Q2 2025 Market Commentary

Matthew Mobilio | CFA, CFP® | Portfolio Manager at Louisbourg Investments

In the following commentary, Portfolio Manager Matthew Mobilio of Louisbourg Investments  offers timely insights into the current landscape—along with some thoughtful perspective on how to stay grounded and make the most of the road ahead.

The start of Q2 was anything but quiet. Trump's declaration of "Liberation Day" triggered a sharp market sell-off, driven by his proposed approach to eliminating the trade deficit. The idea of imposing reciprocal tariffs sparked significant volatility, as markets reacted negatively to the mathematical and logical underpinnings of the plan. Markets rebounded strongly after a rocky start in April. The S&P 500 returned +10.9% in USD (about +5.1% in CAD) as U.S. tech and consumer stocks rallied on solid earnings and easing rate concerns. In Canada, the TSX gained around +8.5%, lifted by strength in gold, metals, and a stronger Canadian dollar. Despite early volatility from tariff shocks, both indices closed the quarter near record highs, reflecting renewed investor optimism.

Mortgage holders in Canada were seeking relief; however, the Bank of Canada held rates steady at 2.75% following both the April and June meetings. That keeps us right in the middle of the BoC's neutral range of 2.25% to 3.25%. All eyes will be on the upcoming meeting to see what's next. The BoC will likely be closely watching how the ongoing trade tensions play out economically and how any new tariffs could be reflected in inflation.

For the past three years, I've taken part in the Whistler GranFondo, a 121 km ride with 2,100 meters of climbing that starts in Vancouver's Stanley Park and finishes in Whistler Village. I still remember my first year: the start wasn't too bad, and the stretch to Squamish felt relatively smooth. But once you reach Squamish, about 60 km in, the real climbing begins. That's where most of the elevation is gained and where things get tougher.

Participating in the GranFondo reminded me a lot of how markets behave. When you're riding downhill, it's smooth sailing, just like a bull market. It's easy to stay the course when everything's going your way. But it's the climbs that test you. That's where preparation, discipline, and form matter most, just like in a market sell-off.

This is where we earn our stripes: by managing risk through proper diversification and being prepared to act when high-quality companies are mispriced, even though their fundamentals remain strong.

The climb and recovery aren't always fast, but if you stay committed to the process and trust your plan, you eventually reach the top. Just like riding, it's not about powering through one moment, it's about pacing, preparation, and consistency.

When markets become volatile, it's easy to jump in and out, trying to catch the lows and avoid the highs. That's called market timing, and doing it well is impossible. You'd need to get both your exit and re-entry exactly right, which very few people ever do. What makes it even trickier is that the market's best and worst days often happen right next to each other. If you miss even a few of those good days, it can really hurt your long-term returns. What I've been reminding clients is that it's not about timing the market, but rather time in the market. Trying to predict short-term moves is incredibly difficult.

Using the S&P 500 as the benchmark (chart below), staying fully invested gave you solid growth. But if you moved to cash and happened to miss only those top 10 days, your annual return would've dropped by over 3% per year. Even more eye-opening, if you missed the 40 best days in that 25-year stretch, your return would've gone negative. Just another reason why trying to time the market can be so costly.

 

*Source: YCharts

 

The graph below is a great indication of historical returns by holding period for stocks, bonds and a 60/40 portfolio (60% equity and 40% fixed income). What this chart really shows is the longer you stay invested, the less volatile the ride becomes. One-year returns can be all over the place, but stretch that out over 5, 10 or 20 years and things start to smooth out, the ups and downs shrink, and the returns become more consistent.

Source: Bloomberg, FactSet, Federal Reserve, Standard & Poor's, Strategas/Ibbotson, J.P. Morgan Asset Management.

It's a great reminder that while it can feel tempting to try and dodge the dips or time the perfect entry, the real value comes from staying the course. Pair that with the data on how costly it is to miss just a handful of the best days in the market, and it's clear: time in the market beats timing the market every time.

In summary, I have seen investors move to cash during volatile times, thinking they'll just "wait it out" and get back in when things settle. But that strategy rarely works. In many cases, they miss the recovery, especially the best days, which often come right after the worst ones. Missing just the 10 best days during a rebound can make a difference to long-term returns. In my experience, staying invested with a disciplined approach tends to work out far better than trying to outsmart the market.

Author:
Matthew Mobilio, CFA, CFP
Louisbourg Investments Inc., Portfolio Manager

 

As always, for more information about Ciccone-McKay Financial Group, or if you want to chat with someone at the firm, we welcome your call: 604-688-5262.