Q4 2025 Strategy & Market Reviews
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 Fourth Quarter of 2025. You can download the full reports via the links shown below.
KEY OBSERVATIONS
The fourth quarter of 2025 marked a pivotal period for global markets as central banks worldwide delivered their most aggressive easing campaign since the financial crisis, with nine major central banks implementing 32 rate cuts totaling 850 basis points throughout the year. This unprecedented monetary stimulus, combined with ambitious fiscal programs across multiple regions, created a supportive backdrop for equity markets despite elevated valuations and periodic volatility.
Corporate earnings emerged as a key driver of market performance, with the S&P 500 delivering 13.6% year-over-year earnings growth in Q3—well above the 7.9% initially expected. More importantly, earnings strength broadened significantly beyond the technology sector, with 82% of S&P 500 companies exceeding earnings estimates, the highest rate since Q2 2021.
International markets demonstrated notable strength relative to U.S. equities, with Europe and Japan generating total returns of 20.7% and 25.5% respectively for the full year 2025, compared to 17.9% for the S&P 500. This outperformance was supported by significant fiscal stimulus initiatives, including Germany’s unprecedented €1 trillion infrastructure package, Japan’s ¥21.3 trillion spending program, and Canada’s ambitious five-year plan to mobilize roughly $1 trillion in public and private investment. These coordinated fiscal efforts, combined with accommodative monetary policy, are expected to provide sustained economic support through 2026.
Perhaps the key wild card remains the White House, as markets can never fully anticipate political developments. Events such as Liberation Day, which drove markets down nearly 20% from their recent high, were an unwelcome reminder of this uncertainty. That said, presidential approval ratings between 35% and 50% have historically been followed by average market gains of approximately 12.19% over the subsequent year. Seems counterintuitive, but perhaps some unpopular decisions might ultimately be good for the economy and markets.
In summary, the combination of resilient economic growth, positive earnings momentum, and the prospect of further interest rate cuts by the U.S. central bank continues to support our favourable outlook on equities going forward.
NORTH AMERICAN EQUITY UPDATE
Peter Jackson, HBSc, MBA, CFA
Chief Investment Officer
Portfolio Manager, North American Equities
Our overall equity exposure increased modestly from 98% to 99%, while cash declined from 2% to 1% since September 30, 2025. Within equities, U.S. exposure decreased from 57% to 53%, while Canadian equity exposure increased from 41% to 46%. Many client portfolios are invested through our North American plus International Equity strategy, which remains at 80% US/Canada and 20% International equities currently; as a result, the effective weights of U.S. and Canadian equities within total equity allocations are proportionally lower due to exposure to international markets.
In our North American strategy, we established the following positions:
Netflix (NFLX) was added based on conviction that the company can organically grow revenue at a mid-teens rate with earnings per share expanding at roughly twice that pace, driven by scaling of the advertising-supported tier, expansion into live events and gaming, and potential acquisition of Warner Bros.’ valuable IP portfolio.
PulteGroup (PHM) was added this high-quality U.S. homebuilder positioned to benefit from a structural housing shortage of approximately five million units and potential mortgage rate declines, trading at roughly 11x forward earnings with a 7.6% free cash flow yield.
Sprott Uranium Miners ETF (URNM) provides exposure to uranium producers positioned to benefit from an estimated 44-million-pound supply shortfall in 2026 and a cumulative 1.8-billion-pound deficit over the next 20 years as demand accelerates globally.
Shopify (SHOP) is a Canadian e-commerce platform offering comprehensive merchant solutions with high switching costs, recently partnering with OpenAI to enable direct sales through ChatGPT conversations, with revenue having grown 31% annually over the past five years.
A detailed review of each holding can be found in the full report per the link above.
GLOBAL EQUITY UPDATE
Phil D’Iorio, MBA, CFA
Portfolio Manager, Global Equities
Global equity markets demonstrated resilience in Q4 2025, with most developed markets generating positive returns despite periodic volatility. International markets significantly outperformed U.S. equities, with Europe’s Euro Stoxx 600 advancing 6.5% and Japan’s Tokyo Stock Exchange gaining 8.8% during the quarter, compared to 2.7% for the S&P 500. The year 2025 proved particularly strong for international investors, with Europe delivering a total return of 36.8% and Japan 25.5%, substantially ahead of the S&P 500’s 17.9% return.
