July 16, 2025 | portfolio managers' brief

Portfolio Managers’ Brief: July 2025

BY: Jason Ayres
A brief review of market conditions and how they are impacting the management decisions of our Investment Review Committee (IRC).

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Portfolio Managers’ Brief July 2025 Key Takeaways

Mid-Year Market Recap: Navigating Uncertainty

  • Investors have endured a volatile first half of 2025, with markets reacting to shifting central bank guidance, inflation pressures, and trade disruptions.
  • Canadian equities have outperformed U.S. counterparts, showing greater resilience amid global macro noise.

Index Performance Year-to-Date (as of recording)

  • TSX Composite: +8.75% YTD — top-performing North American index.
  • NASDAQ 100: +8.00% YTD — driven by mega-cap tech strength.
  • S&P 500: +6.00% YTD — recovering from a steep April sell-off.
  • Dow Jones Industrial Average: +3.85% YTD — lagging other benchmarks.

U.S. Market: A Volatile Path to New Highs

  • Early 2025 strength driven by AI optimism and soft-landing expectations.
  • February CPI surprise and trade tariffs triggered market pullback.
  • S&P 500 fell nearly 22% from YTD highs in April — sharpest drop of the year.
  • Mega-cap tech led a powerful recovery; S&P 500 and NASDAQ hit all-time highs.
  • Bond yields remain elevated as markets price in “higher for longer” rates.

Canada: Resilience Amid Headwinds

  • Strong start supported by job growth and rate stability.
  • Tariffs pressured key exports, pushing TSX and CAD lower.
  • Financials and energy underperformed in March–April, then rebounded in May.
  • TSX hit all-time highs by June, up nearly 22% off April lows.

Outlook for Canadian Markets

  • Investor sentiment remains cautious despite the rally.
  • Inflation is stable; BoC policy remains on hold.
  • Global uncertainty continues to weigh on fixed income.
  • Expect choppier performance in the second half of 2025.

Global Equities: Fragmented Performance

  • Early 2025 optimism gave way to renewed uncertainty from geopolitics and mixed data.
  • U.S. dollar dropped 11% YTD — its worst first-half since 1973.
  • EMs rebounded as dollar weakened; Europe faced recession fears.
  • MSCI ACWI up 9.50% YTD — gains driven primarily by U.S. mega-cap tech.
  • Global equity performance remains uneven outside U.S. tech leadership.

Trump’s “One Big Beautiful Bill”: Market Implications

  • Now law as of July 4, 2025.

Key Impacts:

  • Tax Certainty: 2017 tax cuts made permanent — supports financials, defense, and consumer sectors.
  • Deficit Risk: $3T in new spending could drive bond yields and inflation higher.
  • Sector Winners: Banks, semiconductors, defense contractors.
  • Sector Losers: Clean energy and healthcare — tax credit cuts and reduced federal support.
  • Tariff Revival: Trade-sensitive and consumer sectors under renewed pressure.
  • Bond Market Impact: Larger deficits and lower green support may push long-term yields higher.

Portfolio Positioning – Staying Disciplined

  • Equity Focus: Favoring Technology and Communication Services for strong growth and low leverage.
  • Fixed Income: Holding high-quality bonds in the 2–10 year range; evaluating overweight in corporates.
  • Strategic Reallocation: Initiated put-writing on mid-to-long duration corporate bonds to reduce government bond exposure.
  • Income Strategy: Continuing put-writing on U.S. Treasury ETFs (IEF, TLT) within the CFG Income Fund to enhance yield and preserve capital.

Final Thoughts

  • The first half of 2025 reinforced the importance of staying invested — but selective.
  • Despite volatility in inflation, rates, and trade policy, equity trends remain upward.
  • We remain focused on capital preservation, steady income, and long-term opportunity — even as markets respond to the renewed unpredictability of Trump-era policy and headlines.

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