Monthly portfolio brief
Staying goal-oriented and opportunistic in the second half
What you need to know
- Markets powered through noise and posted broad gains in June amid solid economic data, anchored inflation expectations and steady labour markets.
- Equities provided portfolios a greater boost than bonds, building on their remarkable rally from the year’s lows and, in some cases, hitting new all-time highs.
- Periodic volatility may occur as policy debates unfold, but a goal-oriented approach to investing can help avoid distractions.
- Based on our updated global outlook, we continue to recommend overweighting U.S. stocks, but we've lowered international high-yield bonds to underweight to help manage risk.
- We have also raised our recommendation for the consumer discretionary sector to overweight.
Portfolio tip
Setting appropriate performance expectations and goal-oriented portfolio allocations can help you stay disciplined during periodic market volatility.

This chart shows the performance of equity and fixed-income markets over the previous month and year.

This chart shows the performance of equity and fixed-income markets over the previous month and year.
Where have we been?
Markets demonstrated resiliency in June despite recent headwinds. Global trade tensions, shifting monetary policy expectations, U.S. budget and debt ceiling debates, and escalating geopolitical tensions have triggered market volatility this year, which became extreme at times. Look no further than April, when the S&P 500 index bottomed 19% lower than its February high.
Markets are watching some key July dates, such as the end of the 90-day pause for “reciprocal” tariffs, the potential for the U.S. to hit its debt limit, and more meetings for the Bank of Canada (BoC) and Federal Reserve (the Fed). But they’ve shown resiliency in June amid solid economic growth, anchored inflation expectations and steady labour markets, logging broad gains and boosting well-diversified portfolios. Impressively, the Canadian TSX and S&P 500 indexes hit new all-time highs at month-end.
Equities provided portfolios a greater boost than bonds, building on their remarkable rally from the year’s lows. With markets comforted by economic data, the more economically sensitive asset classes performed best in June, with emerging-market stocks and Canadian small- and mid-cap stocks among the leaders. Supported by gains across nearly all sectors, U.S. stocks gained additional ground, particularly against other international developed markets, which lagged last month. Across sectors, those that are more growth- and cyclically-oriented generally led, while multiple defensive sectors underperformed.
Despite U.S. stock asset classes returning 4% in June, they continue to be a significant underperformer for the year. U.S. large-cap stocks are roughly flat in 2025, despite the year’s volatility, trailing returns greater than 10% within Canadian and overseas developed equity markets.
Returns within bonds were more muted in June. Central banks largely remained in cutting cycles, though some have paused as they await additional certainty, such as the BoC and the Fed. Interest rates have been relatively range-bound. Lower-quality bonds outperformed investment-grade bonds, as they have over the past year, benefiting from their higher yields and contained credit spreads.
What do we recommend going forward?
Set appropriate performance expectations and goal-oriented portfolio targets to help avoid market volatility’s distractions.Trade negotiations are likely to stretch over the course of months, and adjustments to fiscal and monetary policies will likely take shape in the second half of 2025. Geopolitical tensions may also flare from time to time. While we don’t believe the gains have been exhausted or are unjustified, it wouldn’t be surprising if the equity rally paused periodically amid the uncertainties.
While volatility is uncomfortable, it’s normal for an investor to encounter numerous pullbacks on the path toward long-term financial goals. For example, based on our analysis, the S&P 500 index has experienced a pullback of 5% or more three to four times a year on average since 1928.
To help navigate volatility, set well-diversified strategic asset allocation targets according to your risk and return objectives. We also suggest taking a global approach by incorporating all 11 of our recommended asset classes, which we list in the graphics below. As market pullbacks occur, you can use these targets to buy quality investments at lower prices within asset classes that may have become too underweight in your portfolio.
We continue to recommend overweighting U.S. stocks, but we've lowered international high-yield bonds to underweight to help manage risk. Based on our updated global outlook, we maintain our existing overweight recommendation for equity investments, favoring U.S. stocks across all market capitalizations. We also maintain our recommendation to underweight non-U.S. large-cap asset classes, as well as Canadian investment-grade bonds. However, we’ve shifted our underweight recommendation within fixed income to include international high-yield bonds, lifting international investment-grade bonds to neutral.
Despite the potential for periodic volatility, we believe an improving policy backdrop — potential progress in trade negotiations, additional central bank rate cuts, and deregulation and fiscal policy support in the U.S. — should benefit stocks more than bonds. While economic data may cool in the months ahead, we expect labour markets to hold steady, a potential rise in inflation to be short-lived, and economic growth to remain positive, demonstrating resiliency as we head toward 2026.
Within equities, we favour the relative strength of the U.S. economy over Canadian and other non-U.S. international developed economies. U.S. stocks offer exposure to higher-quality and more cyclical segments of the market, which are likely to benefit from U.S. growth and the potential for market leadership to broaden beyond mega-cap tech. Canadian large-cap stocks, on the other hand, may be challenged by potential weakness within housing, as well as their larger exposure to commodities, such as oil which has faced pressure in recent months.
Within fixed income, U.S. yields have become increasing attractive when compared to Canada, which we expect to benefit the international bond asset class, supporting our neutral recommendation for international investment-grade bonds. However, international high-yield bond credit spreads are historically low, leaving them more susceptible to volatility amid heightened policy uncertainty. This could weigh on the asset class. We believe underweighting international high-yield bonds and Canadian investment-grade bonds to help offset the overweight to equity investments can help manage risk during periods of volatility.
We’ve raised our recommendation for the consumer discretionary sector to overweight.Given our existing recommendation to overweight the financial services and health care sectors, we are now overweight across defensive, cyclical and growth sectors. This underscores our expectation for sector leadership to broaden.
We expect the consumer discretionary sector to benefit from a stabilizing tariff backdrop and improving U.S. tax regime, as well as exposure to growth and technology companies. We believe the financial services sector will be a key beneficiary of deregulation and tax reform, and it appears less exposed to trade uncertainties. The health care sector offers relatively attractive valuations and the potential for earnings growth to outpace the broader market.
We're here for you
Periods of market volatility may occur as policy debates unfold, but a goal-oriented approach to investing can help you stay disciplined through the noise. Talk with your financial advisor about designing your strategic portfolio targets based on what you’re trying to achieve, so market volatility doesn’t become a distraction. From there, they can help you opportunistically position your portfolio for the back half of 2025.
If you don’t have a financial advisor, we invite you to meet with an Edward Jones financial advisor to help you design your portfolio to deliver performance aligned with what you’re trying to achieve, while staying opportunistic as we navigate the uncertainties 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.

