“Like the basic laws of physics, where action creates reaction, economic and political trends tend to develop their own countervailing pressures.” —  Arthur Zeikel

 

To sum it up, the quote above indicates where we are today. Many believe they have a firm understanding of what lies ahead amid the political, fiscal, technological, and economic upheavals reshaping the global environment.

 

My view is that we may experience what happens from the “law of unintended consequences” — when events and trends may lead to results that few could have predicted. From a wealth management standpoint, our focus remains on staying disciplined, following our process, and adapting as conditions change. This approach helps us navigate uncertainty and keep working toward your long-term goals.

 

 

Fixed Income

Fixed income portfolios have taken on a more global focus as Canadian rates declined faster than most global rates, creating stronger opportunities abroad. While the portfolio continues to generate steady interest income, we also expect capital gains to meaningfully enhance overall returns. With the U.S. now entering a new rate-cutting cycle, we’re well positioned to benefit.

This contrasts sharply with 2022–2023, when rising rates hurt most bond portfolios — losses we largely avoided by shifting into short-term bonds. Looking ahead, we plan to continue expanding our global exposure through ETFs, actively managed strategies, and hedge fund investments, as U.S. and most global interest rates remain higher than those in Canada.

In taxable accounts, our fixed income holdings continue to produce higher after-tax returns than traditional interest-only investments such as bonds or GICs, as several positions pay part of their returns as capital gains — taxed at only half the rate of interest income.

We maintained our position in the Globe-X Active Preferred Share Index (HPR) after taking profits in Q2 2025 and reassessed our alternative holdings, including East Coast Strategic Credit Trust, RPIA, and Canso Corporate Value. These strategies — along with RPIA’s Alternative Credit Opportunities Fund — use flexible long- and short-positioning to seek returns in both rising and falling rate environments.

 

Equities

As mentioned in our last update, we took profits during the first quarter. By mid-second quarter, we were adding back to some positions that had traded lower after partial profit-taking — for example, Manulife and Broadcom. We also added selectively to National Bank and Sun Life, while continuing to take some profits in U.S.-dollar accounts.

Given the current uncertainty around potential tariff levels, we continue to take a cautious stance. If tariffs were clearly set at 15%, we could analyze the impact and move forward with confidence. Instead, the back-and-forth speculation about where tariffs may land is creating hesitation among businesses. This uncertainty is translating into volatility across both bond and equity markets. There are already enough external factors influencing markets without the added challenge of unclear trade policy.

At present, approximately 20% of our Canadian equity holdings (in Canadian-dollar accounts) — and, where possible, 30% of our U.S.-dollar equities — are protected against a decline greater than 9–10%. Please remember that partial protection is designed to reduce volatility and help limit downside risk, though not to eliminate it entirely.

 

Conclusion

We remain watchful in managing our portfolios and will continue to actively monitor opportunities in the coming quarters. We appreciate your ongoing trust and confidence. Please don’t hesitate to reach out if you need anything — we’re always available by phone, 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 licence. ©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?