Transcript:
ANNA: You’re joining us for the market this month. This is episode two of 2025. I’m joined by my wonderful co-host Bruce Campbell with Stonecastle Investment Management. Thank you for joining me, Bruce.
BRUCE: Yeah, hi Anna. Good to see you. We’re virtual this month, but next month I’ll get to join you in person.
ANNA: I’ll be coming to your neck of the woods in Kelowna. But for now, we’ll have to enjoy each other’s company virtually.
BRUCE: Yeah, exactly. The old school way.
ANNA: That’s right. We did this for a long time during the pandemic. I thought we might be discussing new topics this month, but it seems we’re still talking about tariffs, recession, and interest rates. We’ll dive into all of that and wrap up with some exciting issuer news for CSE issuers.
Let’s jump right into it. Let’s start with tariffs. Since taking office, President Trump’s tariff policies on Canada, Mexico, and China have been a moving target, sparking retaliatory measures, market chaos, and heightened fears of inflation and recession on both sides of the border.
Trump argues that tariffs will generate billions in revenue, reduce national debt, and bring manufacturing back to the U.S. Meanwhile, Canada has responded with economic patriotism, though the long-term impact remains uncertain. The tariff battle escalated quickly.
First announced on January 20th, Trump imposed a 25% tariff on Canada and Mexico by February 1st, along with a 10% levy on Canadian energy imports. Canada retaliated with $30 billion in counter tariffs, prompting a temporary suspension on February 3rd. However, by February 13th, Trump raised steel and aluminum tariffs.
In March, Amazon redirected 45% of its export profits to 50%, imposed digital services taxes on U.S. tech firms, and fully reinstated tariffs on March 4th. Additional measures followed, including exemptions for major automakers on March 5th, new tariffs on Canadian dairy and lumber on March 7th, and a 25% export tax on Ontario electricity by March 10th.
By March 12th, Trump doubled down, increasing steel and aluminum tariffs again. These policies sent shockwaves through financial markets. By mid-March, fears of a U.S. recession wiped $1.7 trillion off the S&P 500, while the Nasdaq 100 lost $1 trillion in value, underscoring the uncertainty surrounding global trade.
So Bruce, here we are discussing this once again. Since we spoke last in mid-February, what are your thoughts on this continuous potential trade war and its impact on the market?
BRUCE: Yeah, it’s like someone’s playing with the VCR—fast forward and rewind. The biggest issue is the uncertainty. We keep hearing announcements about tariffs—new ones, additional ones, extensions—and it’s leaving everyone unsure of what to do.
When the threat of tariffs seems more imminent, the market tends to drop. When it seems less serious, markets rally. It’s been tough to invest with any confidence unless you’re a day trader.
ANNA: Absolutely. How is this affecting Canadian markets? We’ve seen huge swings in the U.S. markets, but how is this playing out in Canada?
BRUCE: From a percentage standpoint, Canadian markets haven’t dropped as much from the early February announcements to now. The U.S. markets have seen sharper declines, which is interesting because you’d expect Canada to take a bigger hit, considering the reliance on U.S. trade.
That’s not to say Canadian businesses haven’t been affected—certain sectors definitely have. However, there’s still uncertainty about the final outcomes of these tariffs. Additionally, some businesses have tried to prepare for this as much as possible. If these tariffs stick, though, the impact could be significant.
ANNA: Well, the U.S. markets have been falling. Right. Now this is just out of curiosity, we’re hearing a lot, obviously, in our place in Canada about the tariffs that are being imposed on Canada and Mexico, but there are also tariffs that are being imposed on China. Do you see that affecting us at all?
BRUCE: Well, it’ll depend on how it is affected. One of the proposals that was thrown out there to try to get the North American tariffs removed was that maybe we band together as North America to tariff Chinese goods at a heavier rate. It’s potential that could be something we would see happen. There’s been talk already of some of the big global companies that use and get a lot of Chinese goods in that they’ve already gone to China and asked for them to be more competitive in the face of these tariffs. Walmart was the example I had heard where Walmart had gone to a lot of their suppliers in China and said, “Look, you guys need to get better pricing so that our consumers aren’t impacted as much when these tariffs go into place.”
ANNA: Interesting. Look, Bruce, I feel like episode three of 2025, we might still be having this conversation. It seems to be changing on a daily basis, so it’s really hard to tell how the markets are going to continue to react. But it has been a rough start, hasn’t it?
