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Commentary

Q2 2025 Fund Commentary

Market Commentary

The second quarter of 2025 began with the U.S. administration’s announcement of new tariffs, which led to a sharp decline in riskier assets. Investment-grade credit spreads (the difference in yield between bonds of similar maturity but different credit ratings) rose and U.S. equities fell. However, spreads subsequently fell and U.S. equities rose as tariffs were soon paused. Investors continued to watch U.S. policy announcements in an attempt to understand the administration’s policy goals.

In both the U.S. and Canada, jobs markets were steady, and the anticipated increase in inflation was not realized. The Canadian federal government announced increased defence and infrastructure spending, some or all of which was expected to be deficit-financed.

Performance

At the sector level, overweight exposure to corporate bonds had a positive impact on the Fund’s performance, particularly in financials. Exposure to federal bonds had a negative impact on performance as yields rose.

Portfolio Activity

Rogers Communications Inc. (3.65%, 2027/03/31) was sold in favour of increasing exposure to higher-yielding, longer-maturity bonds from the same issuer.

Outlook

In the sub-advisor’s view, investors seem largely unconcerned about the uncertainty around U.S. policy action and what it might mean for Canada. That may continue, but the sub-advisor anticipates some fragility in the market. It is not certain what trade deals could be announced, in the sub-advisor’s view, and what effect they could have on the U.S. and Canadian economies.

At quarter end, U.S. tariffs on Canada exempted goods compliant with the United States-Mexico-Canada Agreement. This accounts for about 85% of the trade between the two countries.

The sub-advisor believes it is likely that the Canadian and U.S. economies will continue to move in tandem. However, the sub-advisor also anticipates a convergence in bond yields between the two economies. Longer-term U.S. yields were close to 5% at quarter end. The sub-advisor will be watching to see if these move higher, as higher yields impact all riskier assets.

The sub-advisor is cautious about the valuation of corporate bonds given the uncertain tariff impact on the Canadian economy. The sub-advisor expects that high yield levels, positive funds flow and a lack of supply should keep credit spreads tight.

Disclaimer

The commentaries on the company specific information and purchases and sales were provided by the fund manager. Canada Life Investment Management Ltd. will not be liable for any loss, or damages whatsoever, whether directly or indirectly incurred, arising out of the use or misuse of errors or omissions in any information contained in this commentary. The data provided in this commentary is for information purposes only and, except where otherwise indicated, is current as of June 30, 2025.

The views expressed in this commentary are those of fund manager as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Prospective investors should review the offering documents relating to any investment carefully before making an investment decision and should ask their Advisor for advice based on their specific circumstances.

The content of this commentary (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.

This document may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of June 30, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

There can be no assurance that the Fund’s return or volatility targets will be met, or met over any particular time horizon. Targeted returns and volatility should be evaluated over the time period indicated and not over shorter periods. Targeted returns are not actual performance and should not be relied upon as an indication of actual or future performance.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.

Counsel Portfolios are managed by Canada Life Investment Management Ltd. Counsel Portfolios are distributed by Quadrus Investment Services Ltd., IPC Investment Corporation, and IPC Securities Corporation, and may also be available through other authorized dealers in Canada.