Tariffs and Treasuries

Good afternoon, everyone. 

In today’s newsletter:

— Leah Golob

Prime Minister Mark Carney barks back. Carney walked away from trade talks with the U.S. Saturday morning, after the Trump administration “asked too much and offered too little.” As a result, Donald Trump’s threatened 50 per cent tariffs on a wide range of Canadian products, such as wine and clothing, have now kicked in. The new levies apply to about five per cent of all Canadian exports to the U.S., worth roughly $28 billion annually. In turn, Carney announced he’ll be matching tariffs “dollar for dollar,” starting Sepember 8, followed up this morning by Trump promising to apply 50% tariffs on all Canadian cars, trucks, auto parts, and steel beginning on January 1, 2027.

The bond market schooled the Trump administration. Long-term borrowing costs are rising globally, and in the U.S., 30-year Treasury yields have hit their highest level since 2007. Higher yields make it more expensive for governments to borrow and can impact the financial landscape, from corporate debt to mortgages. In an attempt to tame yields, the U.S. Treasury responded Wednesday by doubling planned purchases of certain bonds. It worked for about two days. Investors soon began selling long-term treasuries again, pushing yields back up. The Wall Street Journal reports investors are still too anxious about high inflation, mounting federal debt, a flood of corporate borrowing to fund AI, and the new Fed Chair’s decision-making skills. 

Anthropic to give SpaceX a run for its money. The AI juggernaut behind Claude could raise more than $100 billion in its initial public offering, according to The New York Times. Its bankers told potential investors the offering could value the company at $2 trillion. At that size, it would be the biggest IPO ever, surpassing SpaceX, which raised $85.7 billion when it went public in June at a valuation of $1.77 trillion. Anthropic filed to go public that same month. According to Money, investors looking for indirect exposure should look no further than tech giants that have invested in Anthropic. “There's a sideways or pass-through exposure by owning Google or Nvidia,” says one market strategist. 

Some first-time condo buyers have become “accidental landlords.” These surprise landlords bought their condos to live in, but rising costs or a desire to move up the property ladder have left them renting out their units instead. That’s because nobody wants to sell at a loss in a slumping condo market. So, they’re stuck paying hundreds of dollars each month to subsidize the rentals, betting that their investment will eventually pay off. According to one financial planner, the market may not bounce back as quickly as they think, and “sometimes selling may be an easier way to recover your money,” as long as that money is reallocated elsewhere. 

Gen Z and millennials are taking the taboo out of debt. Younger adults are adopting an increasingly transparent attitude about money, sharing everything from their salaries and rent to their investments. Lately, they’ve been sharing their significant debt loads too — all for the World Wide Web to see. Some strangers gush in the comments about the posts’ relatability, while others criticize posters for not knowing any better. Those in debt, on the other hand, say their openness helps reduce the shame while also providing community and accountability to tackle loans. But there is a downside: one psychotherapist specializing in financial therapy warns that making personal finances searchable could pose privacy risks and even affect future employment. 

We talk to Rohit Mehta, the President & CEO of Global X, about why ETFs have become so popular with Canadians, how investors can find the right ETF for them, and what ETFs are attracting the most interest today.

Give us the basics of an ETF: what are they, and why have they become such a popular investment vehicle?

At its simplest, an ETF is a basket of investments with a ticker. One ETF might hold hundreds of stocks, a portfolio of bonds, gold, or companies connected to a theme such as artificial intelligence. You can buy and sell it on an exchange just as you would a stock.

Canada’s ETF industry has recently crossed $1 trillion in assets, which shows how mainstream they’ve become. ETFs are popular because they make investing accessible and simple. They can provide diversification, transparency and professional portfolio construction, generally at a low cost. It's not just passive index funds either - there's an ETF for practically everything these days, whether you're looking for active management, income, commodities, alternatives or more. 

Is there ever a good reason for an investor to buy mutual funds rather than ETFs?

Perhaps, but the list of reasons is pretty short. A mutual fund might still make sense if it's the only option in a workplace plan, provides access to a manager unavailable through an ETF, or makes small automatic contributions easier. For most investors, though, ETFs are usually the stronger choice. Unless a mutual fund offers something investors genuinely can't get through an ETF, it can be difficult to justify the added cost and reduced flexibility.

At GlobalX, what products do you see attracting the most investor interest these days?

We’re seeing interest in a few distinct areas. Core Canadian, U.S. and international equity ETFs remain fundamental portfolio building blocks. Income is also a major focus, particularly covered-call strategies, where our lineup now holds more than $5 billion. Cash-management products continue to play an important role as well.

Then there are the longer-term themes investors are watching: AI and the infrastructure required to support it, defence, uranium and nuclear energy, and commodities such as gold, silver and copper. What connects the most successful products isn’t necessarily that they’re exciting. It’s that they have a clear job, whether that’s growth, income, diversification or managing risk.

Read the full Q&A on our website.