BRUCE: It would certainly be nice if we didn’t have to talk about them anymore, if they were just resolved and everybody went back to where it was, but I’m concerned that may not be the case.
ANNA: Yeah. It doesn’t seem like it’s going anywhere soon. The pendulum is certainly swinging between both sides of the border, but hopefully we’ll find some middle ground and be able to reduce some of the chaos that’s out there. One thing that we talked about so much when we had a market recap is we talked a lot about interest rates and there was so much movement in 2023 and 2024, and we’re talking about it again. What are the forecasts? What’s happening in the interest rate world?
BRUCE: When we first started market recap, we were talking about inflation going up and rates going up to try to slow down inflation. Now we’re actually seeing the other side of that. The day we’re recording this is the day the U.S. announced their inflation and it was lower than expected. We are forecasting for the next few months that you will continue to see this trend down in inflation in the U.S. It has to do with a couple of things. One is that we have seen some of these commodity prices, like oil, dropping down over the last few months. That has an impact. The second thing is just the base effect. Comparing it to a year ago, because that inflation number is looked at over the year. The numbers were higher a year ago and they’ve come down. That helps to bring things down. That also has an impact on interest rates. Now with inflation coming down, it gives the central bankers more opportunity to actually lower interest rates. We saw that again, the day we’re recording this in Canada, we saw them drop by 25 basis points. Interestingly enough, with everything that’s going on with the tariffs in the U.S. and the market instability, rates have come down and rates tend to lead what the Fed does. If you look at the beginning of the year, the market was forecasting that there’d be two interest rate cuts for 2025, and now that’s actually gone to four for the Federal Reserve. They’re anticipating that the Federal Reserve is going to drop by a full percentage point over this year versus only a half a percentage point, which was forecast just two and a half months ago. This is fairly important in what we’re seeing with the tariffs because we need lower cost of capital for us to be able to function in a better way within our own borders. Would you agree with that?
ANNA: Well, certainly that’s the call from Wall Street, right, is that they want lower capital. That’s always the case. If you think back when rates first started going up, there was lots of talk that 2023 was going to be a recessionary year because rates had gone up so much. The economy actually has done fairly well in the face of these higher interest rates. The Federal Reserve has always used the interest rates as a tool to try to stimulate things when there’s a slowdown, and the question will be, do these tariffs or the uncertainty of the tariffs start to freeze people up? We talked a little bit in the past about the small business survey and how it spiked up in November after Trump got elected on the fact that there would be lower taxes and lower regulations and now it’s starting to fade a little bit and that confidence can lead to contraction of the economy. If that happens, what does the Fed, what does the Bank of Canada do to try to stimulate the economy? Will they lower interest rates to try to get capital to flow into different areas of the economy?
BRUCE: Absolutely. You did say one word in there that I do want to ask you about because we’re hearing it everywhere that we look right now is the word recession. Is there concern about a pending recession in both Canada and the U.S.?
ANNA: Well, certainly I would think that’s why the market has sold off as aggressively as it has. If you look at the NASDAQ in the U.S. or the Russell 2000, which is smaller cap stocks, they’ve dropped 10 percent plus in the last four weeks, and I think that is not just the market worried about tariffs, but also worried about those tariffs causing a recession. The consumer spending starts to fall off. You saw that with Walmart having weaker numbers, Costco having weaker numbers, and that’s the consumer spending. The consumers are concerned, “Okay, what’s happening with tariffs? Are things going to be more expensive? What do I need to do? Do I need to save some money?” The consumer portion of the economy is so big that you start peeling that back. That’s where you could see a slowdown. We haven’t seen that in the numbers yet, but it is so early, right? The market’s always looking ahead and we’re always trying to figure that out. That’s what we’ll watch over the next few months to see if this is just a little bit of loss in confidence, but the economy continues to click along or if we’re not there yet, but we’re paying close attention, right?
BRUCE: Yeah, exactly. We’re watching really carefully to see if we start to see those numbers slowing.
ANNA: Okay. Good to know. I want to talk about some data that you look at when you’re looking at the markets—the VIX. Can you tell us what the VIX is and what it’s used for?
