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.