Our Thoughts on Today’s Markets, the World, and the Future

As we move through 2025, the global financial landscape continues to evolve in ways that challenge conventional wisdom. Stephen and I believe that zooming out (a mantra you will hear us reference often) and understanding the broader context—economic, geopolitical, and historical—is essential to making sound investment decisions. This mid-year update offers a window into how we see the world today, how we’re positioning ourselves, and the philosophies that guide our approach.

The Market Today: Teetering on a Knife’s Edge

Markets are at historic highs, yet the underlying fundamentals tell a more complex story. Valuations across global equities are stretched—by some measures, the most expensive in recorded history. From the 1929 crash to the dot-com bubble, we’ve seen what happens when prices detach from value. Today, we’re seeing similar warning signs, but with a twist: the world is more interconnected, more indebted, and more reactive than ever before.

Geopolitical tensions—from Middle East conflicts to tariff wars—are adding layers of uncertainty. Meanwhile, the U.S., once the world’s largest creditor, is now its largest debtor. With over US$36 trillion in debt and annual deficits exceeding US$2 trillion, the sustainability of U.S. fiscal policy is under increasing scrutiny. Credit rating agencies have taken notice and so have global investors.

The Market of the Future: Today’s Inflection Point

We are living through a structural turning point in the global financial system—an inflection point where the rules of the past are disintegrating, less likely to apply, moving forward. The strategies that worked for the last 40 years are increasingly misaligned with the realities of today’s world.

For decades, falling interest rates, globalization, and relative geopolitical stability created a powerful tailwind for investors. Passive strategies flourished, and the “60/40” portfolio became a staple of conventional wisdom. But that era is ending. Interest rates have likely bottomed and are now trending higher over the long term. Inflationary pressures—once thought to be tamed—are reasserting themselves, driven by rising debt levels, supply chain realignments, and the return of global conflict.

Markets themselves have changed. Fundamentals are often overshadowed by technicals, algorithms, and news-driven volatility. We now live in a world where a single headline can move markets more than a quarterly earnings report. This shift has made markets more reactive, less rational, and increasingly difficult to navigate with traditional tools.

Geopolitically, the “peace dividend” that followed the Cold War is over. We are entering a more fractured, inflationary world. Wars are inherently inflationary, and the global order that once underpinned economic cooperation is unraveling. The U.S., long the anchor of global stability and the issuer of the world’s reserve currency, is now facing a credibility crisis. Decades of fiscal irresponsibility—ballooning deficits, unchecked spending, and political dysfunction—have eroded trust in the U.S. dollar and its institutions.

As a result, the world is beginning to reprice risk. The U.S. is no longer the unquestioned centre of financial gravity. Capital is flowing more selectively, and investors are reassessing what “safe” really means. In this environment, traditional 60/40 portfolios are broadly exposed to systemic risk. When markets fall, these portfolios often fall with them. Diversification alone is no longer enough.

The market of the future will demand more: more adaptability, more discernment, and more strategic thinking. It will reward those who can navigate complexity, who understand the interplay between macro forces and market structure, and who are willing to be patient when others are reactive.

This is not a time for nostalgia. It’s a time for clarity, discipline, and a willingness to evolve.

The Investment Landscape: Patience as a Strategy

In today’s investing environment, patience isn’t just a mindset—it’s a necessary fundamental virtue. With markets priced over-generously, in our opinion, and uncertainty abounding across global economies, we believe the most prudent course is to remain highly selective and deliberate in how capital is deployed.

Rather than chasing momentum or reacting to headlines, we focus on identifying specific, unique opportunities where the balance of risk and reward is clearly in our favour (an extremely rare occurrence in today’s market). That means waiting for the right conditions—where valuations are compelling, fundamentals are strong, technicals are positive, and the probability of success is high. These opportunities are rare, but they do emerge, and when they do, we act with conviction.

All the while, our strategy is underpinned by a defensive attitude; Warren Buffett famously said, “Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.” If you lose 50%, you need to make 100% just to break even again... We believe that staying disciplined during periods of overvaluation is what positions investors to take advantage of the inevitable reversion to value. Mean reversion is one of the most powerful forces in nature, and financial markets are no exception – it’s just that it can take a long time for this fundamental law to prevail. In this technicals-driven market that is highly influenced by algorithms, emotion, and news headlines, it’s not about timing the market—it’s about detecting value opportunities and being ready to take them.

This approach may not always be exciting, but it’s effective.

Our Philosophy: Real Assets, Real Value

In a world awash with fiat currency and financial engineering, we’re focused on tangible value. The opportunities are likely to be in real assets —iron ore, steel, rare earths, energy, land, etc. These are sectors that not only hedge against inflation but also align with long-term global demand trends.

Robert Arnott of Research Affiliates has said, “What’s comfortable is often not profitable.” The days of passively holding bank stocks and utilities for years are over. That worked for the last several decades, but, zooming out, it’s unlikely to work for the next several decades, in our view.

This is reflected in our proprietary Tactical Model. It’s tactical, actively managed, and focused on total return. It’s driven by decades of experience and supported by relationships with some of the most seasoned and well-connected thought leaders in the world.

Currency Matters: A Strategic Shift to Canadian Exposure

For cross-border investors, currency exposure is a critical consideration. With the U.S. dollar under pressure (fiscal deficits, currency devaluation via money printing, distrust in the Trump administration, etc.), and the Canadian dollar supported by a resource-rich economy, we have seen the CAD strengthen vs. the USD in recent months. This is a trend we expect to continue. Canadian investors, especially, should consider shifting to Canadian-denominated assets.

Looking Ahead: Prepared, Not Predictive

No one knows exactly when the next market correction will come, nor how significant it will be. But we do know that markets move in cycles, and mean reversion is inevitable. Whether it’s interest rates, valuations, or investor sentiment, extremes don’t last forever. They can last for years, but patience and a long-term lens guide us through it.

Our job is to be ready—not reactive. To protect capital when risks are high, and to deploy it when opportunities arise and the balance between risk and reward becomes more favourable on a broader scale. That’s how we’ve managed through every market since 1987, and that’s how we’ll continue to serve our clients in the years ahead.

If you’re feeling uncertain about the markets, you’re not alone. But uncertainty doesn’t have to mean inaction. With the right strategy, the right philosophy, the right guidance, and no small amount of patience, you can navigate even the most turbulent times with peace of mind.