In December, the geopolitical and geoeconomic environment led to a weaker U.S. dollar and marginally lower interest rates. This environment has resulted in a broader push for portfolio diversification amid lacklustre bond returns and concerns of volatility in equity markets. Investment demand for gold has surged across all regions, while central banks continued their buying spree – with demand well above average, even if below the records seen in the previous three years. In December we maintained our twelve-month forward outlook of three months of Stagnation (U.S. Real GDP growth less than 2.5%) followed by nine months of Recession (negative GDP growth) over the next twelve- month period.

China’s annual inflation rate picked up to 0.7% in November 2025,¹ while surveyed urban unemployment stood at 5.1% in November.² China’s trade surplus topped a record $1 trillion in the first 11 months of the year despite a deepening slump in shipments to the U.S. with exports rising 5.4% while imports shrank 0.6%.³ Eurozone GDP growth for the third quarter of 2025 was revised slightly higher to 0.3%, up from the preliminary estimate of 0.2%.⁴ The annual inflation rate in the Eurozone was revised down to 2.1% in November.⁵ The Eurozone’s trade surplus widened sharply to €18.4 billion in October 2025 from €7.1 billion a year earlier, as exports increased while imports fell. By country, imports declined sharply from China (-34.1%) and India (-3.0%), while rising from the U.S. (+19.5%), the UK (+16.7%) and Switzerland (+2.3%).⁶

The GDP in the U.S. advanced an annualized 4.3% in Q3 2025.⁷ The annual inflation rate in the U.S. came in at 2.7% in December 2025. The energy index increased 4.2%.⁸ The U.S. unemployment rate increased to 4.6% in November from 4.4% in September.⁹ The U.S. recorded a trade deficit of $52.8 billion in September 2025, the lowest since June 2020. Exports jumped 3% to $289.3 billion, the second-highest level on record.¹⁰ Canadian GDP rose by 0.6% on quarter in the third quarter of 2025, following a revised 0.5% contraction in the previous period. The expansion was driven by a strengthening trade balance, as imports dropped (-2.2%) and exports edged up (+0.2%).¹¹ Headline inflation  in Canada held at 2.2% in November, unchanged from October,¹² while the unemployment rate fell to 6.5% in November from 6.9% in the previous month.¹³ Canada’s trade swung to a surplus of C$0.15 billion in September 2025 from a C$6.3 billion deficit the month before. Exports rose 6.3% month on month. Exports to the U.S. were up 4.6% in September. Meanwhile imports fell 4.1%. Those flows narrowed deficits with countries other than the U.S. and widened Canada’s surplus with the U.S. from C$6.0 billion in August to C$8.6 billion in September.¹⁴

A record-long government shutdown, concerns over elevated Big Tech valuations, and hawkish sentiment from the Fed initially rattled U.S. equity markets in November. A sharp rise in expectations for a December rate cut led to a strong turnaround for the S&P 500 in the last week of November. As a result, the index finished November up 0.3%. Smaller caps outperformed versus their large-cap peers, with the S&P Mid Cap 400 and S&P Small Cap 600 up 2.1% and 2.7%, respectively. Major Canadian equity indices finished the month on the upside with the S&P/TSX Composite up 3.9%. In Europe, the S&P Europe 350 gained 1%. These gains run counter to the performance of Global Equity indices. After seven consecutive months of increase, Pan Asia equities took a breather in November, The S&P Pan Asia BMI (USD) declined 1.7%, led down by emerging markets.

In December we reduced exposure to Mid Term Bonds and added that exposure to Canadian Equities. We continue to believe that Canada is managing the U.S. tariff uncertainty relatively well, replacing some U.S. exports with contracts in Europe and abroad. This is evidenced in the December Canadian economic data. Gold is held across all models as a long-term strategic asset, playing a role as an effective hedge against the heightened geopolitical uncertainty and market volatility. Gold has historically been negatively correlated with the dollar. The combined effect of heightened geopolitical risk and U.S. dollar weakness contributed to Gold’s December record high.

