What a year it has been. It certainly did not turn out the way many thought after a difficult start. The most prevalent themes were tariffs and artificial intelligence (AI). Both seemed set to derail a 2-year market rally after the lows of 2022. Technology fears emerged from a new Chinese competitor. Donald Trump’s liberation day spectacle upended markets. Concerns about an imminent global recession were widespread. And then, the tides shifted.
As far as tariffs were concerned, Donald Trump quickly realized the poll that really matters to him is the stock market. On that measure, his numbers went sharply negative as the S&P500 plunged over 12% in the days following his tariff announcement. He quickly backed off his initial threats and the market recovered. Residual tariffs remained, but the worst fears were avoided.
With respect to AI, as we sit here today, the performance in this space seems unstoppable. Does anyone remember DeepSeek? You’d be forgiven if you don’t. As a refresher, DeepSeek is a Chinese venture which announced to the world at the start of the year a “better mousetrap” for AI. Far more efficient than anything the western world has developed. So much so it would render hundreds of billions of capital investment dollars worthless in short order. While this caused US technology stocks to fall over 15% in the first quarter, it gets barely a mention today.
The announcement from DeepSeek proved premature. It does, however, highlight the risk inherent in technology and it’s a lesson that seems to have been forgotten quickly by some investors. The only risk technology firms see is not spending enough. Valuations (and expectations) have returned to questionably high levels and unprofitable companies are starting to prepare IPO’s in hopes to cash in. Red flags everywhere.
So, what about the rest of the market? While Donald Trump backtracked on his broader tariff threats, some remained in place. From a Canadian perspective, tariffs on steel and aluminum were significant. For all US trading partners, there were concerns about residual economic impacts. While this remains a concern, most countries introduced fiscal spending measures to counteract this new trade regime. The result would have surprised all prognosticators. Some of the best performing markets were in Europe and yes, Canada, while the US lagged.
Interestingly, one of the best performing stocks in Canada was TD Bank, which was thought to be in purgatory, at best, following its 2024 compliance issues. This, also despite economic headwinds from tariffs and concerns of overheated real estate. Ultimately, valuation did matter and while there were short-term challenges, the strength of the franchise and swift response of management presented an opportunity for investors.
There are important lessons in all of this. Even with the benefit of foresight it is impossible to predict short-term outcomes in the stock market. Fear and greed dictate much of what happens. What is notable is that when fear did begin to creep in, it was the shares with the highest valuations that suffered most. Just as quickly, greed has taken over, setting up expectations that may disappoint.
The question we hear now is whether we are in a stock market bubble. Is it 1998? Is it 1999 or 2000? Our answer to this is that it shouldn’t matter. No one knows. We will leave the guessing to day traders and short term “investors”. What concerns us is the quality of companies we own and their valuations. This is the best way to manage risk. Accordingly, we have done some trimming in portfolios on stocks that have run a little beyond what we would deem reasonable. We have also been more patient in reinvesting dividends, preferring to keep some dry powder when markets do pull back.
2026 will be an interesting year full of opportunities and challenges. What will happen with the US central bank leadership and interest rates? Will economies stall under the pressure of tariffs and inflation? Can AI spending continue at an historic pace despite the lack of profits? And of course, the unknown risks as we saw with DeepSeek. If this year taught us anything, it is always difficult to predict the short term, but rest assured we are watching attentively and scrutinizing our companies closely.
Stocks may fall in the short run, but when you own a portfolio of quality companies, then in the long run this shouldn’t be a concern. Dividends will continue to be paid and an opportunity to add to great companies will emerge. From the team at Doherty, we appreciate the trust you have placed in us. We hope you had a wonderful holiday season and wish you all the very best in the new year.
Information as of December 31, 2025.
Doherty & Associates Ltd. (“Doherty & Associates”) is registered across Canada as a Portfolio Manager and Exempt Market Dealer.
The commentaries contained herein are provided as a general source of information based on information available as of December 31, 2025. It is not intended to address the needs, circumstances, and objectives of any specific investor. The content of this commentary is not to be used or construed as investment advice, as an offer to buy or sell any securities and is not intended to suggest taking or refraining from any course of action. Every effort has been made to ensure accuracy in these commentaries at the time of publication however, accuracy cannot be guaranteed. Market conditions may change and Doherty & Associates Ltd. accept no responsibility for individual investment decisions arising from the use or reliance on the information contained herein. We strongly recommend consulting with your Portfolio Manager prior to making investment decisions.
References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by Doherty & Associates Ltd. The specific securities identified and described in this presentation do not represent all of the securities purchased, sold or recommended for a portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.
