Investing is a game full of surprises

At the beginning of each new year over the past decade, I attempt to reflect on the year past and ponder what might occur over the next 12 months. Let’s look at the predictions made a year ago and what happened.

First, I predicted that most predictions would be wrong. This is always my most accurate prediction and made to poke a little fun at the whole prediction process. I always encourage a heavy dose of salt with all market prognostications.

Second, I predicted an official recession would be called in Canada, and the U.S. economy would slow. I was mostly wrong. Canadian growth has been tepid, flirting with zero, but only went negative in the second quarter.

The U.S. on the other hand is experiencing strong growth. After a negative first quarter, with importers front-running tariffs (imports are negative in the GDP formula), the U.S. has boomed in part because of massive artificial intelligence (AI) investments. Third-quarter growth was 4.3 per cent and fourth quarter is projected to be 5.3 per cent, which could exceed Chinese GDP. When is the last time that happened? However, many aspects of the non-technology U.S. economy are relatively slow.

Third, I predicted a recovery in energy prices and expected natural gas would reach $5, and oil $90. I was half right with gas hitting my target, but oil slid slowly throughout the year, down about 20 per cent overall. On a positive note, energy stocks rose throughout the year, exiting about 12 per cent higher. Staying invested was the right decision.

Fourth, I predicted inflation would remain stubborn which would restrain interest rate reductions. This turned out to be relatively accurate despite lower oil prices, which is one of the most important factors as energy costs filter through on just about everything. While central banks have reduced short-term rates, long-term rates, which are set by the market, remain about the same as a year ago.

Fifth, I predicted significant volatility and only modest gains on North American markets, with Canada outperforming the U.S. Two out of three predictions came to fruition but market gains were surprisingly robust for a third year in a row. The U.S. S&P 500 had a total return of 17.9 per cent, with the Canadian TSX up 28.2 per cent. This averages 23.1 per cent, which is what I use as my benchmark to evaluate portfolio performance.

The volatility came by way of the “tariff tantrum.” While markets had been slowly declining early in the year, they hit a serious air pocket in early April with Trump tariffs. Dire predictions circulated the airwaves. People panicked and sold stocks with reckless abandon. Those who exited at market lows missed out on 40 per cent gains in both Canadian and U.S. markets since then.

In summary, my 2025 predictions were middling at best and my worst prediction performance since I started the practice a decade ago — which underscores my first prediction. More important, however, is evaluating how my portfolios performed and I would encourage everyone to critically assess their own performance.

On this front, 2025 was another successful year. My taxable portfolio, started 10 years ago, was up a bountiful 25.8 per cent, beating the benchmark. It now has a 10-year compound growth rate of 18.9 per cent. Our two TFSAs averaged 20.2 per cent, slightly under the benchmark, but decent given the conservative nature of the portfolios. Our two RRSPs lagged, averaging 15.7 per cent, well below the benchmark. While they are also conservatively managed, that’s too far below the benchmark. In the markets, as in life, there will always be things that make you happy and things that don’t.

Like our RRSPs, the Titanium Strength Model Portfolio (see image below) had a modest year compared to the benchmark, but a good year in nominal terms with a 16.5 per cent gain. For new readers, I set this up in 2018 when I began writing for Grainews with the intent of reinvesting dividends but otherwise staying with all the original stocks, to illustrate how easy it can be to make decent returns with minimal effort.

The portfolio is now up 126.4 per cent in seven-and-a-half years, slightly better than my expectations at the time. Note that Magnum Ice Cream, a Unilever spinoff, is now part of the portfolio. One share was received for every five shares of Unilever owned, and then Unilever reverse split receiving eight shares for every nine owned. This was a little more complex than most spinoffs.

I will use the CAD dividends accumulated to buy more shares of XEG, a Canadian energy ETF. I remain bullish on energy and commodities in general. Some commodities have done extremely well over the past year while others have lagged. I think oil has limited downside and significant upside potential. The world seems to be waking up to the importance of hydrocarbon energy and all the talk of peak oil demand by 2030 is fading into the hallucinogenic past. Energy usage is highly correlated with worldwide GDP growth. As a thought, buying energy company shares is a decent way to hedge one of a farmer’s largest input costs.

Besides this prediction on energy, I will keep my other prognostications simple. Once again, most of what we read will be wrong. Wall Street forecasts are bullish with a median forecast of 12-14 per cent gains, which in itself is a bearish sign. I think we will have another volatile year, relatively directionless with either modest gains or losses, perhaps between minus five to plus five per cent. If energy rallies, as I suspect, Canada could outpace the U.S. again. My overarching concern is massive government debts, while stock valuations and geopolitical risks also remain elevated.

While my predictions are conservative, I will remain largely invested in stocks because no one has proven to be adept at both exiting and entering the market at highs and lows, with regularity. I might be a little more cautious than usual but will continue to look for value where it exists.

And it always exists somewhere.

During a 40-plus year career in agriculture, Herman VanGenderen became an active investor in stocks and real estate. His book Stocks for Fun and Profit: Adventures of an Amateur Investor is available on internet book websites. None of the information presented should be considered as investment advice and while significant care is taken, given the variability of the subject matter, complete accuracy is not guaranteed. Please email you1st.stocks@gmail.com with questions/comments.