A Dynamic Start to 2025

Welcome to 2025! The year has begun with notable global developments shaping economic trends,financial markets, and investor sentiment. From robust job market data to political shifts and re-calibrated monetary policy expectations, the early days of 2025 already present a mix of challenges and opportunities for investors. In this commentary, we distil complex market dynamics into clear, actionable insights to help you navigate these changes confidently and position your portfolio for success.

Key Developments Shaping the 2025 Landscape

Strong Economic Fundamentals in North America

The U.S. and Canadian economies entered 2025 on a solid foundation, supported by robust GDP growth,controlled inflation, and strong labour markets.

• U.S. December Jobs Report: Nonfarm payrolls surged by 256,000, significantly outperforming expectations of 165,000. The unemployment rate dropped to 4.1%, while average hourly earnings grew by 3.9% year-over-year. This indicates sustained consumer spending power and easing inflation pressures.
• Canada’s Labour Market Gains: Canada added 91,000 jobs in December, far surpassing expectations of     25,000, bringing unemployment down to 6.7%. Wage growth of 3.7% supports better inflation dynamics and boosts consumer confidence.

With wage growth outpacing inflation in both nations, consumer spending remains a robust driver of economic momentum and a positive signal for businesses and investors.

Political Transitions Add Complexity to Markets

Political changes in North America are creating additional uncertainties for investors, though markets historically focus on fundamentals rather than headlines.

• United States:
      President-elect Donald Trump will assume office on January 20, with     markets closely watching his administration’s priorities, including     potential changes to tariffs, tax policy, and energy regulations. These     policies could significantly affect inflation, growth, and trade dynamics.
• Canada:
      Prime Minister Justin Trudeau’s resignation and the suspension of     Parliament until late March delayed key legislative initiatives. Investors     are monitoring the impact of these delays on tax policy and broader market     sentiment.

Market Volatility and Central-Bank Repricing

• Rising Bond Yields:
      Strong jobs data has led to reduced expectations for aggressive central bank rate cuts. The Federal Reserve now anticipates only one rate cut in 2025, likely mid-year. Similarly, the Bank of Canada has scaled back the likelihood of near-term rate reductions.
• Impact on Equities:
      Rising bond yields weighed on equities, particularly in high-growth sectors like technology. However, defensive sectors such as healthcare and utilities demonstrated resilience, highlighting the value of diversification.

Global Trends Influencing Markets

• Energy Markets:
      Oil prices spiked above $80 per barrel following U.S. sanctions on Russia but have since stabilized around $78 as markets expect limited disruptions to supply.
• European Equities:
      European markets face pressure from U.S. tariff uncertainties and slowing Chinese demand. Defence stocks remain a standout performer, buoyed by increased NATO spending commitments.
• Emerging Markets:
      Political risks in Latin America, including rising credit-default swap     (CDS) spreads in Panama, highlight the importance of vigilance in assessing geopolitical risks.

Investor Insights: Navigating 2025 with Confidence

1. Fundamentals Matter Most

Despite political uncertainties, resilient labour markets, robust consumer spending, and solid corporate earnings remain the key drivers of market performance.

2. Diversification Is Critical

Balancing growth and value investments can help manage risks as markets adjust to higher rates.Defensive sectors offer stability, while select growth opportunities may arise during pullbacks.

3. Volatility Creates Opportunity

Market pullbacks often provide entry points for quality investments. Focus on areas with strong fundamentals to capitalize on lower valuations.

4. Earnings Season Sets the Tone

This week’s earnings reports from major U.S. financial institutions will offer critical insights into sector health and broader market trends. Pay attention to revenue growth and forward guidance for strategic adjustments.

5. Inflation Data on the Horizon

The January 10 U.S.CPI report will be pivotal in shaping expectations for monetary policy and market sentiment. Watch for any surprises that could influence central bank actions and market direction.

Looking Ahead: Opportunities Amid Complexity

2025 promises a mix of challenges and opportunities for investors. While political transitions and rising rates may create temporary volatility, resilient economic fundamentals and solid corporate earnings provide a strong foundation for long-term growth.

Key events to watch in the coming weeks include:

• Earnings Season Kickoff: Major U.S. banks reporting will shape market sentiment.
• U.S. CPI Report: Inflation data will offer clarity on monetary policy direction.
• Global Policy Developments: Central bank decisions and geopolitical tensions remain critical focal points.

Positioning for Success in 2025

Investors should remain focused on long-term goals, leveraging short-term volatility as an opportunity to re-balance and enhance portfolio quality. Diversification,strategic sector exposure, and disciplined risk management will be key to navigating this dynamic environment.

Let’s make 2025 a year of informed, confident investing!