What will a second Donald Trump presidency mean for your financial portfolio?

Photo: The Canadian Press

President Donald Trump speaks to reporters aboard Air Force One as he travels from Las Vegas to Miami on Saturday, Jan. 25, 2025. (AP Photo/Mark Schiefelbein)

As Donald Trump begins his second term as president of the United States, many Canadian consumers and investors are wondering what that could mean for their financial outlook.

Trump’s prior presidency was characterized by unpredictability, bold economic policies and a penchant for trade disputes—all of which, if repeated, could cause some panic north of the border.

While it’s natural to feel apprehensive, history shows that overreacting to political events can often do more harm than good when it comes to investment decisions and managing your overall financial plan. So let’s break it down:

A look back at Trump’s first term

When Trump was first elected in 2016, there were widespread fears about what his policies might mean for the economy and markets. Concerns about his “America First” agenda, threats of tariffs and a volatile trade relationship with China loomed large. Despite those worries, the U.S. economy grew steadily and stock markets—both in the U.S. and Canada—enjoyed strong performance during much of his term. Canadian investors benefited from a robust global market and resilience in key sectors like technology and resources.

However, the first term wasn’t without challenges. Trump’s trade policies, including the renegotiation of NAFTA into the USMCA, did cause temporary turbulence in Canadian markets. Tariffs on aluminum and steel, though eventually resolved, created headaches for some industries. Nevertheless, the broader economic impact was relatively contained and investors who stayed the course generally came out ahead.

What could a second term mean?

With Trump back in the Oval Office, Canadians are asking familiar questions—Will tariffs make a comeback? Could U.S. tax or trade policies negatively affect Canadian businesses? What happens if the U.S. Federal Reserve adopts a more aggressive monetary stance in response to Trump’s economic priorities?

Here are a few key considerations:

1. Trade uncertainty: Trump’s willingness to use tariffs as a negotiating tool remains a wildcard. While Canada-U.S. trade relations under the USMCA have stabilized, the possibility of new disputes cannot be ruled out. For investors, this could mean short-term volatility in sectors like manufacturing, natural resources, and automotive, which are heavily reliant on cross-border trade.

2. Currency fluctuations: Trump’s fiscal policies, such as tax cuts or infrastructure spending, could strengthen the U.S. dollar. A stronger U.S. dollar often weakens the Canadian dollar, which can benefit Canadian exporters but may increase costs for consumers importing U.S. goods.

3. Energy and climate policy: Trump’s support for fossil fuels and deregulation could provide a tailwind for Canada’s oil and gas sector, which has struggled in recent years. However, this could also clash with Canada’s push toward clean energy and sustainability, creating longer-term uncertainty for investors in the green energy space.

Should you change your portfolio?

The short answer is probably not. While Trump’s policies could create market volatility, long-term investors are typically better off sticking to a diversified plan rather than trying to time the market based on political events. Here are some tips:

• Stay diversified: Ensure your portfolio is well-diversified across asset classes, sectors, and geographic regions. This can help cushion against shocks in any one area.

• Focus on quality: In uncertain times, high-quality investments—such as companies with strong balance sheets, reliable earnings, and competitive advantages—tend to hold up better.

• Don’t overreact: It’s tempting to make drastic changes in response to political events, but history shows that markets tend to recover from short-term shocks. For example, despite initial fears in 2016, stock markets performed well under Trump’s first term.

• Review your risk tolerance: If you’re feeling particularly uneasy, take the opportunity to revisit your investment goals and risk tolerance. Small adjustments to your asset allocation may provide peace of mind.

What about tariff threats?

While the prospect of renewed tariffs is concerning, it’s worth noting that Canada and the U.S. have a deeply integrated trade relationship and both sides have incentives to maintain stability. Canadian industries are also more prepared this time around, having navigated similar challenges during Trump’s first term. Investors should keep an eye on sectors that are particularly trade-sensitive but avoid making knee-jerk decisions based on worst-case scenarios.

The bottom line

Donald Trump’s return to the White House may bring a mix of challenges and opportunities for Canadian consumers. While it’s important to stay informed and vigilant, there’s little evidence to suggest that wholesale changes to your financial plan or investment portfolio are necessary. As with any period of uncertainty, staying disciplined, diversified, and focused on your long-term goals is the best course of action. Political headlines may grab attention, but for most investors, sticking to the fundamentals will yield the best results.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.