Key Takeaways June 2025
Market Overview: Canada Leads YTD
- Canadian equities are outperforming, with the TSX up ~7% year-to-date—leading major North American indices.
- U.S. benchmarks are mixed: Nasdaq +3%, S&P 500 +1.3%, and the Dow slightly negative.
Index Forecasts: S&P 500 and TSX
- S&P 500 year-end target range has shifted up to 6,050–6,600, reflecting stronger earnings and easing trade concerns.
- TSX remains range-bound around 26,500–27,000, with the index currently trading near the low end of that range.
Sector Strength Driving TSX
- Materials and energy, particularly gold and uranium, continue to drive performance.
- Dividend-focused sectors like utilities have also contributed, supported by a weaker Canadian dollar and stable BoC policy.
Global Markets: ACWI Update
- ACWI is up 5.3% YTD, reaching new highs before entering consolidation.
- Global equity leadership is broadening beyond U.S. tech, with materials and industrials gaining momentum.
- Fund managers are shifting exposure toward international markets for better valuations and diversification.
G7 Summit: Trade Window, Rising Tensions
- No major trade breakthroughs, but a 30-day Canada–U.S. agreement window offers near-term potential.
- Geopolitical tensions in the Middle East have lifted oil prices and weighed on sentiment, particularly in Canadian markets.
Central Banks: Firmer, Hawkish Tone
- The BoC held at 2.75%, citing sticky inflation and trade risks.
- The Fed also held at 4.25–4.50%, with updated projections now calling for just one rate cut in 2025.
- Powell emphasized uncertainty, saying the Fed is “flying blind” as it waits for clearer inflation and trade signals.
Market Implications for Investors
- Yield curve remains inverted; inflation and tariff risks are keeping bond yields elevated.
- Stagflation risk is being openly acknowledged by policymakers.
- First expected Fed cut likely delayed to fall or year-end.
- BoC’s caution continues to support Canadian fixed income.
Portfolio Positioning: Staying Disciplined
- Maintaining high-quality fixed income in the 2–10 year range.
- Favouring Technology and Communication Services for growth and balance sheet strength.
- Reducing exposure to U.S. sectors sensitive to trade and debt risk.
- Holding selective European equities benefiting from easing trade tensions.
- Continuing the put-writing strategy on U.S. Treasury ETFs to enhance income while managing risk.
Final Thoughts
Volatility and uncertainty persist, but staying invested—with a selective, risk-managed approach—remains the cornerstone of our strategy.
May’s market behavior reinforces the value of disciplined, selective investing. Volatility will persist, but active risk management and long-term focus remain central.