Market Update January 2025

This Market Update includes key insights into the current market environment, our strategy moving forward, and some notable developments. This update reflects our ongoing commitment to delivering timely insights and keeping you well-informed as we navigate these changes together.

Market Highlights

Canada

• Political Leadership Change:
  Justin Trudeau officially resigned today as Prime Minister and leader of the Liberal Party, marking a pivotal moment in Canadian politics. Polls suggest significant losses to Pierre Poilievre’s Conservatives. Trudeau's resignation follows declining public approval, internal party challenges, and economic strains, including tense trade relations with the U.S. This leadership transition adds a layer of political and economic uncertainty, with potential for a snap election on the horizon.

• Monetary Policy and Economic Indicators:
  The Bank of Canada reduced interest rates by 50 basis points, bringing the benchmark rate to 3.25%. While inflation has eased to 1.9%, the economy continues to face slow growth, with unemployment at 6.8% and a decline in GDP per capita. These indicators highlight ongoing challenges in sustaining robust economic momentum.

• Currency and Investment Opportunities:
  The Canadian dollar has fallen to its lowest level since the COVID-19 pandemic, presenting mixed implications for investors. While this has pressured Canadian equities, it also creates potential investment opportunities tied to the US dollar.
  

United States

• Market Performance and Outlook:
  The S&P 500 ended December down 1.78%, but long-term fundamentals remain strong. Markets are anticipating two rate cuts in 2025, which supports US equities as a global safe haven.

• Sector Resilience:
  Technology and growth sectors continue to drive performance, supported by the strength of the US dollar.
  

Global

• China:
  Deflationary pressures are weighing on China’s economic recovery.

• Europe and Asia:
  Political unrest across Europe and parts of Asia is contributing to ongoing market volatility, adding complexity to global investment strategies.
  

Our Strategy

To address these challenges and opportunities, we are taking proactive steps to align your portfolio with the current environment while focusing on income stability, risk management, and steady growth:

1. Income:

•Maintaining a portfolio yield of 4.5%-5% through high-yield fixed income and dividend equities.

•Maintaining cash reserves at current levels to ensure liquidity during periods of volatility while earning approximately 3.5%.

2. Risk Management:

•Reducing exposure to Canadian and international equities due to the Canadian dollar’s weakness and the uncertainty in Canada’s economic and political landscape.

•Increasing allocations to US dividend-paying stocks, leveraging the strong US dollar and stable economic outlook.

•Adding 6% to fixed income for greater portfolio resilience.

3. Steady Growth:

•Retaining positions in US equities, focusing on technology and healthcare growth sectors.

•Allocating to corporate bonds, which offer a balanced approach to risk and return.

Looking Ahead

With a mix of economic headwinds, political uncertainty, and evolving global markets, 2025 requires a proactive and flexible strategy. By maintaining focus on high-yield investments, managing risks effectively, and seizing growth opportunities, we aim to keep your portfolio well-positioned for success.

If you have any questions or need assistance, please remember that we are always here for you.