Key Takeaways – August 2025
Market Overview
- U.S. markets up ~9% YTD, led by a handful of mega-cap tech names (~35% of S&P 500’s value).
- TSX up ~12.5% YTD, driven by financials and energy; potential BoC cut in September could provide further support.
Concentration Risks
- U.S. – Narrow leadership in six mega-cap tech stocks; valuations stretched, potential policy risks, and rate-cut optimism possibly priced in.
- Canada – Heavyweight sectors are financials, energy, and materials; vulnerable to commodity swings and interest rate volatility.
Global Equities
- MSCI ACWI up ~13% YTD, supported by U.S. tech and emerging markets.
- MSCI ACWI ex-USA up just over 20% YTD, boosted by softer USD, attractive valuations, and supportive policy in Europe and emerging markets.
Fixed Income
- U.S. – Markets pricing ~50 bps in Fed cuts by year-end; short-duration bonds favored for stability, long bonds remain volatile.
- Canada – BoC expected to cut 25 bps in September; long-term yields closely tied to U.S. Treasuries; gains depend on global trends and commodities.
What We’re Watching
- Canadian labour market softness in full-time jobs and participation.
- U.S. jobless claims for signs of a broader cooling trend.
- U.S. services sector input costs and demand trends.
- Key data: inflation, retail sales, and consumer sentiment.
Positioning
- Equities – Selective in Technology and Communication Services, supported by strong earnings trends; positive outlook for equities this earnings season.
- Fixed Income – Favor high-quality bonds, extending duration; potential overweight in high-grade corporates if slowdown deepens.
- Income Strategies – Continuing put-writing on mid- to long-duration U.S. Treasury ETFs to enhance yield and preserve capital.
Final Perspective
- Maintain discipline amid shifting headlines and data.
- Focus on filtering noise, weighing fundamentals, and aligning with long-term strategy.
- Patience, process, and perspective remain critical in navigating crosscurrents