Dollar Under Pressure: Trade Tensions, Tariffs and Portfolio Impact

Overview:
Many clients express heightened anxiety over the Canadian dollar's (CAD) decline, particularly given recent economic challenges such as tariffs negatively impacting CAD and its general downward trend over the past year. This depreciation increases the cost of U.S. expenses and foreign purchases, adding to financial concerns. However, our investment strategy is designed to capitalize on global opportunities, ensuring that currency shifts work in favour of your portfolio. We recognize that successful investing is about investing in the market we have, not the market we want. Just like Wayne Gretzky famously said, "I skate to where the puck is going, not where it has been." Similarly, we position your investments to thrive in evolving market landscapes, regardless of geography. By adapting to economic conditions and focusing on where opportunities exist, we ensure that your portfolio remains resilient and well-positioned for long-term growth, despite currency fluctuations and broader market shifts.

Exchange Rate Change:

• Historic CAD/USD Exchange Rate: 0.75

• New CAD/USD Exchange Rate: 0.69

1. Impact on Investment Portfolios

Assuming a market-neutral environment where only currency fluctuation is considered, the following table illustrates how a declining CAD benefits Canadian investors with predominantly U.S. holdings:

Portfolio Value (CAD) Value in USD Before (0.75) Value in USD After (0.69) Gain from FX Decline (CAD)

$100,000 $133,333 $144,928 $7,692

$200,000 $266,667 $289,855 $15,385

$500,000 $666,667 $724,638 $38,462

$1,000,000 $1,333,333 $1,449,275 $76,923

Key Takeaway: Despite concerns over a weaker CAD, Canadian investors with a globally diversified portfolio actually benefit from a falling Canadian dollar value, regardless of the additional expenses incurred as we vacation and spend for goods or services in other currencies.

2. Impact on USD Expenses

While portfolio values increase, expenses in USD become costlier for Canadian consumers. Below is a breakdown of how the exchange rate shift impacts common USD expenses, such as a US, Caribbean or European vacations:

Expense in USD Cost in CAD Before (0.75) Cost in CAD After (0.69) Additional Cost (CAD)

$1,000 $750 $690 -$60

$2,000 $1,500 $1,380 -$120

$5,000 $3,750 $3,450 -$300

$10,000 $7,500 $6,900 -$600

Key Takeaway: Increased expenses in USD are an additional cost factor, but they are significantly outweighed by the currency-driven gains on investment portfolios.

Conclusion

• While a weaker CAD increases the cost of U.S. expenses, the impact on a portfolio with substantial global exposure is overwhelmingly positive.

• Clients with a 90% global or non-Canadian-weighted investment allocation effectively hedge against CAD depreciation, mitigating concerns about a weaker exchange rate.

• The broader perspective should focus on the net benefit, where portfolio growth outweighs the higher cost of USD transactions that we will incur.

Investment Implication:
Maintaining a globally diversified portfolio with significant under exposure to Canada provides an effective hedge against CAD weakness and enhances long-term financial resilience. We, along with our partners at Fidelity are working daily to ensure client portfolios are positioned for the current and projected investment landscape most beneficial to our clients current and future long-term interests.

Mutual funds, approved exempt market products and/or exchange traded funds are offered through Investia Financial Services Inc. The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This update was prepared by Steve Arial who is an Investment Funds Advisor at QSA Wealth Management, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this presentation comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.  Please read the Fund Fact sheet or prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.