Monthly portfolio brief

Market pressure eases — is this your entry point?

What you need to know

• Market volatility spiked as policy uncertainty peaked, but easing pressures helped erase some of the recent losses in the back half of April.
• U.S. equity was the hardest hit, but globally diversified portfolios benefited from positive returns within overseas equity and higher-quality bond allocations, helping to smooth the ride.
• Uncertainties remain amid ongoing U.S. trade negotiations, but don’t let those distract from your portfolio’s purpose.
• Define your portfolio’s strategy and consider a systemic investing program to help identify your entry points, overweighting stocks over bonds as you work on the design of your portfolio.

Portfolio tip

Investing at regular intervals can help keep your portfolio aligned with your investment strategy and provide opportunities to add quality investments at lower prices during market downturns.

Where have we been?

Market volatility spiked as uncertainty peaked, though pressures later eased, helping markets erase some losses. Tariff and monetary policy-related discussions heated up in early April as the Trump administration placed pressure on global trade relations and the Federal Reserve. This weighed on the minds of consumers and increased uncertainty surrounding the path of inflation and economic growth. Markets began pricing in more gloomy expectations, resulting in a steep sell-off across regions. Market pressures eased later in April, however, as the U.S. administration pulled back on many tariff threats, opening doors to negotiation. Equities then rallied in a sigh of relief, erasing much of the month’s losses.

U.S. equity ended the month the hardest hit, while Canadian equity finished relatively flat but shines as the strongest performer over the past year. The loonie strengthened relative to the U.S. dollar, which weighs on U.S. dollar-denominated returns when converted back to Canadian dollars, further pressuring U.S. equity asset classes. U.S. large-cap stocks ended the month down 4% and are about 9% lower this year. Lower-quality U.S. small- and mid-cap stocks were once again the worst performers, however. They're 13% lower year to date, at the end of April.

The materials and financials sectors, which comprise roughly 45% of the Canadian large-cap stock asset class, have been strong performers. They ended slightly higher in April and have each returned around 30% over the past 12 months, helping Canadian equity become the best-performing asset classes over the one-year period. The relatively large energy sector, on the other hand, has weighed on Canadian equity, pressured by lower oil prices.

Overseas developed-market equity built on their 2025 gains, benefiting portfolios with broad global allocations. Overseas developed-market equities performed best in April, helping to offset the decline within U.S. and Canadian equity allocations in well-diversified portfolios. They've been propelled by increasingly stimulative policies within Europe, including European Central Bank rate cuts and greater fiscal spending from Germany.

Chinese policymakers have also indicated additional stimulus is likely, supporting emerging-market equity. However, trade-related tensions between U.S. and China have weighed on the asset class.

Higher-quality bonds finished the month with little change but have provided well-diversified portfolios a strong boost over the past year. Interest rates shifted in April as markets reconsidered expectations for inflation, growth and central bank rate cuts. The 10-year Canadian government bond yield fluctuated between 2.9% and 3.3%, finishing the month slightly higher than where it began at 3.1%. Canadian investment-grade bonds ended slightly lower, as a result. Though, international high-yield bonds fell further amid the heightened uncertainty.

Over the past year, however, interest rates have been on a downward trajectory, as growth moderates and central banks ease policy, resulting in solid returns across fixed-income asset classes.

What do we recommend going forward?

One of the biggest obstacles investors face in reaching their long-term goals isn’t investment performance but rather their own actions. Instead of sticking with a long-term strategy, they tend to overreact to short-term market volatility, buying investments that recently performed well and selling those that didn’t. Sometimes, they choose to sit on the sidelines completely.

It’s impossible to time entry or exit points perfectly. And by trying to avoid the worst days in the market, you could miss some of the best, as demonstrated in April. Volatility has eased from its peak, but uncertainty remains as trade negotiations unfold. Consider these steps to help you enter the market and stay invested for the long term:

1. Every goal-oriented portfolio has a strategy — decide on yours. Talk with your financial advisor about your goals and objectives, which should guide your portfolio’s strategy. Balancing your comfort with risk, time horizon and financial goals helps you establish a mix between stock and bond investments that aligns with your needs and creates a strategic starting point to build your portfolio.
   
