After a turbulent start to 2025, experts weigh in on what’s next

As Co-chief Investment Officer for CIBC Private Wealth U.S., David Donabedian has seen how U.S. investors have reacted to recent market volatility firsthand. “I would describe the overall mood of investors as nervous, but not yet willing to pull the plug on their asset allocation plan,” he says. “They have not panicked.”

It’s the right perspective, Donabedian says. After all, despite the wild volatility of the markets, since the “Liberation Day” tariffs were announced on April 2, the S&P 500 has actually risen a bit.

U.S. investors have made some changes though. Donabedian says that equity investors have rotated out of so-called “Magnificent Seven” stocks — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla — to diversify their holdings. “That includes rising purchases of non-U.S. equities, an area that many Americans had given up on in the past as the U.S. market outperformed year after year. Again, this is a rational response, indicative of a search for value, rather than panic.”

For investors worried about the effects that tariffs will have on their investments, Donabedian agrees with Tal that tariffs will continue to be “moderated” from their initial levels. “Financial markets are more likely to exert discipline on politicians rather than the other way around. The recent tariff de-escalation between the U.S. and China is an example,” he adds.

Investors who want to plan ahead should look at their holdings to ensure they are diversified, says Donabedian — but that doesn’t mean leaving U.S. investments out completely.

“Many individual and institutional investors have overweighted the U.S. for many years relative to a global benchmark,” he says. “We would recommend a more balanced approach going forward, taking advantage of more attractively priced securities in other countries while factoring in a slightly higher risk premium on U.S. investments.”

The year ahead could offer opportunities for Canadians from a tax perspective, says Jamie Golombek, Managing Director, Tax and Estate Planning at CIBC Private Wealth.

For one thing, the Liberal government stated that its middle-class tax cut will save dual-income families about $825 in tax annually, he says. Also, investors with savings in a Registered Retirement Income Fund (RRIF) could benefit from the government’s plan to reduce the annual amount that must be withdrawn from their RRIF by 25% for one year.

“That means that investors may wish to hold off before taking funds out of their RRIF in 2025 until we have more information on how and when this new measure will take effect,” Golombek says.

As well, the government’s announcement that they won’t proceed with the increase in the capital gains inclusion rate “is good news for equity investors and should provide some certainty for the years ahead,” he says.

With a new government and new rules coming in, Golombek says it’s vital to work closely with your financial advisors to ensure you are well positioned to make any necessary changes.

“The tax rules seem to change almost daily — be sure to work closely with your advisory team to help you stay on top of the latest developments, so you may be in a position to take advantage of any material opportunities in 2025 and beyond.”