Concerns about a softening U.S. labour market and stubbornly high inflation are mounting. Geopolitical frictions continue to simmer but remain close to boiling. Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.

Deborah Frame, President and CIO

Drew Millard, Portfolio Manager

¹ Trading Economics. China Inflation. December 10, 2025.

² Trading Economics. China Unemployment. December 15, 2025.

³ Trading Economics. China Trade. December 8, 2025.

⁴ Trading Economics. Europe GDP. December 5, 2025.

⁵ Trading Economics. Europe Inflation. December 7, 2025.

⁶ Trading Economics. Europe Trade. December 16, 2025.

⁷ Trading Economics. U.S. GDP. December 23, 2025.

⁸ Trading Economics. U.S. Inflation. December 18, 2025.

⁹ Trading Economics. U.S. Unemployment. December 16, 2025.

¹⁰ Trading Economics. U.S. Trade. December 18, 2025.

¹¹ Trading Economics. Canada GDP. November 28, 2025.

¹² Trading Economics. Canada Inflation. December 15, 2025.

¹³ Trading Economics. Canada Unemployment. December 5, 2025.

¹⁴ Trading Economics. Canada Trade. December 11, 2025.

Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. November 30, 2025. Index performance is based on total returns and expressed in the local currency of the index.

Sweeping tariffs across a wide-ranging group of trading partners threaten to hobble global growth and push up prices for consumers and businesses. The effective tariff rate in the United States has risen to its highest level in nearly a century. Households are reining in spending given the prospect for higher prices, while businesses are lowering investment and hiring plans. Renewed U.S.-China trade tensions underscore vulnerabilities in China’s export-driven economy, with President Trump threatening tariffs of up to 100% on Chinese goods. Central banks have been adding to their bullion reserves and investors have sought refuge in gold this year amid the expanding trade war, record U.S. debt levels, and growing encroachment on the independence of the Federal Reserve. In October we maintained our twelve-month forward outlook of three months of Stagnation (U.S. Real GDP growth less than 2.5%) followed by nine months of Recession (negative GDP growth) over the next twelve- month period.

China’s GDP grew 1.1% quarter-on-quarter in Q3 2025.¹ China’s surveyed unemployment rate fell to 5.2% in September 2025,² while China’s trade surplus came in at USD 90.45 billion in September, as Chinese producers continued to diversify into new markets beyond the U.S.³ The Eurozone economy expanded by 0.2% quarter-on-quarter in Q3 2025, up from 0.1% in Q2.⁴ Inflation in the Euro Area increased to 2.2% in September,⁵ while seasonally adjusted unemployment  edged up to 6.3% in August. Among the bloc’s largest economies, Spain (10.3%), France (7.5%), and Italy (6%) continued to see the highest jobless rates.⁶ The Euro Area trade surplus with the U.S. shrank to €5.8 billion from €14.2 billion, driven by a 22.3% drop in exports and a modest 0.6% decline in imports.⁷

U.S. GDP growth, unemployment, and trade statistics are unavailable due to the government shutdown. The annual core consumer price inflation rate in the United States ticked down to 3% in September 2025 from 3.1% in each of the previous two months.⁸ The annual inflation rate in Canada rose to 2.4% in September from 1.9% in the previous month,⁹ while unemployment held steady at 7.1%.¹⁰ Canada’s trade deficit widened to C$6.3 billion in August of 2025 from C$3.8 billion in the previous month. Imports from the U.S. fell by 1.4% and Canada’s surplus with the U.S. dropped from C$7.4 billion in July to C$6.4 billion in August.¹¹

