2025 Mid-Year Market Check-In: Staying the Course Paid Off

2025 Mid-Year Market Check-In: Staying the Course Paid Off

By James Parkyn - PWL Capital - Montreal

We’re halfway through 2025, and there’s one thing we can say for sure: It’s been anything but dull.

Between the epic market swings, tariff soap opera and geopolitical tensions, it was a masterclass in unpredictability and managing emotions. Investors saw one of the most dramatic equity market selloffs in recent memory, but those who stuck it out also enjoyed a spectacular rebound.

President Trump got the ball rolling by announcing aggressive tariffs against major trading partners in April. His “Liberation Day” economic strategy shocked investors due to its scale, speed and unpredictability.

Within days, trillions of dollars in equity value vanished across the globe, as François and I discuss in our latest Capital Topics podcast.

Double-Digit Selloffs

Canada’s S&P/TSX Composite Index plunged 12.2%, the MSCI EAFE developed-market index lost 13.2% and the S&P 500 Index in the U.S. shed 14.7%.

(To see market data and our model portfolios, visit our Capital Topics website’s resources section or our team’s page on the PWL Capital website. Our model portfolios can be a good tool for readers to evaluate their own results.)

Especially significant was the negative reaction of the bond market. Normally, when stocks fall, investors turn to the safety of government bonds, which pushes yields down and bond prices up.

But this time, the opposite happened. Yields increased and bond prices went down. Investors were concerned that the tariffs would spark inflation—fears amplified by growing U.S. federal deficits.

Market rollercoaster

Reports suggested that the bond yield spike is what forced President Trump to pause the tariffs only a week after they were announced. This resulted in the biggest single-day equity rally since 2008. The S&P 500 Index surged 9.5%, the Nasdaq jumped 12% and the Dow Jones Industrial Average gained 8%.

This rollercoaster ride is a perfect example of why we don’t try to time the markets. If an investor had sold when the tariffs were announced and didn’t reinvest when markets bottomed, they would have seriously damaged their portfolio.

It’s a great reminder that reacting emotionally can be costly and undermine your investment performance. As we’ve said many times over the years, market timing is not a strategy our readers should follow.

Many central banks shift to easing

As though to underscore this lesson, investors were tested with plenty of alarming news, including the war in Ukraine and the U.S. attack on Iran’s nuclear facilities. The latter caused a 16% spike in the price of crude oil, followed by an equally sharp drop once a ceasefire agreement eased market fears.

Amid this chaos, many central banks are cautiously shifting to easing to support growth as inflation moderates. In Canada, inflation sits at 1.9% versus 2.7% in June last year. This helped the Bank of Canada reduce its benchmark interest rate from 3.25% at the year’s start to 2.75%. Canada’s economy is growing, albeit at a slow pace—1.3% year-over-year.

In the U.S., the situation is somewhat different, with inflation rising to 2.7% in June, prompting the Federal Reserve Board to keep the fed funds rate unchanged so far in 2025 at 4.5%.

Yields stayed high, equities gained

Turning to the markets, fixed-income yields in Canada and the U.S. remain well above average. The 10-year government of Canada bond yield was roughly 3.3% at the end of June, while the U.S. 10-year Treasury note yield was 4.4%. Relatively high yields continue to be good news for investors with a large bond weighting in their portfolio.

Stock markets have shown surprising resilience given the geopolitical and tariff turbulence. In Canada, the S&P/TSX Composite Index shot up 10.2% in the first half of the year.

The strong performance particularly stands out because Canada has been at the centre of President Trump’s negative rhetoric on tariffs.

Dramatic swings in U.S. equities

Markets in the U.S. saw dramatic swings, with the S&P 500 and Nasdaq both in bear market territory in April after losing more than 20% since their prior highs. But then came the rebound, and the S&P 500 has now hit new all-time highs.

After all this volatility, the total U.S. market was up 5.8% year-to-date at the end of June in U.S. dollar terms. In Canadian dollars, it’s up just 0.2% because of strong gains for the loonie versus the greenback.

