Episode 108: Half-year outlook—all eyes on the second half of 2025

This communication is not and under no circumstances is to be construed as an invitation to make an investment in the Manulife Real Asset Investment Fund (the “Fund”), nor does it constitute a public offering to sell the securities of the Fund. The offering of units of the Fund is made pursuant to its Confidential Offering Memorandum only to those “accredited investors” in certain jurisdictions of Canada who meet certain eligibility and cannot be sold in Canada to the general public. The offering memorandum contains important information regarding the fund’s investment objectives, strategies, restrictions, risks, fees, redemption limitations, liquidity and other matters of interest. There are no assurances that the stated investment objectives of the fund will be met. Applications for investment in the Fund will only be considered on the terms set out in the Confidential Offering Memorandum, a copy of which can be obtained from us. Eligible investors should review the Confidential Offering Memorandum carefully before deciding to purchase units and should note that alternative investments can involve significant risks. The Fund is not guaranteed, its values may change frequently and past performance may not be repeated.

The opinions expressed are those of Manulife Investment Management as of the date of this publication, and are subject to change based on market and other conditions. The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable but Manulife Investment Management does not make any representation as to their accuracy, correctness, usefulness or completeness and does not accept liability for any loss arising from the use hereof or the information and/or analysis contained herein. Manulife Investment Management disclaims any responsibility to update such information. Neither Manulife Investment Management or its affiliates, nor any of their directors, officers or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein.

All overviews and commentary are intended to be general in nature and for current interest. While helpful, these overviews are no substitute for professional tax, investment or legal advice. Clients should seek professional advice for their particular situation. Neither Manulife, Manulife Investment Management Limited, Manulife Investment Management, nor any of their affiliates or representatives is providing tax, investment or legal advice. Past performance does not guarantee future results. This material was prepared solely for informational purposes, does not constitute an offer or an invitation by or on behalf of Manulife Investment Management to any person to buy or sell any security and is no indication of trading intent in any fund or account managed by Manulife Investment Management. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Unless otherwise specified, all data is sourced from Manulife Investment Management.

Manulife, Manulife Investment Management, the Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license.

4589130

Macan Nia  
Welcome to Investments Unplugged.
My name is Macan Nia, Co-chief Investment Strategist at Manulife Investment Management. And as always, I'm joined here by my colleague and partner in crime, Kevin Headland. Welcome, Kev.

Kevin Headland   
Hey, how's it going, Macan?

Macan Nia   
Not too bad.
We thought for this Investments Unplugged, given it is June, that we would do our second-half of the year outlook for the remainder obviously of 2025 when it comes to the global economy, equity outlook, bond outlook.
Let's not go too much into the details of what happened, but in a couple of words, the first half of the year can be characterized as uncertainty, chaos, unpredictability. But despite all this noise.
Equity and bond markets have actually fared up very well in 2025. When you look at depending on the market cap, European equities are up high single digits to low teens.
Asia somewhat of the same dynamic.
Mick here in North America, despite all the noise.
All markets are positive into the low single digit bond markets are low single digits.
So despite the rollercoaster ride, which we have absolutely experienced in the first half of 2025, those investors that may have been very quick to react by selling had came at the expense of the returns because we are at all time highs as we enter the 2nd.
Half of the year in the US.

Kevin Headland   
Macan I'd love to.
I think you characterized it in one of our presentations talking about if if we had a moniker and nickname for the first core or first half of this year, it would be a a Fast and Furious franchise.
You know the next evolution tariff drift 2025 or something that the fact that you know it's been fast and furious whipside back and forth, twists and turns, it's definitely been an interesting first half of the year for lack of a better term.

