During Q4 2025, investors navigated through several market developments, such as central banks cutting interest rates, corporate earnings release, renewed peace talks between Russia and Ukraine, and ongoing economic data announcements. Global equities ended the year strong, with several indices reaching new all-time highs in December. The S&P/TSX Composite gained +6.25% as gold miners moved higher during the quarter. The S&P 500 (in CAD) ended higher by +1.04% as the US equity market broadened out with the health care sector leading the way. In the fixed income market, the Canadian Universe Bond Index was flat during the fourth quarter, falling slightly by 0.32%.
Major central banks cut benchmark interest rates: During the quarter, the Bank of Canada and the US Federal Reserve both cut interest rates. Canada reduced the rate by 0.25% to 2.25% and US cut their interest rate by 0.5% to 3.75%. Outside of North America, central banks are mixed; some, such as China, are holding rates steady and some, such as the Bank of Japan, raised rates. Further rate movements will be highly dependent on each country’s inflation, employment numbers, and overall economy.
Labour market weakening with persistent inflation: In the US, the labour market has been weakening as unemployment moved higher during the quarter. Meanwhile in Canada, the labour market has slightly improved as its unemployment level moved to its lowest level in 16 months but remains above 6%. Inflation in US and Canada both have slowed; however, US inflation is still persistent remaining above the target inflation rate of 2%.
Artificial Intelligence (AI) continue to be top of investor minds: Overall, earnings released by megatech companies, such as NVIDIA, have surpassed expectations; however, concerns seem to mount about how fast these companies can grow in the future and if possible, how will they raise capital to finance that growth.
Private Market Review
In Q4 2025, private markets rounded out the year with encouraging signs of resilience and renewed activity. Across private equity, deal activity rebounded with more transactions completing, especially in technology and healthcare sectors, helping managers find attractive opportunities even as broader markets stayed cautious. Infrastructure and real assets continued to benefit from long-term demand drivers like energy transition and digitalization, supporting steady interest from long-term investors. Private credit remained a meaningful source of income, with many strategies delivering attractive yield and stability relative to public markets. Overall, the quarter underscored how private market investments can provide diversified sources of growth and income that complement traditional stocks and bonds for long-term portfolios.
Portfolio Positioning
The portfolios remain overweight equity assets (including private real estate, infrastructure, and equity) as most central banks globally have been cutting interest rates and providing an environment that supports growth and equity prices. Questions on US equity valuations remain, with equities looking overvalued versus valuation metrics of the past, driven largely by enthusiasm around Artificial Intelligence. As a result, your portfolios are diversified globally. 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 we can take advantage of opportunities when they present themselves, while participating in broad based moves higher.
Q4 2025 Public Market Review
During Q4 2025, investors navigated through several market developments, such as central banks cutting interest rates, corporate earnings release, renewed peace talks between Russia and Ukraine, and ongoing economic data announcements. Global equities ended the year strong, with several indices reaching new all-time highs in December. The S&P/TSX Composite gained +6.25% as gold miners moved higher during the quarter. The S&P 500 (in CAD) ended higher by +1.04% as the US equity market broadened out with the health care sector leading the way. In the fixed income market, the Canadian Universe Bond Index was flat during the fourth quarter, falling slightly by 0.32%.
Private Market Review
In Q4 2025, private markets rounded out the year with encouraging signs of resilience and renewed activity. Across private equity, deal activity rebounded with more transactions completing, especially in technology and healthcare sectors, helping managers find attractive opportunities even as broader markets stayed cautious. Infrastructure and real assets continued to benefit from long-term demand drivers like energy transition and digitalization, supporting steady interest from long-term investors. Private credit remained a meaningful source of income, with many strategies delivering attractive yield and stability relative to public markets. Overall, the quarter underscored how private market investments can provide diversified sources of growth and income that complement traditional stocks and bonds for long-term portfolios.
Portfolio Positioning
The portfolios remain overweight equity assets (including private real estate, infrastructure, and equity) as most central banks globally have been cutting interest rates and providing an environment that supports growth and equity prices. Questions on US equity valuations remain, with equities looking overvalued versus valuation metrics of the past, driven largely by enthusiasm around Artificial Intelligence. As a result, your portfolios are diversified globally. 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 we can take advantage of opportunities when they present themselves, while participating in broad based moves higher.
Watermark Private Porfolios
December 2025 Commentary