The U.S. dollar’s decline this year has been another big story. The greenback has fallen 10.8% against a basket of major currencies due to the trade instability, U.S. deficit concerns and other factors.

Meanwhile, international equities have performed well. The MSCI EAFE developed-market index has gained 13.2% in Canadian dollars year-to-date, while emerging market large and mid-cap stocks rose 9.5%.

Discipline and patience pay off

Overall, investors had plenty of reasons to be nervous this year so far. But those who stayed invested with diversified global portfolios were handsomely rewarded.

We saw once more that the markets are a great teacher. They show time and again that discipline and a patient focus on the long term pay off.

Find market statistics, model portfolios, more commentary, past blog posts, eBooks and podcasts on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and on our Capital Topics website. 

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

55 Years of Data: Staying Invested Paid Off

55 Years of Data: Staying Invested Paid Off

By James Parkyn - PWL Capital - Montreal

Is the reward for long-term investing worth the wait? The numbers overwhelmingly say yes. Over the past 55 years, a dollar invested in a diversified international equity portfolio would have grown to over $16 after inflation.

That’s a return of more than 1,600%.

This was one of the remarkable findings of PWL Capital Senior Researcher Raymond Kerzerho in two recent blog posts and our Capital Topics podcast.

“The stock market is a money-multiplying machine for long-term holders of globally diversified equity portfolios,” Raymond says.

“Because the turning points between market cycle phases are largely unpredictable, the only reliable way to invest profitably is to stay invested over decades, ignore distractions from media news, and let returns compound.”

Takeaways for investing success

Raymond studied more than half a century of market history and distilled these core lessons for growing wealth:

·         Stay invested. This means avoiding active trading.

·         Be patient and think long term.

·         Allocate a substantial amount to equities.

 Raymond evaluated five portfolios to compare their returns. He found that a globally diversified equity portfolio had the best gains.

A portfolio of 30% Canadian stocks and 70% global ex-Canada markets delivered 5.19% in annualized real (after-inflation) gains from 1970 to 2024. A dollar invested in such a portfolio would have become $16.17. (Foreign withholding taxes and fund fees were factored in to simulate an actual investor experience.)

The downside: lots of stomach-churning fluctuation. At 12.88%, the volatility of this portfolio was highest of all those evaluated.

Bond gains unlikely to repeat

The least gains, unsurprisingly, came from a fixed-income portfolio fully invested in Canadian bonds. But even bond investors fared quite well. The annualized real return was 3.32% with a final real value of $6.03 for each dollar invested in 1970. Volatility was less than half that of equities—5.94%.

Raymond also evaluated three mixed portfolios with various combinations of stocks and bonds: 40/60, 60/40 and 80/20. These all had returns and volatility between those of the stock- and bond-only scenarios.

Raymond notes that the “very high” real return of Canadian bonds was unusual and unlikely to repeat in coming years. It was more than double the average return for global government bonds since 1900 and due in large part to the decline of Canadian bond yields and inflation from 1982 to 2022.

“Investors should not expect this type of performance to repeat,” Raymond writes. “Investors who seriously want to accumulate wealth need a substantial equity allocation.”

Let the market work

The key lesson is to “let the market do its job,” he says. “Some people will scoff at the notion of staying invested for 55 years. But even over 10 years, investors sometimes doubled their purchasing power. Think about it. Investors did not work for that money. The market did the work. All investors had to do was defer consumption and accept that volatility is inevitable.”

How much volatility? Markets experienced six bear markets (a 20%+ real decline) in the past 55 years. In other words, investors endured 1.1 such declines per decade on average. This included two “severe” bear markets (a loss of over 40%)—one during the 1973-73 oil shock and one during the 2000-2003 dot-com crash.

Bear markets lasted 21 months on average, with an average decline of 34% (calculated on a monthly basis).