Macan Nia   
Yeah, interesting's a nice way of saying it, Kev. I think it's a lot of work without unnecessarily the actual like productive work.
But it is what it is.
And this is the environment that we find ourselves have found ourselves in the first half of the year and likely will continue.
To experience in the coming months as tariff negotiations continue as we find out what the actual.
The big budget deficit or the big budget bill and the impact on the deficit.
As a Freudian slip.
How that all plays out so you know what, Kev?
Let's get started.
Let's very quickly some key points. As we walk through the presentation.
I know we're walking through a presentation.
We will be talking to visuals for those that are tuning in, who want access to the visuals, reach out to Kevin and I directly through our emails.
We will e-mail it to you or find us on LinkedIn and we will pass it along, but we will try our best to describe the slides we're talking to.
But major talking points, Kev for global economy in a nutshell, when you look at the global economy, the balance of risks for the global economy is to the downside. When we look at equities, we thought that the extreme pessimism towards US exceptionalism in April was overdone. We have.
Seen that.
We think that continues.
To lesser degree, there's no clear investment opportunity. Kev today based on valuations and what's going to drive markets in the future, is it going to be valuations or earnings?
We believe earnings and from the fixed income side, Bank of Canada fed likely to cut rates further, but they are on different paths.
We have seen that in recent announcements yields remain attractive and again not to keep harping on this, but active security selection and especially in bonds, duration management is key.
So let's get started.
Let's get a gauge of the health of the global economy.
There's many ways of looking at it. One way we look at it is through the eyes of global manufacturing.
Pmi's purchasing manager indices in a nutshell, Kev, what we have seen a couple big themes for me is when you look at global manufacturing in May of 2025.
Lot of yellows, lots of Reds.
So when what I mean by that, we characterize these growth patterns, good is green, yellow is neutral.
Obviously red is bad.
There's a lot more yellows and Reds out there than greens, and we believe the path for these is more likely to be weakening than strengthening.
Interesting Kev.
The impact of tariffs is clearly is affecting these economies that are vulnerable to them. When we look at Canada, Mexico, the past three months, so basically may, April and what am I saying, March, April may have been very weak from a manufacturing perspective in North America ex US.
And also we're seeing that in these basically production hubs in Asia, South Korea, Taiwan, Vietnam, Indonesia.
They are also decelerating, so theme one from manufacturing is.
Tariff vulnerable economies are feeling the impacts, and it's likely to continue.

Kevin Headland   
Industry on manufacturing as well what you saw or what we saw is a pickup late last year and then really early this year called January and summer was thinking, oh, this is a new resurgence in the economy both you know ca as well as those Asian countries you.
Mentioned, but what it seems like is front running of tariffs.
The expectation these were coming, let's get in some of this, you know, manufacturing in advance of this uncertainty. And then we're seeing a slowdown, of course, as I like to say, we're kind of caught between, you know, in in purgatory or kind of wait and see approach.
Companies don't know what they're going to be dealing with because of tariffs.
It's like they're on, they're off, they're on and off, and this causes kind of just an absolute, you know, stoppage almost in terms of productivity because they don't know the situation they're dealing with.
So that is hampering productivity.

Macan Nia   
Well, you mentioned that.
And you know what?
Like I wanted to talk to.
Actually, we'll keep the the slide because there's a lot of questions we've received on Europe over the past couple of months we've seen.
A turn around in flows into that part of the world and it comes down to one thing and its returns, right? Like I mentioned, depending on the European equity or European in this index, they're up low teens to mid to high teens. In some cases like the DA.
Investors are wondering, OK, will this continue?
There's reasons that it has done well.
One is the general economy is still weak, but it has improved tremendously since the summer of 2023.
Yes, it is sub 50, which means that they're not growing, but they're very close to 50.
It has been a massive improvement in in their fundamentals, they have monetary policy that is more accommodating than, let's say, the Fed or Bank of Canada. They have cut rates.
Likely to continue.
The fiscal stimulus.
So we'll talk to it in the valuation aspect of it. But from a fundamental perspective, the European rally seems to make sense.
You talked about uncertainty.
There's many ways of looking at uncertainty.
There's a measure that we look at.
It's called trade policy uncertainty.
They measure it daily. If you were to look at this chart, it is basically fivefold of the average over the last four to five years.
We think that this is going to continue. Even the narrative between the Trump administration and the XI administration over the past week in terms of tariff negotiations.
From what was talked about a couple weeks ago, it is actually seems to be the same thing that was in place before, but this uncertainty is likely to continue between the Americans as they negotiate with us as they negotiate with the Chinese as they negotiate with the Europe.
And this will be driving headlines as we move forward. So that uncertainty is unlikely to change. Now when we look at services Kev services has been one area that has remained resilient post COVID because of the resiliency of the consumer. If I showed you again that heat map.
Of gauge of services you're seeing a lot of yellows, a lot of Reds. Again, the path of least resistance.
We believe will continue to be lower and you talked about uncertainty, Kev, it impacts governments.
It impacts companies.
It impacts us as consumers. If it's an uncertain environment.