While the U.S. equity markets closed amid government shutdown concerns, it was a stellar Q3 due to optimism surrounding Fed rate cuts, tech strength, and robust consumer spending, with the S&P 500 up 8.1%. The rally broadened to mid and small caps, with the S&P Mid Cap 400 up 5.6% and the S&P Small Cap 600 up 9.1%.  Major Canadian equity indices finished the quarter on the upside. The S&P/TSX Composite increased 12.5%. The S&P/TSX Global Gold Index increased 48.4%. The headline S&P Europe 350 continued its upward trend. The U.K. was Q3’s best-performing country, contributing more than a third of the index’s quarterly gain. The S&P Pan Asia BMI (USD) recorded a 9.4% quarterly gain. The S&P Asia 50, which comprises 50 leading blue-chip companies in Hong Kong, Korea, Singapore and Taiwan, soared 17.8% in Q3. Chinese equities rallied both onshore and offshore, with the S&P China 500 posting an impressive 22.1% gain in Q3.

In October we maintained all exposures held in September. The reduction in exposure to the S&P 500 and increase in exposure to the Canadian TSX equally across all models in August continues to pay off. We maintain our view that Canada is managing the U.S. tariff uncertainty relatively well, replacing some U.S. exports with contracts in Europe and abroad. Gold is held across all models as a long-term strategic asset, playing a role as an effective hedge against the heightened geopolitical uncertainty and market volatility. Gold has historically been negatively correlated with the dollar. The safe-haven status of gold has been elevated as Trump’s trade agenda and budget deficits shake trust in sovereign debt and currencies, particularly the US dollar. Because bullion is priced in dollars, when the greenback weakens, gold becomes cheaper for holders of other currencies. In mid-September, the dollar fell to its weakest level in more than three years against other major currencies. Central banks have become increasingly active in global gold markets.

The lack of transparency of U.S. economic data resulting from the U.S. government shutdown is cause for caution around the U.S. growth outlook. Though a weaker foreign exchange rate may be good for rebalancing the trade deficit—by making American exports cheaper and more competitive and deterring spending on costlier import, it is not good for household wealth.  Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.

Deborah Frame, President and CIO

Drew Millard, Portfolio Manager

¹ Trading Economics. China GDP. October 20, 2025.

² Trading Economics. China Unemployment. October 20, 2025.

³ Trading Economics. China Trade. October 13, 2025.

⁴ Trading Economics. EU GDP. October 30, 2025.

⁵ Trading Economics. EU Inflation. October 17, 2025.

⁶ Trading Economics. EU Unemployment. October 2, 2025.

⁷ Trading Economics. EU Trade. October 16, 2025.

⁸ Trading Economics. U.S. Inflation. October 24, 2025.

⁹ Trading Economics. Canada Inflation. October 21, 2025.

¹⁰ Trading Economics. Canada Unemployment. October 10, 2025.

¹¹ Trading Economics. Canada Trade. October 7, 2025.

Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. September 30, 2025. Index performance is based on total returns and expressed in the local currency of the index.

U.S. tariffs implemented this year were sold to the American public as being paid by foreign exporters, recharging U.S. manufacturing, and narrowing the size of U.S. trade and fiscal deficits. Early data suggests tariffs are not achieving those goals. U.S. Job growth has decelerated—including in the trade-sensitive manufacturing sector that was meant to benefit from tariffs. In the case of Canada, the blanket International Emergency Economic Powers Act (IEEPA) tariff on Canada impacts a small share of exports that are not compliant with the CUSMA free trade agreement. While sector specific tariffs including on steel and aluminum products remain, more than 90% of Canadian exports continue to access the U.S. market duty free. In August we maintained our twelve-month forward outlook of three months of Stagnation (U.S. Real GDP growth less than 2.5%) followed by nine months of Recession (negative GDP growth) over the next twelve- month period.

