Back in February, we asked advisors serving Canadian family offices how they might put $10 million to work. With all that’s happened over the past six months—Trump, tariffs and so on—it seemed an opportune moment to revisit the question. This time, we made the task a little bit simpler, and asked a group of investment advisors how they would invest a “mere” million dollars today.
Their answers were a bit defensive.
It’s not that they’re uncomfortable about airing their ideas. It’s just that, given excess exuberance in the U.S. equity markets and a host of geopolitical and macroeconomic risks, they are inclined to take a decidedly conservative posture.
Here are four areas where they see opportunities to invest $1 million that could perform well if public markets continue to exhibit volatility.
In defence of defence
Stagflation—a condition of high inflation and slow growth that battered the economy in the 1970s—has been forecast frequently among investment and economic pundits ever since inflation flared post-pandemic. More recently, President Donald Trump’s tariff-driven trade policies are stoking fears that the economy could generate another toxic mix or rising prices and anemic growth, according to Jonathan Baird, the Toronto-based editor of the Global Investment Letter.
“Everything I see suggests we’re going to see that,” he says.
Today’s equity markets, particularly in the U.S, are widely viewed as historically overvalued relative to earnings, Baird adds. Still, some equity investment themes should do well over the next decade—risks aside.
Among those is the defence sector. Increased defence spending in Europe, Japan and even Canada will help fuel growth for many firms, Baird says.
What’s more, defence has a long history of providing investors with steady returns. Since 1994, the MSCI World Aerospace and Defense Index has produced an annualized return of more than 12 per cent.
Baird notes that the share prices of many defence companies’ have already risen significantly. German conglomerate Rheinmetall AG’s stock is up more than 160 per cent year-to-date, for example.
Of course, investors are likely to see those gains retreat if market sentiment turns fearful, which is a real risk, Baird adds. Yet long-term investors should instead see those declines as opportunities to invest at more favourable valuations.
Even at the current high valuations, Baird holds two defence stocks he believes will experience more growth ahead. One is Rolls-Royce Holdings PLC ADR. “It’s not a car company any more,” he says, noting that the British firm produces jet engines and related components for the military.
Baird also holds BAE Systems ADR, another United Kingdom-based manufacturer that produces howitzers, advanced ammunition and technologies for next-generation fighter jets, among other materiel.
Infrastructure 2.0
The U.S. equity market reflects investors’ robust enthusiasm for technological innovation, particularly artificial intelligence, observes Ben Jang, portfolio manager with Nicola Wealth in Vancouver. “Just looking at forward price-to-earnings alone, the U.S. market is in the high 90th percentile,” he says.
Jang likens capital pouring into Palantir Technologies Inc. and NVIDIA Corp. to the Klondike Gold Rush of the 1890s. “Everyone wanted to get rich striking gold, but few actually did,” Jang says. The more profitable play for gold fever back then would have been to sell the tools prospectors needed, he says.
That “pick and shovel” approach applies today to the modern gold rush for electric vehicles, cryptocurrency and AI.
Clément Chenneveau, client advisor in wealth management at Altium Wealth Architecture Inc. in Montreal, says it’s similar to the hype around the Internet in its early days. Many of the companies with high-flying share prices in the early 2000s no longer exist today, he notes, while publicly traded companies involved in electric vehicles, cryptocurrency and AI have a place in portfolios.
Chenneveau also suggests investing in assets facilitating their growth. “We call it investing in infrastructure 2.0,” he says.
He points to private placements in utilities, fibre optics networks and data centres as investments potentially providing steady, inflation-adjusted income and long-term capital growth. “These are necessary elements for the growth of innovation,” he says.
The strategy also reduces the need to pick winners in the innovation race, as investors instead benefit from increased demand for the infrastructure that allows these technologies to blossom, he adds.
One area of particular interest is data centres, Jang notes. Private investment opportunities here are driven by big technology companies and other blue-chip firms requiring data centre assets to accommodate the explosive growth of AI and cloud computing in general.
“Not only is there massive demand, but the companies require data centres that can never go offline,” he says. “These are mission-critical assets, and there simply isn’t enough right now.”
Profitability providing liquidity
Many investors in alternative assets are willing to give up liquidity in exchange for returns that have low correlation to public markets. Yet that doesn’t mean some investors will never need to exit these positions earlier than expected.
Especially when public markets sink, private placements generally see higher redemptions as cash-pinched investors seek liquidity, Chenneveau says: “That’s when investors in secondary markets step in to provide that liquidity, acquiring high-quality assets at discounts.”
Of particular interest currently is private credit, where gating of funds by general partners to preserve the underlying investments increases amid times of economic turmoil and higher cost of capital. “We have spent more than a decade with low interest rates,” Chenneveau says, “and we believe we’re now in a higher-for-longer environment.”
Chenneveau further notes that the secondary market for private credit in turn is particularly interesting. But investors must engage in highly detailed due diligence to ensure the assets they acquire do indeed offer future upside.
“Done properly, secondaries in private credit can provide attractive yields and growth opportunities, but the risks can be higher than expected if you don’t do your homework,” he adds.
Not all secondary market opportunities stem from frantic investors seeking liquidity amid extreme market stress, however. Jang points to university endowment funds, explaining that these institutional investors occasionally must sell private assets to rebalance their overall portfolios.
“But these days, these assets are not selling as quickly as they have historically, so a university endowment can’t count on the general partner to redeem units,” he says.
In turn, endowment funds may need to sell on the secondary market, and cash-rich investors can provide liquidity, purchasing assets at a discount to their intrinsic value, he adds.
As good as gold—and silver, too
Gold is a portfolio’s best friend in times of fear and uncertainty, and many investors have gravitated to it recently. It reached record highs this past spring, Baird says, but “I believe the odds favour gold going higher as opposed to lower.”
One catalyst might be falling interest rates, particularly if investors perceive that the U.S. Federal Reserve will bow to political pressure and begin to ease. If inflation is the result, then it could lead to higher gold prices. (If rates then rise in response, though, they could put downward pressure on gold in the short term.)
Gold also benefits as a store of value if inflation persists, Baird notes.
Silver may not share many of the same characteristics as gold, but it is an interesting investment nonetheless because of supply-demand factors.
“It’s faced a supply shortage for years that is getting tighter and tighter,” Baird says.
He also points to silver’s growing use in semiconductors, mobile devices and other electronics.
“I wouldn’t bet the farm on either precious metal,” he says, “but they have a place in portfolios in the potentially risky environment ahead.”
Joel Schlesinger is a Winnipeg-based freelance writer who has written for Canadian Family Offices since 2021. Specializing in investment, wealth advice, real estate and personal finance, he is also a regular columnist for the Winnipeg Free Press, and his work regularly appears in The Globe and Mail, Calgary Herald and Edmonton Journal.
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