BRUCE: Okay. The VIX is looking at option pricing and option volatility in the markets. Options are really complicated. They can be challenging to understand. If I said I understand them 100%, I would be lying to you. There are probably some specialists who deal just in the option market that understand, but other than that, it’s complicated to say the least. What we use the VIX for and what we track with the VIX is watching the level of the VIX. We have different categories for where you want to balance things with your portfolio. We always talk about below 20 being a very investable area. You can be comfortable getting invested there. Between 20 and 30, there’s a lot of chop; markets can really move up and down. Above 30, it’s really challenging to make money because there’s so much volatility. Often there’s a lot of fear and things are headed to the downside. We talk about those ranges and that’s how we guide our portfolio and how active we are with our portfolio in those different ranges.
ANNA: And right now we’re seeing a decent amount of volatility.
BRUCE: Yeah. There’s been a fair bit. If you go back to pre-tariff talk, we were sitting in that 15, 14 level, and then we moved up, moved through that 20. Now at the time of the recording, we’re sitting around 25 on that VIX. It’s kind of in the middle of that choppy range. It was almost at 30. It’s pulled back a little bit, and so it is in that choppy range now. You see that with the markets that you have big up days, big down days, depending on the mood of the market and what’s happening.
ANNA: How often does this data come available? Is this a monthly piece of information we receive or?
BRUCE: No, it trades real time. The VIX data is updated throughout the day and you can watch that VIX number. It’ll move up and down throughout a trading day based on the risk and the perception of risk in the market.
ANNA: Okay. Let’s talk about all-time highs yet again for gold and copper. Let’s talk about that and how that is affecting the markets. You touched on why you thought we were seeing these all-time highs. But now we’re having a conversation four weeks later, with all of this tariff talk and trade wars and we’re continuing to see those two commodities go up. What are your thoughts there?
BRUCE: The really interesting piece in my opinion is the copper. We just talked about recession and the concern about recession and you wouldn’t expect copper to be making a new all-time high if we were in a recessionary period. They refer to copper as Dr. Copper because it has a PhD in economics, according to Wall Street. Typically, if the market and investors were starting to become concerned about a recession, copper would actually be dropping because it’s such a used industrial metal. That would be forecasting that there would be some type of recession imminent or on the horizon, but it hasn’t been the case. Gold is a little bit different in that gold tends to be an inflation hedge. It tends to be almost a currency in itself. It tends to be a store of value in a safety area. That’s why money’s flowed in there because you’ve seen central banks move out of the U.S. dollar and buy gold. You’ve also seen investors move into gold. The last thing is that gold is tougher and tougher to find and bring out of the ground. It’s more expensive all the time. As a result, the cost to produce gold is going up and the amount of gold that’s out there is more challenging to add to because of that cost.
ANNA: Absolutely. I know that copper and gold are doing well, but just curious what your thoughts are. We’ve had an interesting month in the cryptocurrency space. Do you have any thoughts on that?
BRUCE: Cryptocurrency tends to be a risk-on asset. When the animal spirits are really flowing and you see markets doing well, cryptocurrencies tend to do very well. When the tariff conversation started to happen, that’s where cryptocurrencies peaked out and now they’ve declined. You would probably need to see some stability and then see movement back into a risk-on atmosphere before you would really see new highs in cryptocurrencies.
ANNA: Interesting. Well, we’ll see what happens there. We’re gonna get into my favourite part of our show, Bruce, other than getting to spend time with you, and talk about some CSE issuer news. We’re having this conversation just on the heels of myself and the rest of the CSE team getting together at the annual PDAC conference, Prospector Development Association of Canada. It was a very interesting year. We’ve gone through some interesting years at PDAC. I’d say over the last 10 years, and this was, there was a lot of energy, Bruce. There was a lot of excitement. There were a lot of people there, a lot of issuers raising capital. There were people raising capital on the floor of PDAC, which is not something I’ve seen in a very long time. It was very exciting times. We’re also seeing a lot more delegates coming from various countries that are wanting to get more engaged with the capital markets in Canada, which I thought was really interesting. A big kudos to PDAC, they do an amazing job, and to the people that travel from all over to come and participate in that event. I wanted to mention two of our issuers today that just completed some capital raising. Highlander Silver has announced a 25 million bought deal with Ventum Financial. For those of you that don’t know Ventum, it was PI Financial, now called Ventum Financial, as the lead underwriter and sole book runner. The company intends to use the proceeds from the offering to fund the advancement of exploration activities at the company’s San Luis Gold Silver project in Peru. There are some pretty big, impressive names. If you go to the press release, you’ll see who is interested in participating in that financing. It’s great to see these big names coming in and to see a bought deal even, huh, Bruce?