China’s surveyed unemployment rate rose to 5.2% in July 2025.¹ China’s trade surplus came in at USD 98.24 billion in July as exports rose 7.2% year-on-year, while imports increased by 4.1%. China’s trade surplus with the U.S. declined in June, as both exports and imports with the U.S. declined, falling 21.7% and 18.9%, respectively.² The headline annual inflation rate in the Eurozone was unchanged from the prior month at 2% in July of 2025. This marks the second consecutive month that inflation has aligned with the European Central Bank’s official target,³ while the unemployment rate in the Euro Area remained unchanged at 6.2%.⁴

The U.S. economy grew an annualized 3% in Q2 2025, rebounding from a 0.5% contraction in Q1, when businesses and consumers rushed to stockpile goods ahead of expected price increases following a series of tariff announcements.⁵ The U.S. annual inflation rate remained at 2.7% in July 2025,⁶ while the U.S. unemployment rate rose slightly to 4.2% in July.⁷ The U.S. trade deficit in goods narrowed sharply in June 2025 as imports fell 4.6% from the prior month, while exports edged down 0.7%.⁸ Canadian GDP contracted by 1.6% on a seasonally adjusted annualized rate in the second quarter of 2025, reversing from the 2% growth rate in the previous period. The report shows some evidence that the trade damage isn’t rapidly creeping through the broader economy. The decline was headlined by lower exports and weaker business investment in machinery and equipment. Exports fell 27% on an annualized basis while business investment contracted 10.1% after rising just 1.1% in the first quarter, highlighting the mounting pessimism facing Canadian firms as they contend with the uncertain and frequent changes to U.S. levies and policy.⁹ The annual inflation rate in Canada eased to 1.7% in July 2025,¹⁰ while the unemployment rate remained unchanged from the previous month at 6.9% in July of 2025.¹¹ Canada posted a seasonally adjusted trade deficit of C$5.9 billion in June as imports expanded by 1.4%. Exports rose by 0.9%. Exports to the United States were 3.1% higher from the previous month but remained 12.5% lower annually.¹² 

Despite ongoing tariff-related trade tensions and macroeconomic uncertainty affecting markets, U.S. equities maintained their upward momentum in July, with the S&P 500 increasing by 2.2%.  The S&P Mid Cap 400 and S&P SmallCap 600 concluded July with increases of 1.6% and 0.9%, respectively. Canadian equity indices finished the month on the upside. The S&P/TSX Composite increased 1.7%. The Europe 350 began the second half of 2025 on a positive note, gaining 1% in July. Most countries contributed positively to the S&P Europe 350, with the notable laggard of Denmark. Pan Asian equities sustained their upward trajectory in July, despite a weakening of currencies against the US dollar. The USD denominated S&P Pan Asia BMI closed the month up 1.1%.

In August, we reduced exposure to the S&P 500 and added that exposure to the Canadian TSX equally across all models, reflecting our view that Canada is managing the U.S. tariff uncertainty, replacing some U.S. exports with contracts in Europe and abroad. We maintained exposure to investment-grade mortgage-backed pass-through securities issued and/or guaranteed by U.S. government agencies. Gold is held across all models as a long-term strategic asset, playing a role as an effective hedge against the heightened geopolitical uncertainty and market volatility.

Demand for foreign goods in the U.S. is expected to hold up in the near term due to a lack of domestic alternatives. Concurrently, U.S. trading partners are looking to other countries for new opportunities. Canada’s 15 free trade agreements (FTAs), covering 51 countries and over 1.5 billion consumers will be a high priority focus, with more deals under negotiation to expand its global network. Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.

Deborah Frame, President and CIO

Drew Millard, Portfolio Manager

¹ Trading Economics. China Unemployment. August 15, 2025.

² Trading Economics. China Inflation. August 7, 2025.

³ Trading Economics. EU Inflation. August 20, 2025.

⁴ Trading Economics. EU Unemployment. July 31, 2025.

⁵ Trading Economics. U.S. GDP. July 30, 2025.

⁶ Trading Economics. U.S. Inflation. August 12, 2025.

⁷ Trading Economics. U.S. Unemployment. August 1, 2025.

⁸ Trading Economics. U.S. Trade. July 29, 2025.

⁹ Trading Economics. Canada GDP. August 29, 2025.

¹⁰ Trading Economics. Canada Inflation. August 19, 2025.

¹¹ Trading Economics. Canada Unemployment. August 8, 2025.