The outlook for 2026 remains cautiously optimistic, supported by unprecedented monetary easing with 850 basis points of rate cuts from major central banks in 2025, significant fiscal stimulus programs including the U.S. One Big Beautiful Bill Act ($4.5 trillion in tax breaks over a decade), Germany’s €1 trillion infrastructure package, and Japan’s ¥21.3 trillion spending initiative. Corporate earnings momentum has been strong globally, with the percentage of companies beating earnings estimates in Q3 2025 exceeding historical medians across Europe, Japan, and Emerging Markets. The broadening of earnings growth beyond mega-cap technology stocks, combined with accommodative policy support and a capex supercycle led by artificial intelligence investments, creates a favorable environment for global equities despite elevated U.S. valuations and geopolitical uncertainties.
New positions added to the Global Strategy:
Ametek is an American industrial technology company manufacturing advanced electronic instruments and electromechanical devices for mission-critical applications in aerospace, energy, medical equipment, and industrial automation, operating in specialized niche markets with high barriers to entry.
Dollarama is Canada’s largest dollar store chain with over 1,600 domestic locations and growing Latin American presence through 60.1% ownership of Dollarcity, differentiated by broad income appeal, high private label mix, and exclusion of perishable items requiring refrigeration.
JPMorgan Chase is the largest U.S. bank with over $4 trillion in assets, operating as a universal bank with dominant presence across consumer banking, investment banking, and asset management, led by CEO Jamie Dimon’s disciplined risk management and fortress balance sheet approach.
UnitedHealth is a former position that is being re-added to the portfolio following management changes including former CEO Stephen Hemsley’s return to repair operations and reprice unprofitable business lines.
Netflix, PulteGroup, Sprott Uranium Miners ETF, and Shopify are described in the North American Equity section above.
New positions added to the International Strategy:
Hermès International is a renowned French luxury goods company positioned at the top echelon with iconic products like Birkin and Kelly bags, enjoying strong pricing power through exclusivity, high direct-to-consumer mix, vertical integration, and family control ensuring strategic consistency.
Orix is a major Japanese diversified financial services group transforming from leasing and corporate finance into an alternative asset manager focused on fee-related earnings, well-positioned to capitalize on succession opportunities in Japan’s mid-market under new CEO leadership.
Pan Pacific International is a Japanese retail holding company operating Don Quijote and other discount formats using a treasure hunt model with store manager autonomy, expanding its discount model and private label penetration across the Asia-Pacific region.
TE Connectivity is a global industrial technology leader providing connectivity and sensor solutions for automotive, networking, and industrial applications, benefiting from secular trends in datacenter capex, defense spending, renewable energy, and factory automation.
A detailed review of each company can be found in the full report per the link above.
Owen Morgan, MBA, CFA
Portfolio Manager, Fixed Income
The fixed income market delivered mixed results in Q4 2025 as the yield curve steepened, with short-term rates declining following the Bank of Canada’s October rate cut to 2.25% while long-term yields rose on stronger-than-expected employment and GDP data.
This dynamic created headwinds for government and provincial bonds, which posted small negative returns as bond prices fell in response to rising yields. However, corporate bonds emerged as the quarter’s standout performers, with both investment-grade and high-yield securities delivering positive returns as credit spreads tightened, reflecting growing investor confidence in corporate borrowers’ ability to service their debts.
Looking ahead to 2026, the fixed income strategy emphasizes high-quality investment-grade corporate bonds with select high-yield opportunities where conviction is strong.
With inflation stabilizing at the Bank of Canada’s 2% target and market expectations pricing minimal probability of significant rate cuts—approximately 60% chance of one small cut by year-end, earliest in mid-summer—the portfolio maintains flexibility on duration without extending into longer-term bonds unless spreads become significantly more attractive.
While corporate bond spreads currently sit below historical averages, the absence of recession warning signs and adequate Canadian economic performance support the credit-focused approach, positioning the portfolio to generate steady income while managing risk in an environment where companies remain on solid financial footing.
Given this environment, we’re maintaining a strategic approach. We are emphasizing high-quality investment-grade corporate bonds to capture attractive yields, with select opportunities in carefully chosen high-yield bonds where we have strong conviction. We are not extending into longer-term bonds yet, but if long-term rates become significantly more attractive relative to short-term rates, we’ll adjust accordingly.
While 2026 will bring both challenges and opportunities, we are cautiously optimistic, and believe the current environment supports our credit-focused strategy.
A detailed review of each company can be found in the full report per the link above.
