After a turbulent start to 2025, experts weigh in on what’s next

The first months of this year saw stock markets fluctuate wildly following every comment about tariffs from U.S. President Donald Trump. That turbulence left many investors uncertain about what the markets will look like in future and how they should position their investments to withstand the volatility.

Benjamin Tal, deputy chief economist of CIBC World Markets, says that while investors have good reason to be concerned about markets and economic growth due to the tumult of the past few months, there is also reason to believe that level of uncertainty will ease.

“We foresee growth of around negative 1.4 per cent in the second quarter, mostly due to the fog of uncertainty resulting from President Trump’s current economic policy,” Mr. Tal says. “We believe that the current quarter represents peak uncertainty, and some clarity will be introduced slowly during the course of the second half of the year.”

CIBC expects Canada’s economic growth to be just above one per cent in the second half of 2025, helped by lower interest rates from the Bank of Canada, Mr. Tal notes. And while CIBC’s “working assumption” is that tariffs are here to stay, the numbers are expected to change, he adds.

“At this point, the effective tariff rate for exporting goods is within 5 to 10 per cent, higher than before [the Trump tariffs] but manageable. We see that stabilizing in 2026, with some sectors higher and some lower. These levels of tariffs will be manageable for economic growth.”

Some domestic industries may also benefit from tax cuts from the new Liberal government, which are expected to be worth about $22-billion over four years, and increased spending on defense, infrastructure and housing, Mr. Tal says.

“Sectors most sensitive to developments in the domestic economy might outperform,” he suggests. “An example might be infrastructure, with government spending activity likely to accelerate. Global defense spending is likely to grow fast in the coming years providing some interesting opportunities in the sector.”

‘A search for value, rather than panic’

As co-chief investment officer for CIBC Private Wealth U.S., David Donabedian has seen how U.S. investors have reacted to recent market volatility first-hand. “I would describe the overall mood of investors as nervous, but not yet willing to pull the plug on their asset allocation plan,” he says. “They have not panicked.”

It’s the right perspective, Mr. Donabedian says. After all, despite the wild volatility of the markets, since the “Liberation Day” tariffs were announced on April 2, the S&P 500 has actually risen a bit.

U.S. investors have made some changes though – Mr. Donabedian says that equity investors have rotated out of so-called ‘Magnificent Seven’ stocks – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla – to diversify their holdings. “That includes rising purchases of non-U.S. equities, an area that many Americans had given up on in the past as the U.S. market outperformed year after year. Again, this is a rational response, indicative of a search for value, rather than panic.”

For investors worried about the effects that tariffs will have on their investments, Mr. Donabedian agrees with Mr. Tal that tariffs will continue to be “moderated” from their initial levels. “Financial markets are more likely to exert discipline on politicians rather than the other way around. The recent tariff de-escalation between the U.S. and China is an example,” he adds.

Investors who want to plan ahead should look at their holdings to ensure they are diversified, says Mr. Donabedian – but that doesn’t mean leaving U.S. investments out completely.

“Many individual and institutional investors have overweighted the U.S. for many years relative to a global benchmark,” he says. “We would recommend a more balanced approach going forward, taking advantage of more attractively priced securities in other countries while factoring in a slightly higher risk premium on U.S. investments.”

Good news on the tax front

The year ahead could offer opportunities for Canadians from a tax perspective, says Jamie Golombek, managing director, tax and estate planning at CIBC Private Wealth.

For one thing, the Liberal government stated that its middle-class tax cut will save dual-income families about $825 in tax annually, he says. Also, investors with savings in a registered retirement income fund (RRIF) could benefit from the government’s plan to reduce the annual amount that must be withdrawn from their RRIF by 25 per cent for one year.

“That means that investors may wish to hold off before taking funds out of their RRIF in 2025 until we have more information on how and when this new measure will take effect,” Mr. Golombek says.

As well, the government’s announcement that they won’t proceed with the increase in the capital gains inclusion rate “is good news for equity investors and should provide some certainty for the years ahead,” he says.

With a new government and new rules coming in, Mr. Golombek says it’s vital to work closely with your financial advisors to ensure you are well positioned to make any necessary changes.

“The tax rules seem to change almost daily – be sure to work closely with your advisory team to help you stay on top of the latest developments, so you may be in a position to take advantage of any material opportunities in 2025 and beyond.”

Stay calm and stay invested

Whether you are mulling over your asset allocation or looking for tax opportunities, it’s always a good idea to work with investment and tax experts who can help you understand the current economic and political landscape and its impact on your finances. Trusted advisors can tailor strategies to respond to market fluctuations while ensuring you remain on track to achieve your financial goals.

Mr. Donabedian points out while rapidly shifting news and policies can have a big impact on the markets in both positive and negative ways, markets are resilient.

“Most investors have already forgotten the 25 per cent drop in the S&P 500 that occurred just three years ago,” he says. “Markets recovered – and quickly. In 2020, a year featuring a once-in-a-century pandemic and a brief but paralyzing recession, the U.S. stock market rose 18 per cent.”

That’s why it’s important to stay calm and stay invested during turbulent times.

“Investors need to pivot quickly from asking ‘what just happened’ to focus on ‘what happens next?’”

Advertising feature produced by Globe Content Studio with CIBC. The Globe’s editorial department was not involved.