* Index returns are total returns, including dividends.
TWO CRISES, TWO ROADS
“Never let a good crisis go to waste.”
— Winston Churchill1
This past quarter, both the United States and China announced new tariffs on Canadian goods. In addition, the United States recently announced tariffs on many international trading partners ranging from 10-50%. These tariffs are taxes imposed on products that cross borders. The goal, according to both the U.S. and China, is to protect national industries and respond to global competition. For Canada, however, the situation has reopened old questions about trade, cooperation, and what it means to be a small but open economy.
Many Canadians are wondering what happens next. The truth is, we honestly don’t know. Trade wars like this can have very different outcomes. Some lead to slowdowns. Others spark new ideas and produce stronger local industries. That’s why we believe it’s important to stay prepared for a range of possible paths—not just the one that is capturing the headlines today.
When Protectionism Made Things Worse: The 1930s
Almost a century ago, the world was embroiled in the Great Depression, one of the worst economic crises in history. In the early 1930s, the U.S. government, hoping to protect American farmers and factory workers, passed a law called the Smoot-Hawley Tariff Act. It increased taxes on hundreds of imported goods from other countries. The plan backfired.
Countries around the world, including Canada, quickly struck back with their own tariffs. Trade between nations collapsed. Businesses couldn’t sell their goods abroad. Workers lost jobs. Instead of helping, the tariffs made a bad situation even worse. It became harder for the entire global economy to recover, because countries simply stopped working together.
So, the lesson is that when everyone turns inward, the whole system breaks down, right? Not always. History also shows us a very different story, just a few short years later.
When Protectionism Built a Foundation: Post-WWII Recovery
During World War II, many countries had no choice but to become more self-reliant. Global trade was disrupted, and shipping routes were dangerous. As a result, governments focused on their own factories, supply chains, and energy sources. This shift was not about revenge or politics, but about sheer survival.
By the time the war ended, those efforts had paid off. Countries had stronger local industries. Workers had new skills. And with the help of international cooperation, trade started flowing again, but this time with better systems in place—like the creation of the IMF (International Monetary Fund) and the General Agreement on Tariffs and Trade (GATT). The result was a period of strong economic growth that lifted millions out of poverty and built the modern global economy. As we can see from this example, sometimes a temporary step back from globalization can help nations rebuild and come back stronger—if they work together in the long run. These two tales of protectionism are very different. One shows how it can create lasting damage. The other shows how, under the right conditions, it can help reset the system and spark new growth.
Which of these two roads are we travelling on today? Sadly, we don’t have a crystal ball and it’s impossible to know with any certainty how the world will look five years from now. Global politics, supply chains, and technology are always changing and evolving. What matters most isn’t predicting the future—it’s being prepared for a wide range of possible outcomes. For example, although the U.S.-based S&P 500 index was down 4.4% in Q1, the MSCI EAFE index (international developed market index) was up 6.8%, and even the equal-weight S&P500 index was only down 0.6%. That’s the crux of smart investing: be diversified for multiple outcomes, disciplined on price, and opportunistic when others are fearful.
Sir Winston Churchill was Britain’s Prime Minister during World War II, one of the darkest periods in modern history. He was known for his sharp wit as much as for his unshakable resolve and ability to lead through crisis.
Churchill believed that even in moments of deep struggle, there is a chance to reshape the future for the better. Did he actually welcome crisis? Of course not. But he understood that pressure creates change, and change creates opportunity. After the war, Churchill helped lay the foundation for new international alliances, economic rebuilding, and long-term peace.
Today’s world is not facing a global war. We are, however, facing growing uncertainty. Trade disputes, geopolitical shifts, and policy changes can shake confidence and send markets lower. That can understandably feel uncomfortable in the short term. But it’s often during these periods that some of the best long-term opportunities appear.
When prices fall, quality investments tend to go on sale. That’s why we continue to invest with discipline. We will continue to focus on positioning your portfolio to weather the storm and benefit from the recovery. Crises are rarely easy, but they don’t have to be wasted.
1 The quote “Never let a good crisis go to waste” is widely attributed to Winston Churchill, although there’s no verified record of him saying it. It was popularized more recently by U.S. political advisor Rahm Emanuel during the 2008 financial crisis. Either way, the sentiment closely reflects Churchill’s belief in turning adversity into opportunity.
AN INTERNATIONAL OPPORTUNITY
Associated British Foods (ABF) is a company with deep roots and a broad reach.2 It was founded in 1935 by Canadian entrepreneur W. Garfield Weston, beginning as a small bakery investment group in the UK. Over the decades, it grew through wise acquisitions and organic expansion, eventually becoming one of the most diversified consumer businesses in Europe. Today, ABF operates in 56 countries and owns a mix of well-known grocery brands, industrial ingredients businesses, and one of Europe’s most popular fashion retailers.
The company is organized into five main divisions. Its grocery segment includes familiar names like Twinings tea, Ovaltine, and Jordans cereals. Its sugar business, through British Sugar and Illovo, makes ABF one of the world’s largest sugar producers. The agriculture arm supplies animal feed and services to farmers under the AB Agri brand, while its ingredients division manufactures things like yeast, enzymes, and emulsifiers used in everything from bread to pharmaceuticals. But perhaps the most recognizable member of the ABF family is Primark—a discount fashion retailer with over 450 stores across Europe and the U.S.
What makes ABF unique is its combination of essential, stable businesses—food and raw ingredients—with the more dynamic, consumer-facing Primark. This mix gives it resilience: when one part of the business slows down, another can often pick up the slack. Unlike many large companies, ABF operates with net cash on its balance sheet and follows a conservative, long-term approach to capital allocation.
Primark itself is a key differentiator. While many bricks and mortar fashion retailers struggle with online disruption, Primark thrives using a high-volume, low-price, in-store model. Unlike other retailers, Primark does not pour money into marketing; they focus instead on keeping costs and thus clothing prices low. Customers come for the value and often leave with much more than they planned to buy—a formula that continues to drive strong foot traffic and brand loyalty. With only 32 stores in North America today, the expansion possibilities for Primark are considerable. We consider ABF to be well-positioned for long-term success, with a business model that balances dependability with growth potential. And at a price-to-earnings ratio of just 10.5x, we believe there is a reasonable margin of safety to build a position.
2 Some clients may not hold ABF due to asset mix or timing
HAVE A PLAN & STAY THE COURSE
With a federal election looming later this month, Canadians have an opportunity to help shape the leadership that will guide us through the challenging period ahead. While the near-term outlook includes uncertainty—particularly when it comes to trade—we remain confident in our country’s long-term potential. Canada is rich in land and resources, home to innovative and tenacious people—and yes, still boasts the best hockey players in the world. We’re optimistic that, regardless of the election outcome, the path forward will be one of progress, resilience, and opportunity.
The start to the year has been tumultuous, both domestically and geopolitically. We are carefully monitoring our portfolios and constantly evaluating areas of weakness and opportunity. As always, we will act as fiduciaries, treating your money as if it was our own and being available for any questions you may have.
One thing we aren’t changing, however, is our approach. We are long-term value investors and believe that over time the best way to combat inflation, maintain purchasing power, and set yourself up for financial security is to stay the course and invest prudently in diversified portfolios.
Thank you for your continued confidence and support.
The Evans Team