Kevin Headland  
Yeah.

Macan Nia   
Am I when you look at volatility, you map it over or uncertainty you map it over savings rates?
It's a very strong relationship. If I'm uncertain about my situation, I'm going to save more. So what?
But one thing that really sticks out to me too is when you combine the manufacturing and service backdrop, Canada.
Is the weakest developed market economy in the world. We've been following this for years.
And I can't remember a time where both of these have been this detrimental.
So does that mean that the odds the Canadian economy is going to experience a severe recession?
No, but it's clearly highlights that the balance of risks in this country are lower in the Bank of Canada is probably more likely to cut more than what markets are pricing in today.

Kevin Headland   
Aliot's Key as well in terms of sent to me, you're talking about the the consumer and the impact of they're having.
We look at things that were, you know, quote UN quote hard data versus soft data. And you look at sentiment index, you look at the Michigan University's sentiment index about current situations.
You look at other sentient indices surveys. They're weak.
Consumers feel not great about the situation and a lot of it is because of the news headlines and narrative.
But you see the hard data, the data coming out from governments like.
Economic growth? GDP.
The inflation, those are kind of in line or better than expected.
So you have this kind of widening of soft data versus hard data and you wonder is what's gonna drive, which, you know, call it the proverbial chicken and egg situation.
Does the soft data eventually lead to slow down the consumption, slow down and purchasing on consumers, which would in turn impact the economic hard data? Or does the hard data remain, quote UN quote resilient and the consumers change their attitudes about how they feel?
Maybe they're like things aren't as bad as we really thought. So that's something we're watching is kind of this widening of Hardy versus soft data and what moves what going forward.
We do believe, I think that the likelihood the center data is likely gonna turn and turn, create some weakness or some softening in the hard data. And you said slower economic growth not as a recession but slower economic growth and that's important when we look at equity markets.

Macan Nia   
Yeah. And bond markets, of course.
But I've had questions.

Kevin Headland   
Yeah.

Macan Nia   
What's hard data?
What's soft data?
The in in simplistic terms, hard data is facts.
These are actual facts that you are.
These agencies are collecting unemployment facts. This many people lost jobs.

Kevin Headland   
Yeah.

Macan Nia   
Now, what's the soft data?
These are data.
These are data points that they've gathered through surveys, so they're asking you so where?
Hard data is facts. I look at soft data as feelings.
I'll call you up, they say.
How do you feel about your economic situation today?

Kevin Headland   
Yeah, sentiment. Yeah.

Macan Nia   
Well, I feel I feel great.
How do you feel about it and looking in six months down the road?
Oh, I don't feel good for whatever reasons.
So as you mentioned, there's been a divergent between the two and I think 1 impact that's gonna like whether the soft data impacts the hard data is also gonna be very dependent on how long.
This uncertainty lasts for the longer last for the soft feelings become, you know, more entrenched to become hard data.

Kevin Headland  
Yeah.

Macan Nia   
So when we look at the global economy, Kev in aggregate, the balance of risks we believe are to the downside.
Do we think the odds of a recession have increased globally?
Yes, but I wouldn't say it's is it possible.
Yes. Is it probable?
Probably not, because the hard data continues to remain resilient and at the margin we think, yes, we're going to get weakness, but it's probably not as unlike, it's probably not likely.
To impact or get a typical recession into US, Europe, Canada, we can, we can debate but yeah it's going to be a balance of risks to the downside.
So let's transition to equities.
When we look at equities.
So again, not to keep talk, OK, equities in a nutshell, we are paying more across the board from a valuation perspective compared to the beginning of the year and in many major indices.
For less profits, the earnings growth is lower than what was expected at the beginning of the year.
Yeah, you're playing probably in line or slightly higher valuation. