Date: Feb 4, 2026 The final quarter of 2025 solidified the year as a triumph for the stock market. Despite the longest U.S. government shutdown in history of 43 days, a notable rise in unemployment, and record-low consumer sentiment, risk assets maintained their upward trajectory. A significant shift in market leadership characterized the period, as U.S. equities underperformed their international and Canadian counterparts. U.S. Equities U.S. markets slowed in the final months of the year. The 43-day government shutdown suspended critical economic reporting, leaving the Federal Reserve to navigate a "data-void" environment. Despite this, the Fed implemented its third straight 0.25% rate cut on December 10th, bringing the target range to 3.5%–3.75%. Concentration Risks : While the Nasdaq 100 outperformed the broader S&P 500, the Mag 7 began to lag the index as investors scrutinized the actual return on investment for massive AI capital expenditures. Valuation Concerns : The S&P 500 ended the year trading at 22.5x earnings, approaching dot-com bubble levels. However, proponents argue that current leaders have more established revenue models than their 2000s predecessors. Labor Market Cooling : The unemployment rate climbed to 4.6% in November, marking the highest level since late 2021 and signaling a shift in the Fed's priority from inflation to employment support. Canadian Equities The TSX Composite was the global standout in 2025. Defying early-year pessimism regarding trade wars, the index posted a massive 31.7% annual return. After four rate cuts in 2025, the Bank of Canada held its key rate steady at 2.25% in December, signaling a transition to a neutral stance. International & Emerging Markets For the first time in nearly a decade, international stocks significantly outpaced U.S. equities. Reinvigorated Europe : Southern Europe emerged as an unlikely leader. The European Central Bank's aggressive easing (8 cuts in 18 months) finally stabilized growth, with European stocks gaining 32% for the year. Japan’s Exit from Deflation : Japanese equities surpassed their 1989 peak as sustained wage growth and export strength finally broke the country's decades-long deflationary cycle. China's Pivot : China demonstrated resilience against U.S. trade policy by diversifying its export base. The U.S. now accounts for barely 10% of Chinese exports, with growth shifting toward Southeast Asia and Europe. Fixed Income The bond market saw a milestone in Q4 as the yield curve finally normalized. After two years of inversion, the curve returned to an upward-sloping shape, traditionally a signal of expected economic growth rather than imminent recession. Short and intermediate-term bonds outperformed long-duration assets, which remained sensitive to shifting 2026 rate-cut expectations. Corporate credit spreads remained near historical lows, implying that investors perceive minimal risk in corporate lending despite the broader geopolitical noise. Looking Ahead As we enter 2026, the global investment landscape is shifting from a phase of speculative optimism to one of fundamental accountability. For U.S. equities, the narrative is changing rapidly: the market will move from rewarding massive AI spending to demanding tangible AI earnings, placing significant pressure on mega-cap valuations to justify their current premiums. While central banks in both the U.S. and Canada appear to be pivoting toward a neutral or easing stance, record-high U.S. fiscal debt and the mortgage renewal wave in Canada underscore the need for continued portfolio resilience. In this environment, the outperformance of international and emerging markets is expected to persist, supported by a weakening U.S. dollar and more favorable valuation normalization, while gold remains a critical tactical hedge against ongoing geopolitical and fiscal uncertainty.