¹² Trading Economics. Canada Trade. August 5, 2025.

Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. July 31, 2025. Index performance is based on total returns and expressed in the local currency of the index.

Economic and trade policy uncertainties have led to reallocation of global capital, causing a weaker U.S. dollar, rising gold prices, and U.S. Treasury bond yields widening. Consumer confidence and business investment intentions have been affected by economic and trade policy uncertainty. This in turn has triggered a reallocation of global capital out of the U.S. with global investors seeking out alternative safe-haven assets to U.S. Treasuries, supporting the gold market. Canada’s close economic ties to the U.S. have been negatively impacted. On June 27th President Trump announced that the United States would terminate all trade discussions with Canada, over the country’s plan to begin collecting digital services taxes from U.S. technology giants. In June we maintained our twelve-month forward outlook of six months of Stagnation (U.S. Real GDP growth less than 2.5%) followed by six months of Recession (negative GDP growth) over the next twelve- month period to three months of Stagnation and nine months of Recession.

China’s consumer prices dropped by 0.1% year over year in May 2025, the fourth straight month of consumer deflation, highlighting challenges from ongoing trade risks with the U.S., sluggish domestic demand, and concerns over job stability.¹ Unemployment in China decreased to 5% in May.² China’s trade surplus widened sharply to USD 103.22 billion in May, up from USD 81.74 billion a year earlier, as exports rose while imports dropped by 3.4%.³ The Eurozone economy grew by 0.6% in the first quarter of 2025, driven by Ireland’s exceptional 9.7%.⁴ Eurozone consumer price inflation was confirmed at 1.9% year-on-year in May, down from 2.2% in April.⁵ The unemployment rate in the Euro Area edged down to 6.2% in April. Among the bloc’s largest economies, Germany (3.6%) and the Netherlands (3.8%) reported the lowest unemployment rates, while Spain (10.9%), France (7.1%), and Italy (5.9%) continued to post higher levels.⁶

The U.S. economy contracted at an annualized rate of 0.5% in Q1 2025, the first quarterly contraction in three years. The weaker GDP figure was largely driven by significant downward revisions to consumer spending and exports. The sharp rise in imports reflected a rush by businesses and consumers to stockpile goods ahead of anticipated price increases stemming from a series of tariff announcements. Federal government spending dropped 4.6%, the steepest decline since Q1 2022.⁷ The annual inflation rate in the U.S. rose for the first time in four months to 2.4% in May.⁸ The U.S. unemployment rate held steady at 4.2% in May.⁹ The U.S. trade gap narrowed sharply to $61.6 billion in April. The biggest trade deficit was recorded with China ($-19.7 billion), although it decreased sharply from a $24.2 billion gap in March.¹⁰ Canadian GDP expanded by 0.5% from the previous quarter in the first three months of 2025. The concentration of growth in net foreign demand and inventory accumulation was supported by firms front-running tariffs from the U.S. on aluminum, steel, and auto industries instead of core economic strength.¹¹ The annual inflation rate in Canada was at 1.7% in May,¹² while the unemployment rate in Canada rose to 7.0%, signaling that businesses may be starting to feel the impact of tariffs imposed by the United States.¹³ Sales to the U.S. contracted 15.7% while exports to countries other than the United States rose 2.9%.¹⁴

U.S. equities staged a recovery in May, thanks to optimism surrounding easing tariff tensions, with the S&P 500® up 6.3%. Although the fiscal deficit, inflation concerns, and ongoing geopolitical uncertainties continue to linger, volatility declined with the S&P Mid Cap 400® and S&P SmallCap 600® both up 5.4% and 5.2% respectively. Following a disappointing 20-year Treasury note auction and ongoing concerns about the fiscal deficit, long term Treasury yields surged. Major Canadian equity indices finished the month on the upside. The S&P/TSX Composite increased 5.6%. The S&P Europe 350® gained 4.9%. The U.K. was the biggest positive contributor to the S&P Europe 350, with +1.03% contribution. Pan Asia equities witnessed a strong rally in May as tariff-related tensions eased. The USD denominated S&P Pan Asia BMI recorded a 5.0% gain, bolstered by the strengthening of Asian currencies against the US dollar.

