Navigating volatile markets with confidence

The past few years have been marked by robust returns, with balanced portfolios delivering double-digit results — 11.75% in 2025 and 15% in 2024. However, even in strong markets, periodic downturns are inevitable. For instance, 2025 saw market upheaval due to U.S. tariffs, while 2024 and 2023 experienced notable pullbacks linked to labour reports and technology sector disappointments.

Looking specifically at 2025, leadership within equity markets shifted, with Canadian equities outperforming their U.S. counterparts and emerging markets showing particular strength. Despite this, the pace of returns slowed in the fourth quarter, and some Asian and emerging markets turned negative by year-end. The Canadian dollar remained relatively stable against the U.S. dollar, and bond yields rose modestly, reflecting a normalization of the yield curve. Credit spreads remained tight by historical standards, with minimal widening in Canadian investment-grade corporate bonds. Finally, high-yield spreads increased slightly but continued to reflect a relatively benign credit environment.

When market volatility does occur, it must be assessed and placed in its proper context. At the onset of the conflict in the Middle East earlier this year, our base case scenario anticipated a short-lived flight to safe-haven assets, followed by a resumption of longer-term market themes. Interestingly, not all traditional safe havens performed as expected — gold, for example, saw a sell-off, while the U.S. dollar demonstrated resilience. Energy and defense sectors performed well, underscoring the importance of diversified exposure.

This is one of the reasons why it’s always important to anchor portfolios with long-term objectives, rather than reacting to news headlines. Historical analysis shows that balanced portfolios experience few negative years. Volatility is a normal part of investing. The most effective response — reiterating what was stated earlier — is usually the simplest: stay diversified, keep a long-term view and rebalance when markets move.

For investors who prefer a hands-off approach, fully-managed portfolios can help by making disciplined adjustments, without emotionally reacting to headlines. Within fully-managed portfolio solutions, investors can feel more confident staying disciplined through market swings knowing appropriate adjustments are made to reflect changing realities. This flexibility is embedded in our portfolio management process through both dynamic and tactical asset allocation. For example, in March of 2025, we added low-volatility, dividend-paying equities to our portfolios to reduce risk without sacrificing participation in market gains. These positions proved valuable, offering diversification and improved risk-adjusted returns amid periods of market turbulence.

Knowing that volatility will be a frequent companion, we anticipate and navigate volatile markets with confidence.

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