Each quarter, our Investment Management teams publish their key observations and portfolio updates across Global Equity and Fixed Income markets. This is a summary of our views for the First Quarter of 2025. You can download the full reports via the links shown below.

KEY OBSERVATIONS

The S&P500 and TSX hit new highs in January and February, only to lose steam in recent weeks. In the U.S., concerns about inflation due to tariffs and policy uncertainty that could lead to slower economic growth are not helping what was a pretty decent Q4 earnings season. The S&P500 total return for Q1 was -4.27% in U.S. dollars and -4.37% in Canadian dollars. The TSX total return was +1.51%.

At its March meeting, the Federal Reserve held the federal funds rate steady at 4.25-4.50%, while still favouring two rate cuts later this year. The Fed’s Summary of Economic Projections showed weaker GDP growth but higher inflation forecasts “cancelling each other out,” in Chair Powell’s words. More tellingly, participants’ assessments of uncertainty and risks around their projections have increased significantly.

We entered a correction on March 13th, with the S&P500 down -10.1% from the February 19th high. While this could signal a deeper pullback, most of the supporting data for the “bear case” is based on soft indicators, such as surveys and sentiment. In contrast, hard data such as retail sales and jobless claims remain strong, and corporate earnings continue to rise.

Outside North America, European equities delivered one of their strongest quarterly performances in decades, supported by Germany’s landmark fiscal stimulus package focused on defence and infrastructure. Earnings revisions were positive, relative valuations remain attractive, and multiple rate cuts are expected in the region this year.

In China, manufacturing activity expanded at the fastest pace in a year, suggesting that recent stimulus measures may be gaining traction. Meanwhile, Japan continued to grow at a modest pace, although government officials expressed concern about the potential impact of U.S. tariffs on their export-driven economy.

Markets have been driven by emotion in recent weeks. Amid the volatility, we’ve taken a more cautious stance, but the underlying data remains supportive. The economy is still strong, interest rates have come down and are projected to fall further, earnings continue to rise, and valuations are more attractive than they were three months ago. For now, we are staying the course.

NORTH AMERICAN EQUITY UPDATE

Peter Jackson, HBSc, MBA, CFA

Chief Investment Officer

Portfolio Manager, North American Equities

Our overall equity exposure decreased 3% to 93% and cash increased from 4% to 7%. Our US equity exposure fell from 57% to 53%, while our Canadian equity exposure rose from 39% to 40%.

We reduced allocations to both technology and industrials in favour of more defensive sectors like healthcare, cash, and gold. While uncertainty remains high, the earnings outlooks, particularly for the companies we own, are still solid. Valuations are cheaper, and there are no signs of stress in credit markets. We’ve assumed a more cautious stance, but are prepared to adjust as conditions evolve.

In our North American strategy, we established the following new positions:

AstraZeneca PLC is a U.K.-based pharmaceutical company operating globally with a strong track record in oncology, cardiovascular, and rare diseases. The company has one of the best growth profiles among large-cap pharma and trades at an attractive valuation of 16.5x FY25 P/E. With a robust pipeline and strong emerging market exposure, we believe AstraZeneca is well positioned for mid-single-digit revenue growth and double-digit earnings growth over the mid-term.

Brookfield Corporation is a high-quality earnings business that has delivered an 18% compound annual return over the past 30 years. It currently trades at a significant valuation discount relative to peers, despite higher expected earnings growth. Recent acquisitions in insurance and private credit position Brookfield to benefit from structural growth in alternatives, annuities, and the retirement market.

iShares S&P/TSX Global Gold Index ETF (XGD) provides diversified exposure to gold mining companies. While we typically avoid gold equities due to their volatility, current conditions—including trade tensions, inflation risk, and geopolitical instability—support gold’s traditional role as a store of value. Using a basket ETF helps reduce company-specific risk while maintaining exposure to this potential safe haven.

 

A detailed review of each company can be found in the full report per the link above.

 

GLOBAL EQUITY UPDATE

Phil D’Iorio, MBA, CFA
Portfolio Manager, Global Equities

In a reversal of fortunes, the S&P500 was a laggard among large developed markets during Q1. The “Magnificent Seven” stocks averaged declines of more than 15%. One of the key drivers of this weakness was renewed fears of recession in the U.S., largely due to uncertainty around the Trump administration’s tariff policy.

