Making sense of a volatile first half

As we reach the halfway point of 2025 and the heat of summer, we could all understand wanting to take some time off by a lake or on a golf course. It has been a very turbulent and complex six months.

Stock markets rebounded after the drop in April caused by the new tariffs, although there’s still uncertainty on the trade front even with Canada agreeing to cancel its digital services tax.

We’re also seeing signs of an increasingly soft economic growth picture. Trade uncertainty is likely to contribute to a slowdown in the second half of the year in Canada and weakening industrial production and household consumption are pressuring U.S. growth. There have also been growing tensions between Iran, Israel, and the United States, along with ongoing conflicts in Ukraine and Russia. With all this, it can be easy to forget that we had a federal election just three months ago.

We encourage you to speak regularly with your investment counsellor to make sense of this complex market environment and to explore the best strategies for positioning your portfolio.

Q2 stock gains

The second quarter started on an inauspicious note as the Trump administration’s April 2 tariff policy announcement caused equity markets to drop sharply. The S&P 500 Index, which tracks 500 major U.S. companies’ stock market performance, fell nearly 5% in one day and was down by almost 19% at one point. Both the NASDAQ Composite Index and the S&P/TSX Composite Index dropped more than 10% in the days following the announcement.

However, markets turned around shortly thereafter, and by the end of the quarter, North American index equity markets had notched steady gains, thanks in part to a more conciliatory tone in trade negotiations with the United States.

But the trade picture remains uncertain, with tariff levels broadly at their highest in several decades, dampening the outlook for growth and raising the prospect of higher inflation. This resulted in a mixed quarter for North American bond market returns.

Trade uncertainty has also contributed to the Bank of Canada pausing its rate-cutting campaign following a move in March, though there’s the potential for easing in the second half of the year from both the Bank of Canada and the U.S. Federal Reserve, which could be a boost/content/manulife/ca/fr/personal/insights/q2-2025-in-revie for growth.

As we look at the financial markets, uncertainty will continue to be a key theme with continued trade policy announcements and the evolving conflict in the Middle East. We also understand it can be easy to overreact to headlines and short-term market fluctuations. The uncertainty may be nerve-racking. However, when it comes to investing, it’s important to focus on long-term goals over short-term volatility.

The current market climate reinforces the need for a diversified investment approach. We’ll also continue to provide you with interactive economic updates with Manulife experts to help navigate the markets. Check out our Q2 in review.