63% of time in bear market or recovery

The recovery to pre-decline levels took 49 months on average. During this time, markets gained an average of 57%.

Interestingly, bear markets and recovery periods made up 63% of the time from 1970 to 2024. This means investors spent nearly two-thirds of their time either losing money or recovering their losses.

What happened after markets recovered to their pre-decline highs? This was where the benefits of patience really paid off. Markets continued to rise on average 41 months, returning 79%.

Bear markets are “a normal part of investing”

Raymond’s conclusion? “Investors should hold on to their portfolio and expect bear markets as a normal part of investing,” he said in our podcast.

“Successful investors tolerate long periods of minimal or even negative returns. These periods are the entry price to join the club of successful long-term investors.”

Those who stick with a diversified long-term investing plan are handsomely rewarded by compounding.

“Investors who benefited from this compounding of returns refrained from actively trading and let the market do its job,” Raymond says. “Trading interrupts the compounding of returns. Investment banks and trading platforms make money from your active trading, not you.”

If you jump ship, you risk locking in losses and losing out on the benefits of the inevitable recovery and expansion.

As Raymond concluded, “Just rebalance, never bail out. Your portfolio is there for life. It isn’t a temporary thing.”

Read more commentary and insights on personal finance and investing in our past blog posts, eBooks and podcast on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and on our Capital Topics website.  Find PWL Senior Researcher Raymond Kerzerho’s blogs here and here and the podcast here.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

10 Investing Insights From 125 Years of Market Data

10 Investing Insights From 125 Years of Market Data

By James Parkyn - PWL Capital - Montreal

What do railroads in 1900 and tech giants in 2025 have in common? They both shaped markets—and remind us how much things can change.

The UBS Global Investment Returns Yearbook 2025 uses 125 years of history to show why diversification, discipline and a long-term mindset pay off.

The UBS Yearbook, published in collaboration with academics from London Business School and Cambridge University, doesn’t try to forecast the future. But it gives fascinating historical context for making better decisions today.

Global diversification pays off in 2025

One of the central messages of the 2025 Yearbook is the importance of diversification—a theme we highlight often in our blogs and podcasts. Our strategy of being globally invested paid off so far in 2025, as U.S. stock markets have faced much more volatility than equities in other countries.

As of April 30, 2025:

• The U.S. total market was down 9.2% year-to-date and off 14.2% from its February peak.

• Meanwhile, Canada’ s S&P/TSX Composite Index was up 1.4%.

• International developed market equities gained 7.2%.

• Emerging market equities were flat at 0.1%.

(See our PWL Market Statistics page for additional data.)

10 insights for successful investing

While U.S. equities outperformed during the past 15 years, many investors questioned the value of being globally diversified. This year, we saw the benefit. Diversification may not always pay off handsomely in the short term, but over a longer horizon, the evidence shows it works.

That perspective is reinforced by the UBS Yearbook’s 10 key insights for successful investing drawn from 125 years of market history.

1. Markets constantly change

   Railroads dominated equities at the start of the 1900s, accounting for 63% of the U.S. stock market. Many of today’s largest industries—energy (except for coal), technology and healthcare—were almost totally absent in 1900.

   The lesson: Nobody knows the stock market winners of the future—so don’t try to chase them. As Warren Buffett says in his Fourth Law of Motion, “For investors as a whole, returns decrease as motion increases.”

2. Equities have strongly outperformed

   Since 1900, U.S. equities have returned 9.7% annually, far outpacing bonds (4.6%) and T-Bills (3.4%). Meanwhile, inflation was 2.9% per year.

3. Real bond returns were modest

   Government bonds have offered low returns after inflation over the long term. Their annualized real return was just 0.9%, according to data from 21 markets since 1900. Bonds were more volatile than T-Bills (13.2% standard deviation versus 7.5%), but less than equities (23.0%).

4. Equities don’t offer a smooth ride

   Equities, as we know, are volatile. That’s why we expect to get a higher return than investing in safer assets.