Date: July 30, 2025 The second quarter of 2025 was defined by extreme volatility followed by a recovery. Markets began at a tough start with tariff announcements, temporarily pushing equities toward bear market territory. However, investor sentiment drastically shifted on April 9th when the administration announced a 90-day pause on new tariffs for most nations to allow for negotiations. Markets rallied with relief, climbing a wall of worry around geopolitical risks. This recovery was further bolstered by resilient labor data, stronger-than-expected corporate earnings, and the introduction of the One, Big, Beautiful Bill Act, which offered the prospect of near-term tax cuts and deregulation. While the ultimate economic impact of ongoing trade negotiations remains unknown, a deeper analysis of the quarter shows an economy capable of absorbing policy shocks, shifting focus back to fundamental growth and central bank monetary policy. U.S. Equities U.S. stocks rebounded aggressively in the second quarter after a challenging start. Following a rapid decline early in the quarter tied to tariff fears, the S&P 500 Index surged more than 25% from its April lows to finish the quarter up 10.94%. The technology-heavy Nasdaq Composite Index posted an even sharper gain, surging 17.96%. Several key factors drove this shift: Trade Reprieve and Recovery : The 90-day pause on broad tariffs de-escalated immediate recessionary fears, triggering a massive relief rally. On April 9th alone, the S&P 500 posted its best day in over 17 years, rising more than 9%. Earnings Resiliency: First-quarter earnings heavily exceeded expectations, with S&P 500 companies reporting 12.7% year-over-year earnings growth, well ahead of the 7.2% expected at the start of the season. Technology Leadership Returns : Growth stocks outpaced value, and large-caps outperformed small-caps. Information Technology and Communication Services were the top-performing sectors, driven by continued investments in artificial intelligence. Conversely, Energy was the weakest sector. International Markets International developed and emerging markets once again outperformed their U.S. peers in the second quarter when measured in U.S. dollars. This was heavily driven by a weakening U.S. dollar, which fell relative to a basket of major currencies during Q2. European Easing : The Eurozone, represented by the MSCI European Monetary Union Index, rose 5.01% in local currency. Performance was supported by the European Central Bank, which cut interest rates twice during the quarter by a total of 50 basis points as inflation hit its 2% target. Japanese Rebound : After a steep drop in Q1, Japanese equities recovered powerfully. The Nikkei 225 gained 13.83% in local currency, aided by the Bank of Japan maintaining an accommodative stance (holding rates at 0.50%), which kept the yen weak and benefited exporters. Emerging Markets : The MSCI Emerging Markets Index rose 7.93% in local currency. China lagged its EM peers but still posted a positive 2.56% return, supported by the People’s Bank of China cutting interest rates and lowering bank reserve requirements amid ongoing, tough U.S. trade negotiations. Fixed Income and the Federal Reserve The fixed income market experienced elevated volatility but ultimately posted positive returns. Focus shifted away from monetary policy and toward fiscal policy risks, specifically concerns regarding debt sustainability tied to the OBBB Act. This dynamic caused the yield curve to steepen. The 10-year U.S. Treasury yield rose 2 basis points to 4.23%, while the 2-year yield fell 18 basis points to 3.71%, widening the spread to 52 basis points. Credit markets remained strong, with investment-grade corporate bonds leading the segment as spreads narrowed. Municipal bonds, however, underperformed due to an influx of new supply and early-quarter political threats to their tax-exempt status. Meanwhile, the Federal Reserve maintained its wait-and-see stance, holding its benchmark rate steady. Commodities and Alternatives Commodity markets reacted dynamically to shifting supply metrics and ongoing geopolitical tensions: Gold: The precious metal continued its run as a premier safe-haven asset, remaining elevated as central banks maintained their purchasing pace amid global policy uncertainty. Gold is up approximately 25% year-to-date in Canadian dollar terms. Oil: Energy allocations saw renewed interest, with tactical overweight positions being reinitiated. This shift was driven by attractive pricing models and notable reductions in global oil inventories. Looking Ahead Despite the severe turbulence at the start of Q2, macroeconomic fundamentals remain largely stable. While U.S. Q1 GDP contracted by 0.5% due to a surge in front-run imports, the labor market remains highly resilient, adding 147,000 jobs in June with an unemployment rate of just 4.1%. Inflation is largely in check, with core PCE rising 2.7% and annual CPI at 2.4%. Moving into the second half of the year, investors should expect continued rate volatility and policy turbulence as the 90-day tariff pause expires and the full fiscal impact of the OBBB Act is measured. However, the Q2 recovery served as a potent reminder that market dislocations often present opportunities. Maintaining a disciplined approach to portfolio duration, managing concentration risk in mega-cap tech, and leaning into the valuation discounts offered by international markets will remain essential strategies for navigating the months ahead.