BRUCE: Yeah, it’s great to see for sure. We’ve talked about before that for the last few years, the smaller cap markets have been kind of frozen out and we’re seeing more and more capital raises, more interest in those areas.
And now, with gold, silver, and copper picking up, you’re seeing even more interest. Absolutely. Seeing a nice, healthy capital raise like that, a bought deal, is just really nice to see. The junior markets really do suffer when these big global economic factors occur, but we are still seeing some support level in the junior markets in exploration and advancements of the good properties, which is great.
ANNA: We also saw TalkFan Ventures. They closed an oversubscribed private placement. There was a bunch of private placements that I’m not going to mention today that were all oversubscribed. I also noticed that, which was very cool to see, of 3.15 million to advance expanding gold and silver targets in mine-friendly Sonora.
TalkFan’s Advancing Gold and Silver Project, which is in the mine-friendly jurisdiction of Sonora, Mexico, through ongoing exploration programs, the company is unveiling its high potential at its Grand Pillar Gold Silver Project, which holds 100 percent interest in over 21 square kilometres of prospective area and a majority ownership in one square kilometre area shared with Calibri Resources. So congratulations to them. What I thought was interesting is most of the private placements that I’m seeing, Bruce, are in gold, silver, or copper. It wasn’t that long ago that anything battery metal or rare earth was the focus of everyone’s attention.
Do you think we’re going to continue to see these precious metals get most of the attention right now? With the fact that you see gold at an all-time high, copper at an all-time high, silver is not quite there, but it’s certainly done well.
BRUCE: Yeah. I think there’s going to be more interest in these areas because now a lot of projects that weren’t necessarily feasible before, based on the price of the metals, now are feasible. There’s a lot of exploration that can be done in a lot of areas that people want to explore based on that new economics.
ANNA: Absolutely. The final issuer that I did want to mention, Bruce, because I thought this was interesting, is our issuer, Blue Lagoon Resources. They received their mining permit. They have a property up near Smithers, B.C. We have an updated issuer clip with them coming out. Make sure you go to CSTV to check out our interview with Rana Vig, who’s CEO of Blue Lagoon. One thing I thought was interesting is that we’re seeing this first permit come through the gate in quite some time in B.C. Do you think what’s happening in the U.S. right now will help us start to open up our internal borders with other provinces, with permitting exploration programs, putting them into production? Do you think this will help the Canadian economy start furthering within itself?
BRUCE: Well, I know we talked about that in February, about the fact that several of the provinces were now moving towards a more fast track of bigger projects. I think that trickles down and continues to work its way to the grassroots exploration level as well, where permitting will hopefully be quicker and there’ll be less red tape to get it done so that we can actually start building and developing some of these projects.
ANNA: Absolutely. Okay. I want to ask you, we’ve talked so much about resources. Bruce, is there any other sector right now that is of intrigue to you that you’re watching?
BRUCE: Well, there’s always lots of interest in technology. That being said, the technology sector has been going through a bit of a correction, so that’s always interesting. Healthcare. There’s always lots of interesting health tech companies, especially in Canada. There are lots of those that are on the radar. They tend to be that smaller mid-cap size before eventually they get taken out by larger U.S. companies. The last area that we continue to see lots of interest in is the industrial area. There are lots of interesting industrial tech companies as well that are Canadian, sort of that small mid-cap again, that are doing some really innovative things that are leading their industries. Those tend to do really well and then eventually get gobbled up by a bigger player, but they haven’t yet. So that’s great.
ANNA: Amazing. I love it. Okay. Bruce, we’ll have to wait a few weeks before I get to do this with you again. What should we be paying attention to until we meet again in April?
BRUCE: Well, unfortunately it’s Donald Trump’s tweets. That seems to be what has a bearing on the markets and then we’re going to want to see whether or not any economic data that’s starting to come out is being impacted by the uncertainty of these tariffs.
ANNA: Okay, we’ll watch out for that. Listen Bruce, it’s always such a pleasure to chat with you. Thank you so much for your insights and I look forward to chatting with you next month.
BRUCE: Yeah, we’ll see you in April.
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