   The U.S. equity real return was 8.5% on average, but this included six years with annual returns below negative 40%. There were also six years with gains over 40%. Volatility is the price of admission for these higher returns.

5. Patience was rewarded

   Major bear markets—like the tech crash or the 2008 financial crisis—can last years. It takes patience to stay the course. In the four great U.S. equity bear markets since 1900, stocks lost from 52% to 79% peak-to-trough. The recoveries to pre-crash levels took 5.3 to 15.5 years.

6. Diversification across asset classes helps

   Stocks and bonds have a low long-term correlation—just 0.19 in the U.S. This means owning both is a good way to reduce portolio risk. Keep in mind, however, that over shorter timeframes, this correlation can increase or decrease. We should always be mindful of the longer-term perspective.

7. Diversification within equities also matters

   Globally diversified portfolios have generated higher risk-adjusted returns over the past 50 years than investing in only domestic assets in the vast majority of countries. International diversification works!

8. Inflation impacts real returns

   While equities beat inflation over time, they don’ t always hedge it well. Returns tend to be strongest when inflation is low and stable.

9. Gold and commodities can hedge inflation—but with limits

   While these assets can help, it’s difficult to find products that are retail investor-friendly. Institutional investors may get benefits from adding this asset class.

10. Factor investing has worked—but requires patience

    Size, value, profitability and other factors have outperformed over longer horizons. Still, performance varies across cycles, and some styles can lag for years.

How to sum up all these insights? I think the message is that diversification and discipline are key to investing success. While diversified portfolios may lag at times, they help manage risk and are rewarded over time. This includes owning broadly diversified funds to ensure we own the winning stocks of tomorrow.

Equity investors earn a premium because they’re willing to withstand volatility and drawdowns. It’s easier to stay disciplined if you have a long-term focus and a well-crafted portfolio that aligns with your risk tolerance and personal goals. As investment manager Ben Carlson recently wrote, “You can more easily lean into the pain when you know what you’re buying, holding and why.”

Success in investing doesn’t come from market timing, stock picking or being swayed by the trend of the day. As 125 years of data show, long-term thinking is what matters.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Read more commentary and insights on personal finance and investing in our past blog posts, eBooks and podcast on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and on our Capital Topics website. 

Passive Beats Active Again in 2024

Passive Beats Active Again in 2024

By James Parkyn - PWL Capital - Montreal

Passive funds offer better results and a steadier path to navigate tough markets

It’s during challenging times like this that people find out what kind of investor they really are.

What is your tolerance for risk and volatility? Do you react to the headlines (which often means buying high and selling low)? Are you paralyzed by indecision—possibly missing opportunities because you’re waiting for the right time to act?

Mindset makes all the difference. When you adopt a long-term investor mindset, short-term macroeconomic events shouldn’t change your investment plan. Markets are out of our control and can’t be predicted—but you can control your own emotions and tune out the noise.

Sticking to the plan

Of course this isn’t always easy, and today’s volatility can test our discipline. At PWL, we like to keep in mind the words of the world’s most famous investor, Warren Buffett. He is a well-known advocate for tuning out the noise, managing emotions and sticking to a long-term investment plan.

As Mr. Buffett puts it, “Stocks are safe for the long-run and they’re very unsafe for tomorrow.”

This quote is a good jumping-off point to the topic of our latest Capital Topics podcast—passive versus active management.

80% of active funds underperformed

Readers of this blog will know we aren’t fans of market timing and active management. Two new reports add to the ample evidence supporting our view. The SPIVA Canada Scorecard measures the performance of actively managed Canadian funds against their benchmark or index.

This year’s findings are similar to the results we’ve written about in the past. Over 80% of active funds underperformed their benchmarks in 2024. This includes 72% of international equity funds, 89% of Canadian Equity funds and a remarkable 96% of Dividend and Income Equity funds.

This wasn’t just a fluke bad year, either. The underperformance generally gets worse with longer time horizons. Over 10 years, 93% of active funds underperformed their benchmarks, including 82% of Canadian Small and Mid-Cap funds and 100% of Canadian Focused Equity funds.