Within our strategic guidance, we recommend these asset classes:
Equity diversification: Canadian large-cap stocks, U.S. large-cap stocks, developed overseas large-cap stocks, Canadian small- and mid-cap stocks, U.S. small- and mid-cap stocks, developed overseas small- and mid-cap stocks, emerging-market stocks.
Fixed-income diversification: Canadian investment-grade bonds, international bonds, international high-yield bonds, cash.

Within our strategic guidance, we recommend these asset classes:
Equity diversification: Canadian large-cap stocks, U.S. large-cap stocks, developed overseas large-cap stocks, Canadian small- and mid-cap stocks, U.S. small- and mid-cap stocks, developed overseas small- and mid-cap stocks, emerging-market stocks.
Fixed-income diversification: Canadian investment-grade bonds, international bonds, international high-yield bonds, cash.
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.

Our opportunistic asset allocation guidance is as follows:
Equity —overweight overall; underweight — Canadian large-cap stocks and developed overseas large-cap stocks; neutral — Canadian small- and mid-cap stocks, developed overseas small- and mid-cap stocks, and emerging-market stocks; overweight — U.S. large-cap stocks and U.S. small- and mid-cap stocks.
Fixed income —underweight overall; underweight — Canadian investment-grade bonds and international high-yield bonds, neutral — international bonds and cash.

Our opportunistic asset allocation guidance is as follows:
Equity —overweight overall; underweight — Canadian large-cap stocks and developed overseas large-cap stocks; neutral — Canadian small- and mid-cap stocks, developed overseas small- and mid-cap stocks, and emerging-market stocks; overweight — U.S. large-cap stocks and U.S. small- and mid-cap stocks.
Fixed income —underweight overall; underweight — Canadian investment-grade bonds and international high-yield bonds, neutral — international bonds and cash.

Our opportunistic equity sector guidance follows:
Overweight for consumer discretionary, financial services and health care
Neutral for communication services, energy, industrials, real estate, technology and utilities
Underweight for consumer staples and materials

Our opportunistic equity sector guidance follows:
Overweight for consumer discretionary, financial services and health care
Neutral for communication services, energy, industrials, real estate, technology and utilities
Underweight for consumer staples and materials

Our opportunistic Canadian investment-grade bond guidance is overweight in interest rate risk (duration) and neutral in credit risk.

Our opportunistic Canadian investment-grade bond guidance is overweight in interest rate risk (duration) and neutral in credit risk.
Tom Larm, CFA®, CFP®
Tom Larm is a Portfolio Strategist on the Investment Strategy team. He is responsible for developing advice and guidance related to portfolio construction, asset allocation and investment performance to help clients achieve their long-term financial goals.
Tom graduated magna cum laude from Missouri State University with a bachelor’s degree in finance. He earned his MBA from St. Louis University, is a CFA charter holder and holds the CFP professional designation. He is a member of the CFA Society of St. Louis.
Important information
Past performance of the markets is not a guarantee of future results.
Diversification does not ensure a profit or protect against loss in a declining market.
Investing in equities involves risk. The value of your shares will fluctuate, and you may lose principal. Mid- and small-cap stocks tend to be more volatile than large-company stocks. Special risks are involved in international and emerging-market investing, including those related to currency fluctuations and foreign political and economic events.
Rebalancing does not guarantee a profit or protect against loss and may result in a taxable event.
Before investing in bonds, you should understand the risks involved, including credit risk and market risk. Bond investments are also subject to interest rate risk such that when interest rates rise, the prices of bonds can decrease, and the investor can lose principal value if the investment is sold prior to maturity.
The opinions stated are for general information purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation.