The Markets
The markets were strong this month and it’s been volatile this year with tariff talks. This is a good reminder on why we don’t time the market and we focus on long term objectives built into our financial plans.
The TSX is up 5.8% for April and up 6.3% year to date
The S&P500 is up 5.7% for April and flat year to date.
The NASDAQ is up 9.5% for April and down 1.1% year to date
I am attaching our Global Insight Weekly dated May 30, 2025
From our Portfolio Advisory Group (as of May 30, 2025)
Global equity markets continue to grind higher on the back of the trade war de-escalation. Moreover, a U.S. federal court recently ruled that President Trump had overstepped his authority in using an emergency law to impose tariffs, leaving investors and businesses questioning the implications. The U.S. administration has indicated it will appeal the court’s ruling and it appears too early to draw any real conclusions. U.S. stocks are close to where they began the year, whereas other stock markets are nearing or sitting at all-time highs. As trade tensions ease somewhat, markets have increased their attention to movements in government bond yields. We discuss this more below.
A brief primer on government bond yields
A government bond is a form of debt issued by sovereign countries to fund spending and cover financial obligations. For major developed nations, these bonds are often considered lower-risk investments since they are backed by countries with reliable revenues, political stability, and liquid capital markets. The yield on these bonds (the interest payment divided by the market price of the bond) can effectively be considered a proxy for the cost of government financing and the return demanded by investors to lend to that government. The higher the yield, the greater return investors seek to lend to a government, and vice versa. These instruments can vary in maturity with differing factors driving yield changes. The yields on short-term government bonds (ie. five years and less), are generally subject to a mix of market factors and central bank policy (ie. interest rates), whereas long-term yields are driven more by broader market dynamics and fiscal stability. In a "normal" environment, markets tend to pay close attention to interest rate decisions by central banks (influencing short-term yields more) but in recent weeks and months, the focus of investors has been on the rise in longer-term government bond yields.
Long-term yields moving higher in many places
During periods marked by elevated uncertainty and investor concern, government bonds typically see their prices rise (and yields fall) as investors seek the stability and safety that can be offered by government bonds. But that relationship has been put to the test this year. For example, at the beginning of April when the U.S. government unveiled its reciprocal tariffs on a range of countries, longer-term U.S. government bond yields rose abruptly (and U.S. government bond prices fell). And after a brief recovery, long-term U.S. government bond yields continued to climb higher, suggesting investors may be reassessing some of their views around the U.S. and its government.
It is tempting to think this is a U.S. issue, but it appears to be part of a global phenomenon. Despite the moves noted above, the U.S. 10-year Treasury yield has fallen modestly year-to-date, compared to sovereign yields in other major developed countries (Canada, Germany, Japan, Australia, and the U.K.) that have risen. Meanwhile, the rise in the 30-year U.S Treasury yield has been much more notable, but broadly in-line with the aforementioned countries. In fact, longer-term (ie. 30-year) government bond yields across a range of developed countries sit near or above levels that haven’t been seen in well over a decade. This suggests that investors are demanding more return than they have in the past for locking up their money in longer-dated loans to governments.
Investors increasingly focusing on the sustainability of government finances
There may be a variety of factors that are responsible for the recent move higher in longer-term bond yields. However, concerns over the trajectory of government finances appear to be playing some part. Debt levels across regions have been trending higher in recent decades. That had not been a big concern when interest rates were falling and were relatively low, but the interest rate regime changed a few years ago and the cost of servicing debt has meaningfully increased as a result. In addition, budget deficits are aggravating the issue as some governments continue to plan to spend more than they are earning, which will require them to raise even more debt in the future. The most recent example is in the U.S., where the government is trying to pass a bill that includes higher spending and lower taxes (ie. lower revenue) and will require another increase in the government’s so-called debt limit. Other regions are dealing with similar issues to varying degrees.
The unsustainable nature of governments’ fiscal trajectories is not new. It has been a concern on the minds of some investors for as long as we can remember. Yet that has not presented too much of a hurdle for governments (except the U.K. in 2022) and investors. Nevertheless, at some point, investors may demand a return that is high enough that governments may be forced to take more decisive action to address their fiscal issues. We are not sure that time is near but remain mindful of the risk.
Wealth Management
I have been helping a family with some share certificates held at a transfer agent. The owner of these share certificates has passed away and the family is having a difficult time having these shares transferred. If you have shares certificates that are not booked into an account, please have a conversation with me on this topic. It’s important for the family to have things in order prior to estate time.
We have some new videos out;
Learn about estate/death tax here;
As part of our Healthy Aging Series we have a video on preventative health care
Matters Beyond Wealth: Episode 64
We also have podcasts from RBC Global Asset management – The Download, RBC Capital Markets – my favourites are Markets In Motion with Lori Calvasina, Head of U.S. Equity Strategy and Matters Beyond Wealth.
https://www.rbccm.com/en/insights/markets-in-motion.page
https://www.rbcwealthmanagement.com/en-ca/podcasts/matters-beyond-wealth
In the Community
Hearth Place Cancer Support Centre held their annual gala on May 3 and the event was a big success! We raised over $47.000 – our best event yet. We had a sold out event with 250 people in attendance, lots of silent auctions items, 2 Leafs tickets for a playoff game were auctioned off, a diamond necklace compliments of Graziella’s were some of the highlights. A big thanks goes out to Domenic Albis from Avanti Restaurante for donating his time to be our DJ this year. Thanks also to sponsors/donors – RBC Foundation, RBC Global Asset Management, Lysander, Global X, Hampton Regal Industrial Group and Crown Maintenance and some clients who personally donated. Picture attached.
I participated in the RBC sponsored Ride For The Ridge in support of the Lakeridge Health Network this past weekend. This event raised over $170,000 to support the hospital network in the community we all live. The energy, commitment, and community spirit was truly inspiring. This is an annual event and if anyone wants to come out and bike with me next year, please keep this in mind for end of May. See pictures attached (here, here and here).
Team News
Our office and the markets are closed on Tuesday July 1 for Canada Day.
Happy Father’s Day to the Dad’s on June 15th.