   We recommend taking a globally diversified approach when building your strategic allocations, the benefits of which have been on full display this year amid volatile and diverging markets. Once you decide on your investment mix, our strategic asset allocation guidance can guide how to allocate your contributions so that your portfolio is well-diversified and invested according to your risk and return objectives.
    
2. Set up a systematic investing strategy. Periods of volatility can make it feel increasingly difficult to maintain discipline. Making regular, planned contributions to your portfolio over time can help you remove emotions and stay focused on your financial goal.
   
   Systematic investing strategies, such as dollar cost averaging, can also help ensure your portfolio stays within your intended targets over time by providing natural opportunities to rebalance, enhance diversification and/or add quality investments at lower prices during market downturns.
    
3. Keep your strategic allocations targets in sight, but favour stocks over bonds. It’s important to keep your strategic allocation targets in sight so that you don’t deviate too far from your investment strategy. With that in mind, we recommend a lean toward equity over fixed income, and we specifically favour U.S. stocks over high-quality bonds and non-U.S. large-cap asset classes, given our outlook over the next one to three years.
   
   The preliminary estimate for U.S. growth in the first quarter indicated a slight 0.3% contraction, weighed down by higher levels of imports as purchasers tried to avoid the onset of higher tariffs. However, we expect the U.S. economy to regain strength, given the support of steady labour markets, Fed interest rate cuts and a renewed focus on tax policy and deregulation in the back half of the year. Diversifying across market capitalizations can offer a level of stability amid near-term uncertainties while providing exposure to more economically sensitive segments of the market as growth reaccelerates in the quarters ahead.
   
   We recommend a focus on quality in strategic bond allocations. The core of which should comprise Canadian and international investment-grade bonds, in our view, to help you benefit from global diversification within fixed income. Opportunistically, we recommend underweighting these asset classes in favour of U.S. equity as interest rates are likely to remain range bound, especially if inflation remains anchored and a deep or prolonged recession avoided. Favouring longer-duration bonds may help boost returns, given the potential for the Bank of Canada and Federal Reserve to continue their rate-cutting cycle.
    

We're here for you

Trying to perfectly time the market can be stressful and may result in a portfolio misaligned from what you’re ultimately trying to achieve. Talk with your financial advisor about a more disciplined approach, guided by a goal-oriented investment strategy focused on what you can control. They can help ensure your portfolio’s diversification is aligned with your risk and return objectives, backed by rebalancing and systematic investing strategies to help you stay on track.

If you don’t have a financial advisor, we invite you to meet with an Edward Jones financial advisor to help define and execute strategies most appropriate for your circumstances, helping your prepare for any potential volatility that may still lie ahead.

Strategic portfolio guidance

Defining your strategic investment allocations helps to keep your portfolio aligned with your risk and return objectives, and we recommend taking a diversified approach. Our long-term strategic asset allocation guidance represents our view of balanced diversification for the fixed-income and equity portions of a well-diversified portfolio, based on our outlook for the economy and markets over the next 30 years. The exact weightings (neutral weights) to each asset class will depend on the broad allocation to equity and fixed-income investments that most closely aligns with your comfort with risk and financial goals. 

Diversification does not ensure a profit or protect against loss in a declining market.

Opportunistic portfolio guidance

Our opportunistic portfolio guidance represents our timely investment advice based on current market conditions and a shorter-term outlook. We believe incorporating this guidance into a well-diversified portfolio may enhance your potential for greater returns without taking on unintentional risks, helping to keep your portfolio aligned with your risk and return objectives. We recommend first considering our opportunistic asset allocation guidance to capture opportunities across asset classes. We then recommend considering opportunistic equity sector and Canadian investment-grade bond guidance for more supplemental portfolio positioning, if appropriate.