In June, we maintained exposure to investment-grade mortgage-backed pass-through securities issued and/or guaranteed by U.S. government agencies. Gold is held across all models as a long-term strategic asset, playing a role as an effective hedge against the heightened geopolitical uncertainty and market volatility. Central bank buying is a big factor in gold’s strength as gold’s performance in periods of crisis is at play. For about a decade, as real interest rates rose, gold was inversely correlated. Since 2022, as real rates rose, that inverse correlation has been counterbalanced, supported by investors seeking to mitigate a variety of risks and by central bank buying. We maintained exposure across all models to U.S. Large Caps.

The impact on inflation from tariffs has likely been slow to show up because of lags between when imports face tariffs, and when an imported good hits store shelves. Many final goods sold in stores through May were likely ordered pre-tariffs. The pass-through of tariffs therefore will only become evident over the next 2-3 months. Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.

Deborah Frame, President and CIO

Drew Millard, Portfolio Manager

¹ Trading Economics. China Inflation. June 9, 2025.

² Trading Economics. China Unemployment. June 16, 2025.

³ Trading Economics. China Trade. June 9, 2025.

⁴ Trading Economics. EU GDP. June 6, 2025.

⁵ Trading Economics. EU Inflation. June 18, 2025.

⁶ Trading Economics. EU Unemployment. June 3, 2025.

⁷ Trading Economics. U.S. GDP. June 26, 2025.

⁸ Trading Economics. U.S. Inflation. June 11, 2025.

⁹ Trading Economics. U.S. Unemployment. June 6, 2025.

¹⁰ Trading Economics. U.S. Trade. June 5, 2025.

¹¹ Trading Economics. Canada GDP. May 30, 2025.

¹² Trading Economics. Canada Inflation. June 24, 2025.

¹³ Trading Economics. Canada Unemployment. June 6, 2025.

¹⁴ Trading Economics. Canada Trade. June 5, 2025.

Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. May 31, 2025. Index performance is based on total returns and expressed in the local currency of the index.

Recent market turbulence underscores a shifting global outlook as tariffs usher in a new economic era. On April 2nd, the U.S unveiled the most significant tariffs in almost a century, deepening a decline in U.S. stocks. By April 9th, as broad-based tariffs took effect, the U.S. 30-year bond yield surged amid a sell-off in the Treasury market. Later that day, President Trump paused many of the tariffs for 90 days. Equity markets soared. While the pause creates time for negotiation, tariffs are an ongoing U.S. weapon. In April we maintained our twelve-month forward outlook of six months of Stagnation (U.S. Real GDP growth less than 2.5%) followed by six months of Recession (negative GDP growth) over the next twelve- month period.

China’s economy grew 5.4% year-on-year in Q1 of 2025, maintaining the same pace as in Q4.¹ Core consumer prices in China increased 0.5% in March over the same month in the previous year, reversing a 0.1% fall in February,² while China’s surveyed unemployment rate fell to 5.2%.³ China’s trade surplus surged to USD 102.64 billion in March 2025. The sharp increase was largely driven by a 12.4% year-on-year surge in exports, as factories rushed to ship goods ahead of U.S. President Trump’s upcoming tariffs. Meanwhile, imports fell by 4.3%, due to weak domestic demand. The trade surplus with the U.S. stood at USD 27.58 billion in March. For the first quarter of the year, the trade surplus with the U.S. reached USD 76.65 billion, as exports advanced 4.5% while imports declined 1.4%.⁴ The annual inflation rate in the Eurozone slowed to 2.2% in March. Among the bloc’s largest economies, inflation eased in Germany (2.3% vs 2.6%), Spain (2.2% vs 2.9%), the Netherlands (3.4% vs 3.5%), and Belgium (3.6% vs 4.4%), but steadied in France (at 0.9%) and accelerated in Italy (2.1% vs 1.7%).⁵ The unemployment rate in the Euro Area edged down to a fresh low of 6.1% in February.⁶

