These on and off tariffs feel like gusts of wind constantly pushing against us moving forward. While we have seen the recovery in equity and bond markets, the final tariff levels will be the back end of the hurricane leading to more market ups and downs. History reminds us that these events can take many months to finally hit.
This is a first, but thought I would add another quote to my strategy update from the famous Physicist, Stephen Hawking: “We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity.” Enough said on that.
During the first half of 2025, our portfolios performed very well with lower volatility compared to other balanced benchmarks.
Strategy Update Highlights
- We are still cautiously positioned as we wait for more clarity of the US tariffs against Canada and other nations.
- 15% of our Canadian equity exposure has insurance in place until September 19th.
- Our portfolio returns have been good with significantly lower ups and downs (volatility) due to profit taking early in the year with our portfolio insurance also deflecting volatility.
Fixed Income:
Fixed Income portfolios continued performing very well and at the same time providing a buffer from Trump’s liberation day tariff announcement. Again, we took profits on our preferred share ETF HPR from Global X and sold off our Dynamic ETF DXP completely. We decreased our preferred share exposure as performance was well beyond expectation and, out of an abundance of caution, as preferred shares can be sensitive to credit and equity market shocks from tariffs.
We’re continuing to increase our Global fixed income exposure through ETFs, actively managed funds, and alternative hedge strategies, especially since U.S. and global rates remain higher than Canadian rates.
The alternative fixed income strategies we’ve been adding to are East Coast Strategic Credit Trust, CANSO Corporate Value Fund, RPIA Alternative Global Fund. These alternative investments focus on generating returns in both rising and falling interest rate environments.
Please remember our tax-efficient fixed income holdings in taxable accounts continue to provide better after-tax returns than traditional interest-only bond or GIC portfolios.
Equities:
As mentioned in our first quarter update, we were taking profits. By mid-second quarter, we started buying back into certain positions that had traded down after taking profits, for example Manulife and Broadcom.
We also added to national bank and Sunlife, while continuing to take some profits in US dollar account positions.
Given the current uncertainties surrounding where tariffs may end up, we are continuing to take a cautious stance. If we knew that tariffs were going to be, say 15%, that knowledge would allow us to analyze the impact and move forward. 15% would be almost like Canada’s HST.
These up and down tariff announcements cause economic uncertainty. This translates into bond and equity markets uncertainty which can cause volatility. There are enough external influences to deal with not knowing where the trading relationships will finally land.
We have about 15% of the Canadian equity holdings in Canadian dollar accounts protected from a drop greater than 9 or 10%. We are considering adding protection to our US dollar holdings as we've had a considerable rally off the bottom.
Please remember, partial protection aims to reduce volatility and partially limit the portfolio drops.
Conclusion
We remain watchful in managing our portfolios looking for opportunities over the coming quarters as trade uncertainty continues. We appreciate your trust and confidence. Feel free to reach out to us anytime—by phone, video chat (WebEx), or in person.
** Here’s the fine print and there’s a lot of it…
Currency can add return when the Canadian dollar goes down but reduce returns when the Canadian dollar goes up for non-currency hedged US and international investments. Also, please remember that your US accounts report values in US dollars.
Securities or investment strategies mentioned in this newsletter may not be suitable for all investors or portfolios. The information contained in this strategy update is not intended as a recommendation directed to a particular investor or class of investors and is not intended as a recommendation in view of the particular circumstances of a specific investor, class of investors or a specific portfolio. Options, and other strategies mentioned, may not be suitable for all investors. You should not take any action with respect to any securities or investment strategy mentioned in this newsletter without first consulting your own Portfolio Manager or in order to ascertain whether the securities or investment strategy mentioned are suitable in your particular circumstances. This information is not a substitute for obtaining professional advice from your Portfolio Manager. The commentary, opinions and conclusions, if any, included in this newsletter represent the personal and subjective view of Daniel Kelly who is not employed as an analyst and do not purport to represent the views of RBC Dominion Securities Inc. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. Investment Trust Units are sold by RBC Dominion Securities Inc. There may be commissions, trailing commissions, management fees and expenses associated with Investment Trust investments. Please read the prospectus before investing. Investment Trusts are not guaranteed, their values change frequently, and past performance may not be repeated. (Keep reading, there’s only 7 more sentences to go.) This commentary is based on information that is believed to be accurate at the time of writing and is subject to change. All opinions and estimates contained in this report constitute RBC Dominion Securities Inc.’s judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Interest rates, market conditions and other investment factors are subject to change. Past performance may not be repeated. The information provided is intended only to illustrate certain historical returns and is not intended to reflect future values or returns. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ®Registered trademarks of Royal Bank of Canada. Used under license. ©2025 Royal Bank of Canada. All rights reserved.
Investment portfolios are not guaranteed, and past performance is no indication of future returns. In addition to these portfolios not being a guaranteed investment, there can also be significant fluctuations in the value of the portfolio. Has anyone read this far?