Market and economic commentary
January 2025
January was an eventful month with equity and bond markets continuing their positive momentum into 2025.
After finishing 2024 off on a positive note, both equity and bond markets continued the momentum into the new year, ending January higher than at year-end. The month was full of political and market events, from Prime Minister Trudeau’s resignation, President Trump's tariff threats, and the level of AI spending from tech companies that Deepseek has brought into question.
All Compass Portfolios and ATBIS Pools (the Funds)1 saw positive returns in January. Find up-to-date performance data on the ATB Investment Management website here.
Below are index total returns in Canadian dollar (CAD) terms for January:
| Index | January 2025 |
|---|---|
| S&P/TSX Composite Index | 3.5% |
| S&P 500 Index | 2.7% |
| MSCI EAFE Index | 5.4% |
| FTSE Canada Universe Bond Index | 1.2% |
Source: Bloomberg, FTSE Russell
Economics
With a new year came a new, but somewhat familiar political landscape within North America as Donald Trump was again inaugurated as President of the United States. Trump immediately reinforced his calls for increased border security or he would impose tariffs against Mexico and Canada, the US’ largest trading partners. Reaction was initially muted as Trump is known to make overarching demands and later pare them back, but policy makers and markets are now facing the reality that Trump is more demanding than before.
Even though the tariff threat was resolved—or at least put on hold for a month—all of this overshadowed positive economic data from the US and Canada. Job reports beat expectations by a significant margin pushing the unemployment rate down by 0.1% in both nations and US core CPI ticked down to 3.2% despite headline CPI rising 0.2% to 2.9%. Towards the end of the month, the Bank of Canada (BoC) cut its overnight rate by 0.25% to 3%, while noting that outside of the threat of tariffs and adverse policy, other risks to the economic outlook are balanced. The US Federal Reserve (the Fed) on the other hand, opted to keep the policy rate where it currently is, further widening the policy rate gap between the two central banks. Yields in Canada fell further, likely in response to the dovish BoC and the reiteration of the threat of tariffs from President Trump.
Markets
Global equity markets rallied to start the year, with all major developed market indices rising in local terms, and being further enhanced for Canadian investors by a falling Canadian dollar. Within the US, tech-related stocks took a step back in January, largely a result of Deepseek bringing into question the extraordinary spending on AI-related initiatives by the tech industry. As a result, the S&P 500 rose 2.9% in Canadian dollar terms, but the equal-weighted index gained just under 3.6%, pointing to a broad based rally as opposed to a few high profile names driving performance. Small- and mid-cap stocks also participated in the rally, both outperforming the equal-weighted large cap index which was beneficial overall for the US holdings within the Funds.
The Canadian market was also positive over the month. However it didn’t quite see the same effect of Deepseek as US equities experienced, as information technology was a top contributor to index performance, with the sector rising 10% for the month. Materials, in particular precious metals, drove performance as well, benefitting from the run up in gold and silver prices through the month.
Markets internationally2 are far less exposed overall to the AI theme than their US counterparts, leading to international stocks outperforming their North American peers. European banks in particular led the way, while Japanese equities were more or less flat.
Fixed income markets also saw some volatility over the month, with bonds losing ground initially as yields initially rose on expectation of some central bank cuts being pushed back due to favourable economic data. Things quickly reversed, and yields were down by month-end across the yield curve, although shorter and mid-term maturity bonds saw their rates fall more than long bonds. This resulted in the continuation of an unusual theme where bonds with longer maturities aren’t benefitting as much as bonds in other parts of the curve despite yields falling overall. As a result, mid-term bonds outperformed overall, but credit spreads widened slightly over January, leading to corporate bonds underperforming the index, despite being positioned to benefit from the movement in yields.
Compass Portfolios Series F1 - Returns net of fees
|
|
January 2025 |
1 year |
3 year |
5 year |
10 year |
|
Compass Conservative Portfolio |
1.82% |
10.76% |
4.44% |
5.73% |
5.10% |
|
Compass Conservative Balanced Portfolio |
2.41% |
12.85% |
5.33% |
6.48% |
5.79% |
|
Compass Balanced Portfolio |
2.99% |
14.91% |
6.11% |
7.54% |
6.83% |
|
Compass Balanced Growth Portfolio |
3.54% |
16.31% |
6.84% |
8.25% |
7.73% |
|
Compass Growth Portfolio |
4.11% |
18.18% |
7.67% |
8.92% |
8.43% |
|
Compass Maximum Growth Portfolio |
4.96% |
21.12% |
8.97% |
9.78% |
9.07% |
Source: ATB Investment Management Inc.
ATBIS Pools Series F1 - Returns net of fees
|
January 2025 |
1 year |
3 year |
5 year |
Since inception* |
|
|
ATBIS Fixed Income Pool |
1.06% |
7.58% |
2.51% |
4.06% |
3.65% |
|
ATBIS Canadian Equity Pool |
2.54% |
20.65% |
8.68% |
9.30% |
7.16% |
|
ATBIS US Equity Pool |
4.97% |
26.32% |
12.27% |
12.99% |
12.82% |
|
ATBIS International Equity Pool |
6.34% |
17.58% |
7.31% |
6.36% |
6.87% |
*Inception date: September 22, 2016
Source: ATB Investment Management Inc.
1 Using F series returns
2 As defined by the MSCI EAFE Index
This report has been prepared by ATB Investment Management Inc. (ATBIM). ATBIM is registered as a portfolio manager across various Canadian securities commissions, with the Alberta Securities Commission (ASC) being its principal regulator. ATBIM is also registered as an investment fund manager and manages the Compass Portfolios and the ATBIS Pools. ATBIM is a wholly owned subsidiary of ATB Financial and is a licensed user of the registered trademark ATB Wealth.
The performance data provided assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that may reduce returns. Unit values of mutual funds will fluctuate and past performance may not be repeated. Mutual Funds are not insured by the Canada Deposit Insurance Corporation, nor guaranteed by ATBIM, ATB Securities Inc. (ATBSI), ATB Financial, the province of Alberta, any other government or any government agency. Commissions, trailing commissions, management fees, and expenses may all be associated with mutual fund investments. Read the fund offering documents provided before investing. The Compass Portfolios includes investments in other mutual funds. Information on these mutual funds, including the prospectus, is available on the internet at www.sedar.com.
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