A minority of stocks drove most gains

The stark underperformance isn’t explained only by fees. Funds benchmarked against the S&P/TSX Composite Index underperformed by 4 percentage points last year, while funds benchmarked to the S&P World Index underperformed by 9 points. The active managers in the S&P World Index category left a third of the performance on the table last year since the benchmark gained 30%.

A key reason for the poor results, SPIVA found, is that “a minority of stocks drove most of the gains…. active stock selection delivered worse-than-random results….

“Opportunities to generate outperformance through astute stock selection, sector and capitalization tilts were present, but difficult to capture,” the report concluded. “Patterns of majority underperformance continue to illustrate the headwinds facing many active managers year after year.”

Just 4% of stocks generated wealth

The finding reinforces data we published last year that just 4% of stocks generated all U.S. stock market wealth from 1926 to 2023 above a risk-free investment in Treasuries. A majority of stocks—51.6%—actually had negative compound returns.

This means if you didn’t own those 4%, you would have lost out on the massive 22,940% gain in equities during that period. How do you ensure you own that 4%? Not through jumping in and out of stocks, but via owning the entire market with broadly diversified, passively managed index funds, as our clients do at PWL.

Only 22% of actively managed funds outperformed over 10 years

The story is similarly sad for actively managed funds in the U.S., according to the Morningstar U.S. Active vs Passive Barometer. The Morningstar report measures active fund performance against passive peers net of fees.

It found that 42% of actively managed mutual funds and exchange-traded funds beat their passive counterparts in 2024. Over 10 years, the underperformance was worse. Just 22% of active funds survived and beat their passive peers.

Our good friend and colleague Raymond Kerzerho nicely summed up the benefits of passively managed funds in his new report, “The Passive Versus Active Fund Monitor.”

“Passive funds offer advantages that active funds can hardly compete with, including lower management fees, lower transaction costs, consistently higher returns, transparency, tax efficiency, and peace of mind for investors,” Raymond wrote.

Passive funds grow quickly

It seems that investors have taken note of the overwhelming data about the advantages of passive funds.

Passive funds have increased their global market share every year for the past decade and now account for 43% of the market, up from 23% in 2015, according to Raymond’s report.

Even more impressively, passive funds’ assets under management worldwide have grown 291% to USD $21.8 trillion during that period. This rapid growth far outpaced that of active funds, which added a more modest 53% in assets, now totalling $28.3 trillion.

Focus on evidence

Raymond cautions, however, against the perception that “the whole market is turning passive.”

For one thing, many people own passive funds, but use them to actively trade—buying and selling to time the market. Doing so, they risk underperforming in the same way that active funds tend to.

Tough markets may test your nerves. But they can be a chance to revisit your risk comfort level and make sure your long-term investment plan is still in sync with your needs.

They’re also a good reminder that smart investing relies on evidence, not drama.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

For more commentary and insights on investing and personal finance, listen to our Capital Topics podcast and subscribe to never miss an episode. And download your free copy of our popular eBook Seven Deadly Sins of Investing.

Guide to Intergenerational Wealth Transfer: Preserving Your Legacy Through Strategic Planning

Guide to Intergenerational Wealth Transfer: Preserving Your Legacy Through Strategic Planning

By James Parkyn - PWL Capital - Montreal

You've built a strong financial foundation. Now, it’s time to ensure a smooth transfer of your wealth to loved ones. The Parkyn—Doyon La Rochelle team understands the complexities of intergenerational wealth transfer and can guide you through every step. Working closely with your tax and legal professionals, we'll create a clear and comprehensive plan to fulfill your wishes.

What is Intergenerational Wealth Transfer?

Intergenerational wealth transfer involves passing of assets like money, property and investments, from one generation to the next. This transfer often occurs within families, through inheritance, gifts, or trusts, sustaining family financial legacies and giving future generations economic advantages.