Outside the U.S., returns were mixed, with strong gains in Europe and Canada and modest losses in Japan. European equities outperformed the S&P500 by over 15% in U.S. dollar terms, the widest margin in more than 30 years.

Germany’s March 18th announcement of hundreds of billions of euros in defence and infrastructure spending marked one of the largest fiscal shifts in postwar Germany. These measures could significantly boost German and broader Eurozone growth.

We see several tailwinds supporting European equities, including fiscal and monetary policy support, favourable valuations, and improving earnings revisions. Meanwhile, China’s manufacturing activity showed signs of life in March, and Japan continues to grow modestly, although concerns remain about Trump’s trade policy given Japan’s export dependence.

In response to rising uncertainty, we raised cash in our portfolios. While near-term risks have increased, we remain constructive over the longer term, driven by anticipated rate cuts, fiscal stimulus, and structural tailwinds across several international markets.

This quarter saw elevated trading activity in both our Global and International strategies, reflecting what we believe could be a turning point in global market leadership. With U.S. equities retreating after years of outperformance, we took the opportunity to reposition the portfolios toward companies and regions we believe are poised for the next phase of the cycle.

In our Global strategy, we established the following new positions:

3i Group is a private equity company whose net asset value is primarily driven by Action, Europe’s fastest-growing non-food discount retailer. Action’s treasure-hunt retail model and private-label strategy support double-digit sales growth and margin expansion. Management sees the potential to expand from 2,900 stores to over 7,000, suggesting a long runway of future growth.

Autodesk is the global leader in design, engineering, and entertainment software. Its platform supports industries from architecture and construction to manufacturing and media. With strong organic growth, a broad set of end-to-end design tools, and a cloud migration strategy that’s improving customer retention, Autodesk is well positioned for sustained earnings growth.

Cadence Design Systems provides essential Electronic Design Automation (EDA) software for semiconductor development. With a near-duopoly market position, strong pricing power, and increasing demand tied to AI and custom chip design, Cadence offers attractive growth prospects and consistently strong returns on capital.

Progressive Corporation is a top U.S. auto and property insurer with the lowest expense ratio in the industry. Its leadership in telematics and underwriting performance positions the company to gain market share while maintaining profitability. We believe Progressive has the potential to double its revenues within the next 5–7 years.

Stantec is a global leader in sustainable engineering, architecture, and environmental consulting, with a growing focus on water infrastructure. The company is benefiting from tailwinds tied to U.S. legislation including the Inflation Reduction Act and the CHIPS Act. Strong organic growth, supported by acquisitions, positions Stantec for continued momentum.

 

In our International strategy, we established the following new positions:

Adyen is a financial technology platform offering a full-service payments infrastructure through a single integration. Its unified architecture provides clients with high authorization rates, simplified global expansion, and end-to-end transaction visibility. Adyen’s global footprint and enterprise focus make it a compelling long-term holding in the evolving digital commerce space.

Aon is the world’s second-largest insurance brokerage and a leader in risk, retirement, and health solutions. With a globally integrated network and exposure to major trends like climate change and cybersecurity, Aon benefits from built-in inflation protection and consistent industry tailwinds.

Hannover Re is a leading global reinsurer with a conservative underwriting strategy and low-cost structure. Unlike many peers, Hannover focuses solely on reinsurance and prioritizes long-term capital stability. This approach has delivered low variability in returns and steady growth in book value and dividends.

Publicis has transformed from a traditional advertising agency into a global provider of data-driven marketing and digital solutions. With operations in over 100 countries and a strong consulting arm, Publicis is gaining market share thanks to its integration of Epsilon and enhanced personalization capabilities.

Reply is a decentralized IT services company specializing in next-gen technologies like AI, IoT, cloud, and big data. With 210 niche-focused companies under its umbrella, Reply helps clients adopt and scale innovative technologies across sectors including automotive, financials, and telecom.

Sony Group is a diversified entertainment and technology company with market leadership across gaming, music, semiconductors, and imaging. The company is benefiting from secular trends in mobile devices and digital media, and is actively integrating its intellectual property across platforms to drive margin growth.

 

A detailed review of each company can be found in the full report per the link above.