Global Asset Allocation Perspectives

April 2025

To help guide the positioning of Scotia Portfolio Solutions, the Multi Asset Management team of Scotia Global Asset Management meets regularly to discuss and debate the current macro environment and what it means for portfolio positioning. The following report captures the team’s current views.

Key macroeconomic themes

Global economic themes that are most likely to influence our views on portfolio asset allocation over the next 12-to-18 months.

Economic uncertainty has significantly increased

While global economic growth was on stable footing prior to recent events, the unpredictability and hawkishness of U.S. trade policy and the tightening of financial conditions has clouded the outlook.

Modestly paced interest rate cuts are still expected

As market conditions have deteriorated, central banks are likely to look beyond short-term tariff-related price increases and continue to cut rates at a modest pace to support the economy.

Risk and uncertainty have risen sharply

Risks and tighter financial conditions are expected to persist until a resolution to the trade war. While a reversal in U.S. policy could ease the pressure, conditions could worsen if the U.S. fails to soften its stance.

Asset allocation perspectives

Equities

Rather than economic fundamentals, headlines are currently moving equity markets. A neutral view on equities is warranted at this time as the market fluctuates around trade-related news.

Although recession risks have risen significantly, we believe many off-ramps exist that have the potential to lead to positive outcomes for equities in general.

Additionally, recent declines have improved valuations which increases the probability of a rebound.

Fixed income

We have a neutral view on fixed income overall relative to equities. While market fundamentals remain strong, U.S. trade policy has weakened market sentiment causing uncertainty and volatility to rise materially.

The path markets will take is highly dependent on the direction of trade policy developments.

Overall, yields remain attractive from both income and potential capital appreciation perspectives.

Canada

We have a neutral view of Canadian equities. Despite the Bank of Canada having provided considerable easing to the Canadian economy through interest rate cuts, U.S. tariffs have dampened expectations for economic growth. Additionally, the outcome of the Canadian federal election is unclear, further increasing uncertainty.

U.S.

We have a neutral view to U.S. equities. Although U.S. trade policy is impacting global equity markets, its effect on the U.S. is perhaps, the most acute. Trade rhetoric has led to significant market volatility, with U.S. stocks in particular experiencing sharp declines followed by sudden surges based upon policy shifts. This unpredictability has clouded the outlook.

International

We have a neutral view on international equities due to U.S. trade policy uncertainty. European and Japanese equities represent a large portion of international markets and Europe and Japan are key tariff targets as both regions have large trade surpluses with the U.S.

Emerging Markets

We have a neutral view on emerging market equities. While lower valuations, technological advancements, and Chinese stimulus provide tailwinds, the escalation in U.S. tariffs targeting China and other emerging markets with trade surpluses with the U.S., raises concerns. Many less developed emerging markets are also more economically sensitive.

For further information, download the full Global Asset Allocation Perspectives Report.

Legal

As of March 31, 2025.

Commissions, trailing commissions, management fees and expenses may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed or insured by the Canada Deposit Insurance Corporation or any other government deposit insurer, their values change frequently and past performance may not be repeated.

The information provided in this document is not intended to be investment advice. Investors should consult their own professional advisor for specific investment and/or tax advice tailored to their needs when planning to implement an investment strategy to ensure that individual circumstances are considered properly and action is taken based on the latest available information. Information contained in this document, including information relating to interest rates, market conditions, portfolio positioning and other factors are subject to change without notice. Scotia Global Asset Management is not responsible for updating the information and views expressed. To the extent this document contains information or data obtained from third party sources, it is believed to be accurate and reliable as of the date of publication, but Scotia Global Asset Management does not guarantee its accuracy or reliability. The information provided is not intended to be investment advice.

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