Global equity markets have navigated a volatile landscape so far throughout 2025 and despite the elevated market turbulence, have shown remarkable resilience.
For the first time in years, it seems like investors are beginning to look at markets outside of the United States as alternatives, with renewed focus on long-overlooked regions such as Canada and Europe.
While global markets have largely shrugged off the overwhelming pessimism arising in April, sparked by the official announcement of sweeping tariffs and the start of potentially destructive trade wars, there is little in the way of resolution yet. Tariffs remain a significant overhang with multiple potential ramifications.
Despite the backdrop, a resilient economy, easing trade tensions and potential policy support offer grounds for cautious optimism, and we think investors will benefit from staying diversified with quality assets.
However, volatility will likely remain elevated, so, in spite of this, we continue our philosophy of not jumping too far too fast, instead focusing on incremental improvements. So far this year, adjustments to the portfolio have been deliberately muted to reflect this perspective.
We take a selective approach to portfolio construction, focusing in areas where fundamentals remain attractive. We have, however, been making selective additions to property, infrastructure and alternatives while pruning weaker performers.
One example we have added to is asset management and services group Brookfield Corporation, a long-term alternative investment play supported by improving fundraising conditions in private markets.
We think there are also signs of life in property again. It has been a longer-term burn but we are starting to see opportunities. For example, we made an addition to our existing holding in Colliers International, reflecting opportunities in the space. It gives us exposure through property management, so it is not as reliant on transactional activity as many of its peers.
Alongside these targeted allocations, our attention has naturally turned to the broader market, where equity performance has already improved and we are seeing solid returns.
The Canadian equity market itself remains in an interesting position. After a long period of relative underperformance versus the US, Canadian stocks are beginning to show renewed strength.
The first half of 2025 highlighted how domestic names can deliver robust gains across a range of sectors. The continued interest in Canada’s resource sector, coupled with global energy transition dynamics, may also prove supportive.
For investors, the story is one of balance. While Canada lacks the mega-cap technology leaders that dominate US indices, its market offers exposure to different drivers of growth.
The S&P/TSX Composite Index posted a 23.9% total return in the year to 30 September, and all the sectors within the index ended in positive territory except for healthcare, which had an inconsequential effect on the overall composite given its 0.3% weighting.
It was clear precious metals were the standout driver of Canadian market returns in early 2025. Gold stocks advanced approximately 109% and accounted for around 36% of the Index’s total return. While still underweight gold, we have been rebuilding exposure to gold and other precious metals, particularly in light of market movements.
Franco-Nevada, a gold-focused royalty and streaming company, remains one of our top holdings since its 2007 IPO and we believe it epitomises our long-term strategy, representing around 4% of our portfolio.
We think gold retains a clear diversifying role, especially within Canada, and Franco-Nevada is one example of a stock that can offer something different, as it offers investors steady returns.
We have also been adding to our gold weighting in streaming company Wheaton Precious Metals and gold producer Alamos Gold. The combination of the three offer investors steady returns (from royalty companies Franco-Nevada and Wheaton) while Alamos provides higher upside potential but also carries higher risk.
Beyond resources, opportunities are also emerging in other sectors, such as Canada’s industrial and technology-linked sectors. Meanwhile, Celestica has been the runaway return leader in the portfolio, with a return of 158.2% in the year to the end of September, and the timing of our initial purchase of this electronics manufacturing company in mid-2024 has proven to be opportune.
Its stock price has more than tripled in price since, benefiting from its position as a key supplier to the rapidly expanding AI infrastructure space. The present artificial intelligence (AI) boom has resulted in the build-out of the cloud and data centres (Meta, Amazon etc.) for which Celestica is extremely well placed to capture the benefit – something that is starting to be recognised in its share price.
Dollarama is another where we have seen strong returns. Rising 31.1% to end September, reflecting its continued ability to execute in Canada’s retail market, this dollar store chain with a dominant market share is a distinctive domestic retail play with a growing international presence, and it continues to be a steady and consistent performer, building on its success since our purchase at IPO in 2009.
Retail success has been complemented by engineering and infrastructure strength. Stantec another of our trust’s leaders with a 33.7% gain, has had a great start to the year.
Operating in areas of infrastructure, buildings, water, energy and environmental, this engineering company has a global footprint, but its largest market is the US, contributing more than 50% of revenues, which should accelerate due to sizeable governmental spending tailwinds and the strong economy.
Ultimately, 2025 so far illustrates Canadian equities are far from being overshadowed by their counterparts to the south. They remain capable of generating compelling returns, especially for investors prepared to embrace diversification and withstand periods of volatility. In an environment where global investors are reconsidering the balance of their portfolios, Canada’s renewed momentum may prove an underappreciated opportunity.
The market’s resilience, combined with prudent, fundamentals-driven management strategies, offers a compelling narrative: Canadian equities are staging a comeback, and disciplined investors are positioning themselves to take advantage.
Greg Eckel is portfolio manager of Canadian General Investments. The views expressed above should not be taken as investment advice.