Paul Holba, President and CIO of Empire Life Investments Inc. discusses some of the key themes the investment team will monitor as we head into the second half of 2025.
As we enter the second half of 2025, we're closely watching several key global themes: trade and policy volatility, ongoing geopolitical tensions, and the evolving energy landscape. These powerful dynamics are significantly shaping market behaviour and influencing investor sentiment across all asset classes. While challenges persist, our focus remains on pursuing high-quality opportunities and fostering long-term resilience for our investors. Thank you.
From our perspective, the second half of the year is likely to present a complex mix of risks and opportunities. Trade dynamics, geopolitical tensions, and the energy transition continue to evolve, influencing investor sentiment across multiple asset classes. Let’s take a closer look.
Trade policy is again a dominant market driver, with tariffs increasingly used as tools of diplomacy and protectionism. Recent months have seen tariffs adjusted across regions, impacting everything from Canadian aluminum to Chinese electric vehicles.
This uncertainty directly affects capital investment, particularly in the U.S., where businesses hesitate to deploy capital amid shifting trade terms. This trend is evident in management commentary across sectors, from manufacturing to consumer goods.
In Canada, recent trade tension with the U.S. briefly impacted equity and currency markets; while stable now, investor confidence remains fragile. This uncertainty has led to divergence: the Bank of Canada has cut rates twice to support domestic growth, while the Fed remains steady.
This causes volatility in yield curves and a weakening U.S. dollar against commodity-linked currencies like the CAD. For investors, flexibility is key. Trade volatility will likely persist, so we focus on resilient businesses with strong pricing power and global reach, able to navigate shifting supply chains and regional frictions.
Geopolitical tensions remain elevated, spanning the Middle East, Eastern Europe, and the Red Sea. Despite hopes for de-escalation, recent developments, like Israeli airstrikes on Iran’s nuclear infrastructure, indicate ongoing instability.
This amplifies the appeal of traditional safe havens. Gold, for instance, has gained over 20% year-to-date, supported by strong central bank demand for reserve diversification amid rising sovereign debt and currency concerns.
We believe gold remains crucial for portfolio construction, hedging against macroeconomic volatility and unexpected inflation. While not a straight-line trend, its structural case holds, especially if U.S. and European fiscal concerns persist. Geopolitical risks have also caused episodic spread widening in investment-grade and high-yield markets.
Yet, strong fundamentals, particularly in higher-quality credits, offer support. We slightly prefer corporate bonds in the 5–10 year range, favoring defensive issuers over cyclical exposures.
The energy landscape is rapidly changing. Traditional energy markets remain volatile due to rising OPEC+ supply and geopolitical risks near the Strait of Hormuz.
Though oil prices are relatively flat year-to-date, sharp fluctuations highlight market reactivity to headlines. Concurrently, long-term shifts toward alternative energy are evident.
North American natural gas demand is increasing, driven by LNG export capacity. In the U.S., nuclear energy is gaining bipartisan momentum as a reliable, carbon-neutral base load, supported by tech companies investing in energy infrastructure.
From an equity standpoint, these shifts create compelling long-term opportunities in both traditional and next-generation energy companies.
Our balanced exposure favours firms with solid balance sheets, operational leverage, and adaptability to changing regulation and demand. Regionally, we observe divergence: Europe benefits from rising fiscal investment in energy and defence infrastructure.
Meanwhile, Japan and China face mixed conditions—weak consumer demand, limited stimulus, and slow manufacturing recovery. Despite masked challenges, standout opportunities exist among companies aligned with energy transition and infrastructure modernization trends.
In summary, we expect the remainder of 2025 to present both challenges and opportunities. Trade and policy volatility, ongoing geopolitical risks, and the global energy transition are reshaping the investment landscape.
Our approach focuses on fundamentals: identifying resilient businesses, maintaining diversification, and adjusting exposures. While near-term uncertainty will persist, we believe long-term value remains in select market areas.
Thank you for your continued trust and support. We look forward to updating you again soon.
This document includes forward-looking information based on the opinions and views of The Empire Life Insurance Company and Empire Life Investments Inc. as of June 25, 2025 and is subject to change without notice.
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July 2025