The Importance of Careful Intergenerational Wealth Transfer Planning

For financial advisors, helping clients transfer wealth across generations is one of the most significant and rewarding challenges. We have been working with families in Montreal and across Canada for over 25 years. We are dedicated to helping our clients navigate these important, often emotionally charged milestones, while ensuring they feel supported and heard throughout the process.   

We provide thoughtful support, information, and resources to make this process a success. This includes collaborating with your trusted legal and tax advisors to help secure your financial legacy, promote harmony, and ensure enduring family values are passed to the next generations. As your “quarterback,” we work with your team of professionals to ensure your family proceeds with confidence.

Careful wealth transfer planning is crucial for two key reasons:

• Preserving Wealth: Proper planning helps mitigate risks like tax burdens and mismanagement, protecting wealth for future generations.
  
  Minimizing Disputes: A clear, documented plan can reduce family disputes over inheritance, fostering harmony and continuity.

Essential Estate Planning documents

For provinces where common-law applies:

• Legal will

• Ethical Will

• Revocable Living Trust

• Durable Power of Attorney for Financial Affairs

• Durable Power of Attorney for Medical Decisions

• Living Will for Quality-of-Life Decisions

For Quebec Residents where the civil code of Quebec applies:

• Legal Will

• Ethical Will

• Protection Mandate for Financial Administration and Medical Care

• Advance Medical Directives

Key Strategies for Intergenerational Wealth Transfer

• Estate Planning: This is the cornerstone of wealth transfer. Comprehensive estate planning involves wills, trusts, and other legal instruments to ensure your assets are distributed as you wish. Trusts offer added flexibility, allowing for specific conditions and timelines.

• Tax Planning: Tax-efficient wealth transfer is essential. Strategies like gifting, charitable donations, and tax-advantaged accounts can significantly reduce the tax burden on heirs. For families with privately held businesses, an estate freeze may be a valuable tax strategy.

• Education and Communication: Preparing the next generation to manage and grow their inheritance is crucial. Financial education, involving heirs in family business decisions, and open communication about wealth transfer plans promote readiness and alignment.

Role of Philanthropic Planning in Intergenerational Wealth Transfer

Philanthropy is increasingly integral to wealth management, with high-net-worth families recognizing the importance of giving back. Integrating philanthropy into wealth transfer planning offers several benefits:

• Tax Benefits: Charitable donations can reduce tax liability, maximizing the wealth passed on.

• Legacy Building: Philanthropy allows families to establish a lasting legacy that reflects their values and commitment to societal good.

• Engaging the Next Generation: Involving younger family members in philanthropy fosters a sense of responsibility, empathy, and community service.

Effective Philanthropic Planning Strategies

• Charitable Trusts and Foundations: These allow for structured, sustained giving aligned with the family's values, ensuring a long-term impact.

• Donor-Advised Funds: Popular in Canada, Donor Advised Funds (or DAFs) provide a flexible, tax-efficient way to manage charitable donations. Donors can make a charitable contribution, receive an immediate tax benefit, and recommend donations to charitable organization from the fund over time.

• Impact Investing: This approach involves investing in ventures that generate social or environmental benefits alongside financial returns. It’s a powerful way to align investment strategies with philanthropic goals.

It’s Never Too Early to Plan Your Wealth Transfer

Intergenerational wealth transfer and philanthropic planning are essential to building and preserving family legacies. By combining sound financial strategies with a commitment to philanthropy, families can ensure their wealth sustains future generations and contributes to a greater good.

At Parkyn—Doyon La Rochelle, we specialize in implementing personalized strategies that align with your family’s values and goals, ensuring a seamless, impactful transfer of wealth. Working alongside your preferred legal and tax professionals, we make the process efficient and worry-free.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

For more commentary and insights on investing and personal finance, listen to our Capital Topics podcast and subscribe to never miss an episode. And download your free copy of our popular eBook Seven Deadly Sins of Investing.