining your potential U.S.-dollar cash flow needs and depositing them into a U.S.-dollar bank account over a period of time. Mr. Joyce notes that every Canadian bank offers one where you can easily move money between your Canadian and U.S. accounts. He says buying using the dollar-cost-averaging method, or acquiring a chunk at a time on a regular schedule instead of all at once, helps smooth out fluctuations in the exchange rate. “You likely won’t get the highest or the lowest, but it removes the risk of having to convert a large amount at an inopportune time,” he says.

Is now a good time for young people to start investing?

Yes, although it may not feel like it. With the stock market a cauldron of chaos these past few months, it may be tempting to sit on the sidelines until normalcy returns. But this would probably be a mistake. As an investor, your greatest advantage is time. The earlier in life you can start putting money in the market, the more time you allow compound interest to work its magic. Even modest sums can accrue to small fortunes when left to compound over multiple decades. This is true even if that money is invested at the very peak of the market. It doesn’t feel great seeing a chunk of your investment promptly vanish. But as the old investing cliché goes, time in the market matters more than timing the market.

Are bonds worth holding in my portfolio?

Absolutely. Though bond performance has been disappointing this year as inflationary pressures send yields higher (bond yields and their prices move in opposite directions), there are a number of reasons why bonds can still serve investors well.

For one thing, they’re not as volatile as the stock market. So as stock prices swing wildly, bonds can provide meaningful ballast to balanced portfolios, or even serve as havens during stock market sell-offs. When the S&P 500 fell as much as 20 per cent in April, a typical bond fund that provides exposure to a variety of U.S. debt produced modest gains. Bonds also provide a kind of insurance against an economic downturn. That’s because central banks tend to cut interest rates when growth is threatened, and lower rates can send bond prices higher.

Which global stock markets beyond Canada and the U.S. have the best prospects?

Europe stands out. The region is benefiting from investment dollars that are fleeing the instability of U.S. markets, and it is poised for better economic growth as governments – particularly Germany – ramp up spending. A third factor in favour of Europe: Stocks are cheap compared with U.S. stocks. So far in 2025, through May 30, the Euro Stoxx 50 index of blue-chip companies has risen more than 9 per cent, compared with less than 1 per cent for the S&P 500 over the same period. At the same time, the European index has a price-to-earnings ratio close to 17, while the S&P 500 trades at more than 25 times earnings, according to Bloomberg.

Should I take CPP/QPP now?

As markets whip back and forth and portfolios shrink, some Canadians may be tempted to take their CPP/QPP earlier. The idea is simple: Start taking government payments sooner to reduce the need for withdrawals from your equity investments, giving them time to recover. But financial planners say that starting CPP early should be a last resort – not a reaction to short-term market turbulence. That’s because the longer you wait to take CPP, the more you get, and the increase is substantial.

You can start CPP/QPP as early as age 60, but your monthly payments grow the longer you wait – up to 42 per cent more if you delay until 70. That said, only about 4 per cent of Canadians wait that long. Taking CPP early can make sense if you have a shorter life expectancy or need the income sooner. The right choice depends on your health, other income sources, and whether you value more cash flow now or more income later.

How should I protect my investments ahead of retirement?

What makes the early years of retirement and the years leading up to it especially risky is something financial experts call “sequence of returns risk.” If markets fall right after someone retires and they start withdrawing to cover expenses, those losses can compound faster than if the same downturn happened later in retirement when markets recover. One method to guard against this is the cash-wedge strategy – setting aside a portion of your portfolio to cash or cash-like investments to help meet immediate expenses, while leaving the rest of the portfolio invested. It’s a good idea to keep at least two years of expenses in liquid assets, but some experts recommend up to 10 years of savings in cash.

What should I do about my child’s RESP?

If you need money from an RESP soon, ideally you have already gradually shifted assets in your RESP into more conservative investments – such as bonds or cash – as your child approached postsecondary age. But if your portfolio remains heavily invested in equities, some advisers recommend moving money into cash now to avoid further declines, even if that means locking in some losses. If you’ve got some extra cash on hand, it might be worth waiting it out while your investments recover. If you don’t need to access funds in the RESP for a few more years, a general rule for investments is that they should start aggressive and then become more conservative, similar to retirement planning (but with a shorter runway).

How do I recession-proof my personal finances?

Start with liquidity: Build a three- to six-month emergency fund in a high-interest savings account. It’s more important than you think, as 26 per cent of Canadians say they couldn’t cover an unexpected $500 expense, according to 2023 data from Statistics Canada. Next, prioritize paying off any debt, especially high-interest debt, that you may have. If your job is in an industry that is affected by layoffs, consider diversifying your income streams, and taking on a side-hustle. Lastly, stay calm and avoid making panic-induced investment decisions. Instead, use this opportunity to look at your portfolio, and make sure you’re investing across industries and countries so that if one sector or area drops, you won’t be hit too hard.