This document may contain forward-looking information that reflects our current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein.
This document may not be reproduced (in whole or part), transmitted or otherwise made available to any other party without the prior written consent of Doherty & Associates.
As far as tariffs were concerned, Donald Trump quickly realized the poll that really matters to him is the stock market. On that measure, his numbers went sharply negative as the S&P500 plunged over 12% in the days following his tariff announcement. He quickly backed off his initial threats and the market recovered. Residual tariffs remained, but the worst fears were avoided.
With respect to AI, as we sit here today, the performance in this space seems unstoppable. Does anyone remember DeepSeek? You’d be forgiven if you don’t. As a refresher, DeepSeek is a Chinese venture which announced to the world at the start of the year a “better mousetrap” for AI. Far more efficient than anything the western world has developed. So much so it would render hundreds of billions of capital investment dollars worthless in short order. While this caused US technology stocks to fall over 15% in the first quarter, it gets barely a mention today.
The announcement from DeepSeek proved premature. It does, however, highlight the risk inherent in technology and it’s a lesson that seems to have been forgotten quickly by some investors. The only risk technology firms see is not spending enough. Valuations (and expectations) have returned to questionably high levels and unprofitable companies are starting to prepare IPO’s in hopes to cash in. Red flags everywhere.
So, what about the rest of the market? While Donald Trump backtracked on his broader tariff threats, some remained in place. From a Canadian perspective, tariffs on steel and aluminum were significant. For all US trading partners, there were concerns about residual economic impacts. While this remains a concern, most countries introduced fiscal spending measures to counteract this new trade regime. The result would have surprised all prognosticators. Some of the best performing markets were in Europe and yes, Canada, while the US lagged.
Interestingly, one of the best performing stocks in Canada was TD Bank, which was thought to be in purgatory, at best, following its 2024 compliance issues. This, also despite economic headwinds from tariffs and concerns of overheated real estate. Ultimately, valuation did matter and while there were short-term challenges, the strength of the franchise and swift response of management presented an opportunity for investors.
There are important lessons in all of this. Even with the benefit of foresight it is impossible to predict short-term outcomes in the stock market. Fear and greed dictate much of what happens. What is notable is that when fear did begin to creep in, it was the shares with the highest valuations that suffered most. Just as quickly, greed has taken over, setting up expectations that may disappoint.
The question we hear now is whether we are in a stock market bubble. Is it 1998? Is it 1999 or 2000? Our answer to this is that it shouldn’t matter. No one knows. We will leave the guessing to day traders and short term “investors”. What concerns us is the quality of companies we own and their valuations. This is the best way to manage risk. Accordingly, we have done some trimming in portfolios on stocks that have run a little beyond what we would deem reasonable. We have also been more patient in reinvesting dividends, preferring to keep some dry powder when markets do pull back.
2026 will be an interesting year full of opportunities and challenges. What will happen with the US central bank leadership and interest rates? Will economies stall under the pressure of tariffs and inflation? Can AI spending continue at an historic pace despite the lack of profits? And of course, the unknown risks as we saw with DeepSeek. If this year taught us anything, it is always difficult to predict the short term, but rest assured we are watching attentively and scrutinizing our companies closely.
Stocks may fall in the short run, but when you own a portfolio of quality companies, then in the long run this shouldn’t be a concern. Dividends will continue to be paid and an opportunity to add to great companies will emerge. From the team at Doherty, we appreciate the trust you have placed in us. We hope you had a wonderful holiday season and wish you all the very best in the new year.
Information as of December 31, 2025.
Doherty & Associates Ltd. (“Doherty & Associates”) is registered across Canada as a Portfolio Manager and Exempt Market Dealer.
The commentaries contained herein are provided as a general source of information based on information available as of December 31, 2025. It is not intended to address the needs, circumstances, and objectives of any specific investor. The content of this commentary is not to be used or construed as investment advice, as an offer to buy or sell any securities and is not intended to suggest taking or refraining from any course of action. Every effort has been made to ensure accuracy in these commentaries at the time of publication however, accuracy cannot be guaranteed. Market conditions may change and Doherty & Associates Ltd. accept no responsibility for individual investment decisions arising from the use or reliance on the information contained herein. We strongly recommend consulting with your Portfolio Manager prior to making investment decisions.
References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by Doherty & Associates Ltd. The specific securities identified and described in this presentation do not represent all of the securities purchased, sold or recommended for a portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.
This document may contain forward-looking information that reflects our current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein.
This document may not be reproduced (in whole or part), transmitted or otherwise made available to any other party without the prior written consent of Doherty & Associates.