Another quarter is in the books, and it was another quarter of surprisingly strong returns. All equity regions posted robust gains led by the Canadian benchmark index, which rose by just over 8.5%. The U.S. and international markets also both gained more than 5%. Bonds did not fare as well, dropping by -0.57%, as investors are struggling to predict the impact that U.S.-based tariffs will have on inflation.
Speaking of tariffs, it is not just the bond market that seems to be struggling with what to expect. Very few “deals” have been announced by the U.S. administration with other national trading partners, which has prompted another round of announcements/threats from Donald Trump, including one targeted at Canada. The stock markets no longer seem to care about tariffs, but that may change as we get closer to the latest self-imposed, revised deadline of August 1st.
Turning to the state of economies, central bankers find themselves caught between a rock and a hard place. The nearly out-of-control inflation that existed a few years ago has been contained, but not fully tamed, leaving interest rates at elevated levels – most predominantly in the U.S. Any indication of economic slowdown should lead central banks to lower their interest rates, but the weakening data has not completely cooperated despite nearly unanimous dire predictions by alleged forecasting experts. Canadian economic data does appear to be slowly weakening but has still shown enough strength that the Bank of Canada policy rate has been on hold since March.
It is hard not to ignore the one-year performance numbers shown in the table below. The S&P/TSX Capped Composite is up over 26% in the last year, and that includes the rough patch experienced in the early part of this year! Missing out on periods of strong performance is just as harmful to investors as being invested during periods of negative performance in the context of longer-term returns, and that is a very predictable outcome for investors who panic sell during periods of market weakness.
We expect that volatile market swings could persist through the summer months as lower trading volumes can exacerbate any kind of momentum shifts depending on the latest comments from “you-know-who”. It is important to stay focused on your goals and not the headlines in the media. Enjoy the summer, stay cool, stay safe, stay invested!
Here is a recap of market performance as of June 30, 2025*
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