First Quarter 2025 Newsletter
- catherine2042
- May 2
- 2 min read
Market Commentary
The financial markets pulled back in the first quarter in the face of the tariff war that began on February 1st. Balanced portfolios performed reasonably given the circumstances highlighting the benefits of diversification across not only asset classes but within asset classes, most notably with respect to US and non-US equity market performance.
Here are the key quarter and YTD highlights:
Equities
S&P 500: -4.27%
TSX 60: +1.70%
Global Equities: -1.27%
Bonds
US Bonds: +2.74%
Canadian Bonds: +2.01%
High Yield: +0.93%
Balanced Portfolios
Global 60/40: +0.41%
We recently highlighted rising bond yields and ongoing inflation concerns. We can now likely add an economic slowdown as a distinct possibly, which will compound the challenges ahead for the market.
We’re 100% confident that the most important thing going forward is our humility to admit that it’s not our job to make predictions and market calls. Rest assured, the systems and processes are firmly in place for us to appropriately position client portfolios. In order to protect capital and participate on the upside when the market eventually resumes a firmer footing.
Fortress Portfolio Positioning and Outlook
The Anchor Pacific Fortress Portfolio is designed to deliver a highly confident reliable outcome over a long-term investment horizon. To provide resilience in the face of evolving market challenges across multiple market cycles. Consistency and adaptability remain at the heart of our investment process.
During the first quarter, we made modest adjustments to the equity composition of the portfolio. Mainly through the shifting of our equity geographic exposure, from an overweight to US listed companies back to a more neutral weighting.
There were no other material changes of note to our allocations over the course of the quarter.
Our present asset allocation for the Fortress Balanced Model Portfolio is below.
Please see below the composition of the equity exposure of the Fortress Portfolio by geography versus those figures at year-end. As you can see from the charts, we reduced our weightings to the US in favor of Europe and Asia geographically while maintaining our desired industry sector exposures.
Fortress Portfolio Positioning and Outlook
Moving forward, the key themes likely to drive portfolio risk and performance are as follows:
Tariff related economic uncertainty and increased recession risk
Higher global cost of capital
Elevated stock and bond correlations
Stretched equity valuations
Above-trend inflation
We are pleased to have been able to generate positive stable returns for our clients despite having relatively conservative allocations to equities. The potential risks going forward continue to guide our process of positioning the portfolio to protect and grow, with a heightened emphasis on the protect piece given our present economic circumstances.
While diversification remains the only free lunch in investing, successful implementation is easier said than done. We take pride in the differentiated strategies we have identified and utilized for many years and will continue to adapt our processes and critical thinking to ensure that your portfolios remain intelligently diversified and resilient to market extremes and uncertainty.
Comentários