Harbourfront’s Chief Investment Officer, Theresa Shutt, shares her perspective on the economic and political developments that influenced the second quarter of 2025 and offers her insights on what to expect going forward.
Sections include:
Economic and Political Developments in Q2 (0:00)
Key Trends Ahead (2:37)
Canadian Economy (7:17)
Economic Outlook (9:53)
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CIO, Theresa Shutt, shares her perspective on the economic and political developments that influenced the second quarter of 2025 and offers her insights on what to expect going forward.
I, Theresa Shutt, have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of Harbourfront Wealth Management Inc. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this should be viewed as a reflection of my informed opinions rather than analyses produced by Harbourfront Wealth Management Inc.
Included in the Watermark Private Portfolio quarterly statements distributed in July.
Public Market Review
The second quarter of 2025 under Trump’s second administration was met with increased uncertainty, particularly in April when volatility reached a level not seen since 2020. Despite the rise in uncertainty earlier during the quarter, the equity markets managed to bounce back and recover its April decline, with some indices also making new all-time highs. The S&P/TSX Composite gained +8.45% during the quarter, while the S&P 500 (in CAD) ended higher by +4.98%. In the fixed income market, the Canadian Universe Bond Index was mostly flat during the quarter, falling by 0.52% despite the downgrade of the US’ credit rating in May.
Trump 2.0 tariffs & trade negotiations: Early April, the retaliatory tariffs took effect. However, Trump implemented a 90-day tariff pause during the quarter, which is set to expire on July 9. In June, investor sentiment improved as the US reached trade agreements with China and the UK. Trump is currently working on negotiating trade with other countries.
Major central banks mixed on benchmark interest rates: During the entire quarter, the Bank of Canada, the US Federal Reserve, and the Bank of Japan held its interest rates. On the other hand, China and the UK cut their benchmark interest rates by 0.10% and 0.25%, respectively.
Geopolitical tensions heightened:While trade negotiations improved during the quarter, geopolitical tensions picked up in the Middle East between Israel and Iran as both countries exchanged missile attacks in the early half of June; resulting in a spike of oil prices. However, after a ceasefire agreement was reached in late June, oil prices fell.
Private Market Review
In Q2 2025, private markets continued to show resilience across asset classes. In private equity, investors remained active and well-positioned, with record levels of available capital, over $1 trillion, ready to be deployed into new opportunities. Many firms focused on adding value through operational improvements and long-term growth strategies. Private credit stayed strong, with direct lending continuing to attract attention thanks to its higher yields compared to public bonds. Investors also appreciated the added stability from floating-rate structures, which help manage interest rate risk. New players, including hedge funds, are entering the space, underscoring growing confidence in this market. Commercial real estate began showing signs of recovery, supported by expectations for lower interest rates and improving financing conditions. Infrastructure investments also remained steady, especially in sectors like renewable energy, digital networks, and senior living, where demand continues to grow. Overall, Q2 2025 highlighted the long-term appeal of private markets. Investors focused on quality assets and strategic growth, setting the stage for renewed momentum in the second half of the year.
Portfolio Positioning
The portfolios remain overweight to equity (including private real estate, infrastructure, and equity) so you can participate in any market run up that occurs. US valuations appear to be expensive heading into Q2 earnings, where we will find out the health of these large global companies. We expect that economic data may start to come in below expectations as the impact of tariffs begin to impact profit margins. Our investment strategy remains focused on long-term value creation through risk management, asset class diversification, and identifying growth opportunities when they arise. The portfolios continue to be well diversified, so they can weather market fluctuations while capturing upside potential by investing into high quality businesses at reasonable valuations that are growing their earnings.
Harbourfront’s Chief Investment Officer, Theresa Shutt, shares her perspective on the economic and political developments that influenced the second quarter of 2025 and offers her insights on what to expect going forward.
Sections include:
Market & Economic Insights – Q2 2025
Disclaimer
I, Theresa Shutt, have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of Harbourfront Wealth Management Inc. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this should be viewed as a reflection of my informed opinions rather than analyses produced by Harbourfront Wealth Management Inc.
Watermark Private Portfolios – Q2 – 2025 Commentary
Included in the Watermark Private Portfolio quarterly statements distributed in July.
Public Market Review
The second quarter of 2025 under Trump’s second administration was met with increased uncertainty, particularly in April when volatility reached a level not seen since 2020. Despite the rise in uncertainty earlier during the quarter, the equity markets managed to bounce back and recover its April decline, with some indices also making new all-time highs. The S&P/TSX Composite gained +8.45% during the quarter, while the S&P 500 (in CAD) ended higher by +4.98%. In the fixed income market, the Canadian Universe Bond Index was mostly flat during the quarter, falling by 0.52% despite the downgrade of the US’ credit rating in May.
Private Market Review
In Q2 2025, private markets continued to show resilience across asset classes. In private equity, investors remained active and well-positioned, with record levels of available capital, over $1 trillion, ready to be deployed into new opportunities. Many firms focused on adding value through operational improvements and long-term growth strategies. Private credit stayed strong, with direct lending continuing to attract attention thanks to its higher yields compared to public bonds. Investors also appreciated the added stability from floating-rate structures, which help manage interest rate risk. New players, including hedge funds, are entering the space, underscoring growing confidence in this market. Commercial real estate began showing signs of recovery, supported by expectations for lower interest rates and improving financing conditions. Infrastructure investments also remained steady, especially in sectors like renewable energy, digital networks, and senior living, where demand continues to grow. Overall, Q2 2025 highlighted the long-term appeal of private markets. Investors focused on quality assets and strategic growth, setting the stage for renewed momentum in the second half of the year.
Portfolio Positioning
The portfolios remain overweight to equity (including private real estate, infrastructure, and equity) so you can participate in any market run up that occurs. US valuations appear to be expensive heading into Q2 earnings, where we will find out the health of these large global companies. We expect that economic data may start to come in below expectations as the impact of tariffs begin to impact profit margins. Our investment strategy remains focused on long-term value creation through risk management, asset class diversification, and identifying growth opportunities when they arise. The portfolios continue to be well diversified, so they can weather market fluctuations while capturing upside potential by investing into high quality businesses at reasonable valuations that are growing their earnings.