The U.S. consumer price index fell by 0.1% month-over-month in March. This marked the first decline in consumer prices since May 2020, largely driven by a 2.4% drop in energy costs.⁷ The U.S. unemployment rate rose to 4.2% in March.⁸ The U.S. trade deficit narrowed to $122.7 billion in February 2025 from a record high of $130.7 billion. Exports rose 2.9% to $278.5 billion. The U.S. trade gap narrowed with China, Switzerland, and Canada, but increased with the EU, Mexico, and Vietnam.⁹ The annual inflation rate in Canada fell to 2.3% in March,¹⁰ while the unemployment rate rose to 6.7%.¹¹ Canada reported a trade deficit of CAD 1.5 billion in February 2025, shifting from a revised 32-month high surplus of CAD 3.1 billion in January. Exports decreased 5.5% over a month to CAD 70.1 billion.¹² 

U.S. markets experienced a turbulent Q1, as concerns about impending tariffs, inflation, and economic growth spooked investors. The S&P 500 closed out the quarter with a 4.3% decline, posting its worst quarterly loss since 2022. Mid and small caps fared worse, with the S&P Mid-Cap 400 and S&P Small-Cap 600 falling by 6.1% and 8.9%, respectively. Despite negative results in March, Canadian equities finished the quarter on the upside. The S&P/TSX Composite increased 1.5%. Europe’s large- cap S&P Europe 350 advanced 6.1% for the quarter, led by its euro- based components, which gained 8%. Almost every country contributed positively, with Germany contributing the most. Global equities faced a downturn in Q1 amid escalating concerns on impending tariffs, geopolitical tensions, and their potential economic repercussions. The S&P Pan Asia BMI (USD) closed the month and the quarter unchanged.

In April, we eliminated exposure to U.S. Municipal Bonds and replaced it with exposure to investment-grade mortgage-backed pass-through securities issued and/or guaranteed by U.S. government agencies.  We use diversifiers including short duration U.S. fixed income exposure as yields are expected to respond to renewed inflation. Municipal Bonds have become less attractive as their tax -exempt status is at risk. Gold is held across all models as a long-term strategic asset, playing a role as an effective hedge against the heightened geopolitical uncertainty and market volatility that is currently in play. While Gold is not a direct target of tariffs, market reactions to trade uncertainty have driven a significant shift in trading behaviour, positively impacting the gold price. We maintained exposure across all models to U.S. Large Caps.

The onset of the North American Trade War has created unprecedented near-term distortions to trade flows across the region. Uncertainty over the economy and future trajectory of potential Fed rate cuts is weighing on investor sentiment. A protracted trade conflict will sharply reduce exports and investment. It will cost jobs and boost inflation in the next few years and lower the standard of living in the U.S. and all countries targeted. Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.

Deborah Frame, President and CIO

Drew Millard, Portfolio Manager

¹ Trading Economics. China GDP. April 16, 2025.

² Trading Economics. China Inflation. April 10, 2025.

³ Trading Economics. China Unemployment. April 16, 2025.

⁴ Trading Economics. China Trade. April 14, 2025.

⁵ Trading Economics. EU Inflation. April 16, 2025.

⁶ Trading Economics. EU Unemployment. April 16, 2025.

⁷ Trading Economics. U.S. Inflation. April 10, 2025.

⁸ Trading Economics. U.S. Unemployment. April 4, 2025.

⁹ Trading Economics. U.S. Trade. April 3, 2025.

¹⁰ Trading Economics. Canada Inflation. April 15, 2025.

¹¹ Trading Economics. Canada Unemployment. April 4, 2025.

¹² Trading Economics. Canada Trade. April 3, 2025.

Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. March 31, 2025. Index performance is based on total returns and expressed in the local currency of the index.