The Oxford Dictionary defines chaos as “complete disorder and confusion”. This is an accurate description of President Trump’s first weeks in office. Trump’s use of Executive Orders is unprecedented and nowhere is this more evident than with his capricious use of tariffs. Initially implemented against Canada and Mexico, Trump’s recently announced 10% base line tariffs on all goods imported into the U.S., in addition to more punitive targeted tariffs, were more aggressive than investors had expected. While the U.S. will not be applying these new tariffs on Canadian and Mexican imports, the previously announced tariffs on aluminum, steel, autos and auto part imports remain in place.
The Trump administration claims that tariffs will generate revenue and return manufacturing jobs to America. However, these benefits will likely pale in comparison to the economic burdens of rising costs, slower growth and higher unemployment. It has already soured relations with, and generated reciprocal tariffs from long-term allies like Canada, Mexico and the EU. Further, the 145% tariff applied to goods imported from China effectively represents a trade embargo on non-essential goods and China has responded in kind. U.S. services, primarily in the technology space, could also be targeted. The result will be the forging of new trading blocs and partnerships to diversify away from the U.S. and to strengthen a “buy local” mentality at the expense of U.S. manufactured products.
Added to the mix is the aggressive cost cutting underway by Elon Musk’s Department of Government Efficiency (DOGE), which seems to have been taken straight from the Silicon Valley playbook of “move fast and break things”. Not only is the constitutionality of DOGE’s actions questionable, but these cuts will also act as a drag on the economy and further stress financial markets. Longer term, these cuts will negatively impact American dominance in technology, healthcare, research and higher education.
Our decades of investment experience help us to manage the volatility that results from geopolitical and economic uncertainties. While no equity-oriented portfolio is immune from market downdrafts, we have found that our conservative, high quality investment approach fares well during periods of market decline. This is due to our focus on cyclically stable companies that generate high levels of free cash-flow – that is, cash generated in excess of a company’s normal operating cash needs. We focus on the manner in which companies allocate this excess cash to the benefit of shareholders. For our smaller companies, these funds are allocated primarily towards growth, through either internal expansion or acquisitions. Our more senior companies use this excess cash to buy back shares, pay down debt, and more importantly, increase dividends.
Dividend paying companies are the anchor of our portfolios, with the majority of our holdings offering a long history of dividend payouts. Many have paid dividends for over a century, including Bank of Montreal (196 years), Royal Bank of Canada (155 years), Stanley Black and Decker (148 years), Johnson Controls (148 years), and Colgate Palmolive (130 years). While dividend continuity is a source of corporate pride, of more importance to us is a company’s ability to increase its dividend on a sustained basis. This provides shareholders with a steady, increasing income stream and attracts higher valuation multiples over the long term. This also provides significant protection during market declines. Companies that have increased their dividends for over 50 consecutive years are known as Dividend Kings, and are represented in Rempart portfolios by Becton Dickinson, Colgate Palmolive, Fortis, Lowes and Stanley Black & Decker. Companies that have increased their dividends for at least 25 consecutive years are known as Dividend Aristocrats and include CN Railway, Nestle, Roper Technologies and Stryker.
As we noted in our previous letter, elevated market valuations, particularly as a result of high-flying momentum stocks, warranted caution. However, while these types of stocks were the most vulnerable to growing economic and geopolitical uncertainty, the market selloff has been more broad-based in nature. With our focus on stable growth companies which are well-funded market leaders, multinational in nature, and led by strong management teams, your portfolio is better insulated during market downturns. Resilient dividends provide a steady income, in good times and bad. With the political situation in North America and beyond evolving rapidly, we remain vigilant but confident in the underlying foundation of your portfolio.
First Quarter 2025
The Oxford Dictionary defines chaos as “complete disorder and confusion”. This is an accurate description of President Trump’s first weeks in office. Trump’s use of Executive Orders is unprecedented and nowhere is this more evident than with his capricious use of tariffs. Initially implemented against Canada and Mexico, Trump’s recently announced 10% base line tariffs on all goods imported into the U.S., in addition to more punitive targeted tariffs, were more aggressive than investors had expected. While the U.S. will not be applying these new tariffs on Canadian and Mexican imports, the previously announced tariffs on aluminum, steel, autos and auto part imports remain in place.
The Trump administration claims that tariffs will generate revenue and return manufacturing jobs to America. However, these benefits will likely pale in comparison to the economic burdens of rising costs, slower growth and higher unemployment. It has already soured relations with, and generated reciprocal tariffs from long-term allies like Canada, Mexico and the EU. Further, the 145% tariff applied to goods imported from China effectively represents a trade embargo on non-essential goods and China has responded in kind. U.S. services, primarily in the technology space, could also be targeted. The result will be the forging of new trading blocs and partnerships to diversify away from the U.S. and to strengthen a “buy local” mentality at the expense of U.S. manufactured products.
Added to the mix is the aggressive cost cutting underway by Elon Musk’s Department of Government Efficiency (DOGE), which seems to have been taken straight from the Silicon Valley playbook of “move fast and break things”. Not only is the constitutionality of DOGE’s actions questionable, but these cuts will also act as a drag on the economy and further stress financial markets. Longer term, these cuts will negatively impact American dominance in technology, healthcare, research and higher education.
Our decades of investment experience help us to manage the volatility that results from geopolitical and economic uncertainties. While no equity-oriented portfolio is immune from market downdrafts, we have found that our conservative, high quality investment approach fares well during periods of market decline. This is due to our focus on cyclically stable companies that generate high levels of free cash-flow – that is, cash generated in excess of a company’s normal operating cash needs. We focus on the manner in which companies allocate this excess cash to the benefit of shareholders. For our smaller companies, these funds are allocated primarily towards growth, through either internal expansion or acquisitions. Our more senior companies use this excess cash to buy back shares, pay down debt, and more importantly, increase dividends.
Dividend paying companies are the anchor of our portfolios, with the majority of our holdings offering a long history of dividend payouts. Many have paid dividends for over a century, including Bank of Montreal (196 years), Royal Bank of Canada (155 years), Stanley Black and Decker (148 years), Johnson Controls (148 years), and Colgate Palmolive (130 years). While dividend continuity is a source of corporate pride, of more importance to us is a company’s ability to increase its dividend on a sustained basis. This provides shareholders with a steady, increasing income stream and attracts higher valuation multiples over the long term. This also provides significant protection during market declines. Companies that have increased their dividends for over 50 consecutive years are known as Dividend Kings, and are represented in Rempart portfolios by Becton Dickinson, Colgate Palmolive, Fortis, Lowes and Stanley Black & Decker. Companies that have increased their dividends for at least 25 consecutive years are known as Dividend Aristocrats and include CN Railway, Nestle, Roper Technologies and Stryker.
As we noted in our previous letter, elevated market valuations, particularly as a result of high-flying momentum stocks, warranted caution. However, while these types of stocks were the most vulnerable to growing economic and geopolitical uncertainty, the market selloff has been more broad-based in nature. With our focus on stable growth companies which are well-funded market leaders, multinational in nature, and led by strong management teams, your portfolio is better insulated during market downturns. Resilient dividends provide a steady income, in good times and bad. With the political situation in North America and beyond evolving rapidly, we remain vigilant but confident in the underlying foundation of your portfolio.