Quarterly commentary

Q1 2025

Following up on what was a great year in portfolios for our clients, the beginning of 2025 started strong for global equity markets. All major indices in North America were positive and as the world awaited the new US President to take up residence in the White House, the markets seemed content knowing the global economy outlook was for continued expansion, although maybe at a slower pace.

The closer Mr. Trump’s residency came towards us, the more headlines began to speak of pending tariff implementation and a revised approach to global trade. What was first thought to be a trade negotiation, quickly turned into historic announcements regarding tariff implementation on goods coming into the United States.

It became challenging to keep up with the tit-for-tat announcements being made from countries all over the world in response to what seemed to be hourly commentary from the White House and trade representatives speaking for the President. Trade relations seemed more tense than we have witnessed in most of our lifetimes and a resolution seemed at best, uncertain. The uncertainty grew into thoughts of economic slowdown and the question of a potential recession seemed to be more and more a part of the headlines. The headlines then led to many analysts adjusting their outlook for year-end market levels and earnings forecasts. 

In the later part of the 1^st quarter of 2025, the narrative around a positive outlook for 2025 became more and more uncertain. Yet, at the time of writing this note to our clients, there have been several developments which seem to have provided some support for markets. We have constantly noted in our discussions with clients, the largest pressure the White House seems to be facing is from within the United States as Democrats and Republicans seem to be at odds with the approach Mr. Trump is taking with important trading partners around the world. Trading volatility has calmed somewhat in recent days, and we hope for more clarity and rational decision making as things unfold.

At the beginning of this year, it seemed interest rates around the world were coming down in most of the developed world. Canada has been more aggressive in cutting rates than our southern neighbor because expectations for our economy were not as positive as the United States. Today, there continues to be debate around the inputs to inflation data and the need to support the economy. Though expectations were for another possible rate cut, the Bank of Canada announced on April 16th they were holding steady at 2.75% amid trade uncertainty. The Federal Reserve in the United States seems reluctant to cut rates without more data on what policy will look like.

As we so often speak of, our portfolio is filled with high quality, dividend paying securities. To us, most of these companies are fabrics of our society and are positioned to handle whatever the global economy brings. We understand the unsettling feeling of stock prices declining but history has continually demonstrated that good quality always comes back. We raised a bit of cash in portfolios late in February by taking some profit off our equity model. We will be looking to put this capital back to work when we feel the time is appropriate. During the quarter, we had 16 instances where a company we own raised its dividend. We also had one special cash dividend paid to the portfolio. After a great year of dividend growth in 2024, we are off to a great start this quarter.

We have been pleased with the portfolios ability to endure the recent volatility. Although portfolios ended the quarter in a flat to slightly negative position, on a comparative basis to major indices, we are pleased. The Canadian market, represented by the TSX was up 1.5% over the quarter, while the Dow Jones Industrial, S&P500 and the Nasdaq all finished in negative territory. The tech heavy Nasdaq ended the quarter down 10.4%. The Canadian dollar strengthened slightly against the US dollar over the quarter. Natural gas performed very well in the first 3 months of 2025.

Later in April, Canada will head to the polls for our federal election. Polls seem to suggest we will see a tight race with Conservative and Liberals running neck and neck. Given the status of the trade relations and the outlook for the Canadian economy, the path forward is critical for our country. Get out and vote!

On Sunday, April 13^th, we witnessed one of the most exciting Masters Golf tournaments in history. Rory McIlroy’s long-awaited victory at the iconic Augusta Golf Course marked only the 6^th time a professional golfer has completed the Grand Slam of golf.

We have been busy chatting to clients during regular reviews and you can always reach out if you wish to discuss anything with us. The team has been busy, helping as best we can, to make sure clients are prepared for their tax filings. This year has been a bit more challenging than usual in terms of CRA systems and timely uploading of information. We hope things improve but we are always here if you have any specific needs. 

Please keep an eye out for emails from the team and to keep up to date, please view our Publications page on our website for updated and timely articles.

Warm regards,

Bow Valley Wealth Management Group