Insights from our Portfolio Managers
Three years ago, just before Halloween in 2022, a new bull market quietly took shape. Now, on its third birthday, we’re celebrating – albeit cautiously. Since that turning point, the S&P 500 has gained nearly 90% in Canadian dollar terms, while the S&P/TSX Composite has risen about 71%. In 2025, however, Canadian equities have taken the lead, outpacing their U.S. counterparts. It’s been a remarkable run by any measure, but valuation signals are beginning to flash amber. The concentration of gains in mega-cap technology stocks has created asymmetric downside risk – if valuations were to normalize, the resulting losses could be meaningful.
Even so, there are still several reasons for cautious optimism in the bull case. Earnings momentum is accelerating, corporate margins are strong, and AI infrastructure continues to attract heavy investment. At the same time, both the U.S. Federal Reserve and Bank of Canada have resumed easing, adding another tailwind for equities.
Three years into this cycle, the fundamentals remain sound – but the price paid for future earnings demands careful positioning. That’s why we continue to emphasize disciplined diversification. Because our role is to build portfolios for the future, not to chase the past.— Craig Maddock, VP & Senior Portfolio Manager, Head of Multi-Asset Management
October in review
Equity markets advanced in October, supported by resilient corporate earnings, central bank rate cuts, and easing geopolitical tensions. Canada’s S&P/TSX Composite rose 0.97%, led by strength in Information Technology (13.82%), Health Care (4.32%) and Utilities (4.12%) sectors, while the S&P 500 gained 2.34% in U.S. dollar terms, led by Information Technology (6.23%), and Health Care (3.58%) sectors. Bonds also strengthened, rising 0.69% in Canada and 0.62% in the U.S. as both the Bank of Canada (BoC) and U.S. Federal Reserve lowered policy rates by 0.25 percentage points to support growth. Commodities delivered mixed results—gold and natural gas advanced 3.18% and 6.29%, respectively, while oil prices fell 1.58%. Emerging markets outperformed with the MSCI Emerging Market index up 4.19%, bolstered by a tech rally that fueled equity gains in South Korea KOSPI index (19.94%).
Here are some of October’s most notable events:
Exports cool as trade tensions heat up. Canada’s trade deficit widened to $6.3 billion in August, the second largest on record and higher than economists expected. Exports fell 3.0%, while imports rose 0.9% highlighting the disruptive and continued effects tariffs have had on Canada’s trade balance. Shortly after November’s trade data was released, tensions with the U.S. escalated quickly when President Trump abruptly halted negotiations and imposed an additional 10% tariff on Canadian goods, following an Ontario ad that quoted former U.S. President Ronald Reagan on free trade.
BoC cuts policy rate to support economy amid slowing growth. The BoC lowered its main interest rate by 0.25% to 2.25% on October 29, marking its second cut in a row. The BoC cited a slowdown in economic activity, with output contracting 1.6% in the second quarter as exports and business investment weakened. The labour market also softened, with unemployment rising to 7.1% in September. While headline inflation edged up to 2.4%, and core inflation measures held near 3%, suggesting price pressures remain persistent, policymakers described the lower policy rate as appropriate to support the economy.
| Index† | Change (%) | Index Level | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Treasury Bill (FTSE Canada 60 Day T-Bill) | 0.24 | 2.40 | 3.03 | 190.17 |
| Canadian Bonds (FTSE Canada Universe Bond) | 0.69 | 3.69 | 4.70 | 1,211.97 |
| Canadian Equities (S&P/TSX Composite) | 0.97 | 25.15 | 28.77 | 30,260.74 |
| U.S. Bonds (Bloomberg U.S. Aggregate Bond, US$) | 0.62 | 6.80 | 6.16 | 2,337.80 |
| U.S. Equities (S&P 500, US$) | 2.34 | 17.50 | 21.42 | 6,840.20 |
| Global Equities (MSCI World, US$) | 2.02 | 20.24 | 22.56 | 4,390.43 |
| Emerging Markets (MSCI Emerging Markets, US$) | 4.19 | 33.56 | 28.65 | 1,401.55 |
| Currencies† | Change (%) | Exchange Rate | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| C$/US ($) | -0.64 | 2.68 | -0.54 | 0.7138 |
| C$/Euro (€) | 1.05 | -7.86 | -6.19 | 0.6187 |
| C$/Pound (£) | 1.57 | -2.30 | -2.44 | 0.5428 |
| C$/Yen (¥) | 3.46 | 0.53 | 0.73 | 109.925 |
| Commodities (US$)† | Change (%) | Price | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Gold Spot ($/oz) | 3.18 | 44.44 | 39.05 | 3,996.50 |
| Oil WTI ($/barrel) | -1.58 | -10.57 | -8.56 | 60.98 |
| Natural Gas ($/MMBtu) | 6.29 | -5.50 | 7.42 | 4.12 |
†Total Return, as at October 31, 2025. Indices are quoted in their local currency.
Source: Bloomberg
Indices are not managed, and it is not possible to invest directly in an index.
U.S. earnings keep pace despite headwinds. According to FactSet, about 64% of S&P 500 companies had reported third-quarter results by late October. So far, 83% have exceeded profit forecasts, though the size of the surprises was smaller than usual. With earnings season still underway, the blended earnings growth rate, reflecting both reported and expected results, stands at 10.7%, keeping pace for a fourth straight quarter of double-digit year-over-year growth. Revenue performance also remained strong, with companies reporting revenue results 2.2% above estimates on average. Of the eleven sectors, ten sectors posted year-over-year revenue gains—led by Information Technology, Health Care, and Communication Services with Energy the only sector to record a decline.
Did you know?
The BoC’s 2% inflation target has been in place since 1991, making it one of the longest-running inflation-targeting frameworks in the world. This target guides the Bank’s interest rate decisions, aiming to keep prices stable enough for consumers and businesses to plan with confidence. Over time, the policy has helped anchor inflation expectations, reduce economic volatility, and build trust in Canada’s monetary system — proving that sometimes, staying the course is the most powerful move of all.
