The Trump trade is on again, and equity markets are at record highs. Yet even though the incoming administration’s promised policies may offer plenty of upside, market euphoria over the election of Donald J. Trump as president of the United States (again) does not present a clear-cut investment thesis for Canadian family offices in 2025. And along with the opportunities, markets under Trump will likely bring plenty of risk, too.
“The only predictable aspect,” says Neil Nisker, co-founder and chief investment officer at Our Family Office Inc., a Toronto-based multi-family office, “is that he will be very unpredictable.” Right now, Nisker says, favourable market conditions heading into 2025 represent a “honeymoon period” as equity investors, looking forward to tax cuts and deregulation, power markets higher.
“But at some point,” he adds, “this honeymoon will end.”
The good and the ugly
In fixed income markets, bond traders are already pricing in the downside risk. Yields have largely trended upward since Trump’s election over concerns that his proposed policies—notably, wide-ranging tariffs and the deportation of millions of illegal migrants—could be highly inflationary, diverting the U.S. Federal Reserve from its recent dovish path and sending rates higher.
Uncertainty remains a key theme for Canadian families.
Manju Jessa, RBC
Whether Trump’s promises turn out to be bargaining tactics, bluster or actual policies—or some combination of the three—remains to be seen, but they have made for a volatile mix of potential outcomes.
“Uncertainty remains a key theme for Canadian families,” says Manju Jessa, head of family office and strategic clients at RBC, “as recent changes in Washington may have implications on trade and, therefore, deficits and the Canadian dollar.”
The good news is that 2025 will start from a strong base, Jessa adds. Among other positive tailwinds, unemployment is low, central banks remain more dovish than hawkish, and consumer sentiment is improving. “Overall, the fundamentals remain decent,” she says.
Still, the tug-of-war between the bond and equity markets is likely to be a hallmark of 2025, as speculation continues over whether the Trump administration will make good on its core policies. Don’t be surprised if those do come to pass, says Jonathan Baird, editor of the Global Investment Letter.
“One thing about Trump, whether you love him or you hate him, is that he tells you exactly what he’s planning to do,” Baird adds. Trump may be volatile, but he is “certainly of the view that tariffs are the greatest thing since sliced bread and that he can bully other countries. All of this puts Canada in a tough spot.”
One thing about Trump … is that he tells you exactly what he’s planning to do.
Jonathan Baird, Global Investment Letter
But a trade war could be bad news for the U.S. economy, too. History “does not paint a pretty picture,” Baird says, pointing to examples like the Smoot-Hawley Tariff Act of 1930. Aimed at saving the U.S. economy after the 1929 crash, it made the Great Depression even worse. If high tariffs of the sort Trump has floated—as much as 25 per cent on imports from Mexico and Canada, and higher for imports from China—are imposed, the U.S. dollar will likely soar and other nations may impose tariffs on American exports in retaliation. Trading partners are also likely to devalue their currencies to offset tariffs’ impact on exports, Baird notes.
That suggests Canada’s economic prospects will be sketchier than in 2024, when the TSX Composite Index was among the top-performing equity markets globally. Interest rates here are likely to move lower, even amid inflation risks, which could boost stocks, he adds.
Liquidity matters
Of course, Trump’s tariff threats may not come to pass, and growth could continue.
“The theme for 2024 seems to be about being conscious of inflation while still having good exposure to potential growth,” says Spencer Clark, head of private markets and thematic investments at Richter Family Office in Montreal.
The so-called Magnificent Seven U.S. equities—Meta, Alphabet, Microsoft, Apple, Tesla, Amazon and Nvidia—may still have upside, since even a trade war—while impacting demand for their products internationally—would not completely stem growth given the lack of global competitors, Clark notes.
It’s really important to understand what the overall liquidity budget is for each family.
Spencer Clark, Richter Family Office
As equity markets remain at all-time highs, however, the risk of a correction remains. That’s one reason family offices will likely continue increasing exposure to alternative assets, while placing a premium on liquidity—even for their alternative positions. “It’s really important,” Clark says, “to understand what the overall liquidity budget is for each family.”
That goes beyond understanding their cash needs for lifestyle. Many will to want to keep cash on the sidelines for tactical pivots as risks and opportunities emerge. Among those opportunities could be increased merger and acquisition activity and more initial public offerings. “In general,” he adds, “we think there should be more activity in those areas, especially if the regulatory regime in the U.S. becomes more conducive.”
Evergreen private equity and credit funds should also see more attention from many family offices attracted to the ability to redeem capital quarterly, for example, in a climate of higher volatility. Still, Clark cautions family offices must be “wary” of liquidity claims, since many evergreen funds are new and untested by stressful market conditions.
Richter’s investment team is focused less on tactical pivots than on strategic positioning for long-term growth drivers. Those include the buildout of artificial intelligence infrastructure and, more simply, physical infrastructure investment in general—roads, bridges, pipelines and the like. Another area of expected long-term growth are companies, both private and public, that are poised to benefit from an aging demographic.
As an asset allocator, the family office’s role is often oversight of fund managers running chosen strategies and ensuring that the managers’ tactical pivots make sense for clients. Part-and-parcel to that is preparing for liquidity events that could, for example, arise with private equity and venture capital funds. Asks Clark: “Are we going to get capital calls for new investments, and are we going to get distributions back that need to be re-invested?”
Capital preservation, growth, or both?
No matter the market conditions, clients do expect portfolio growth every year, but the stock market might not help like it has in the past, says Nisker. His firm’s portfolios today have no more than 25 per cent allocated to public equities, with as much as 70 per cent in alternatives.
“Prepare for challenging times,” he adds, citing several risks for equities in 2025, from overvaluation to historically high levels of margin debt. “No one knows when this current bubble will burst.”
Many families still favour cash, says RBC’s Jessa, further suggesting continued uncertainty. In fixed income, she adds that “strategies have not yet changed significantly, other than perhaps a lengthening of term, for some clients, in order to lock in rates.” Equity concerns are typically more centred on downside risk, and so “a more defensive stance, and owning higher-quality investments, has become a theme.”
Prepare for challenging times.
Neil Nisker, Our Family Office
Jessa points to RBC’s U.S. analyst predictions for 2025, which forecast a bullish environment for the U.S. and Canada’s energy exploration and production sectors, telecoms and precious metals. Yet its outlook is bearish for the auto sector, homebuilding and clean energy.
Volatility, of course, creates both risk and opportunity, which means that tighter oversight will be critical to navigating the 2025 environment, Baird says. “The overarching theme is to preserve the accrued profits amid the risks, and then reallocate to where volatility suggests the next opportunities might be.”
Still, given that most family offices have more than enough money for lifestyle and legacy plans, the overarching goal remains capital preservation with steady, risk-adjusted returns, Nisker adds.
“We’re not in the business of making people rich,” he explains. “We’re in the business of keeping them rich.”
The Canadian Family Offices newsletter comes out on Sundays and Wednesdays. If you are interested in stories about Canadian enterprising families, family offices and the professionals who work with them, but like your content aggregated, you can sign up for our free newsletter here.
Please visit here to see information about our standards of journalistic excellence.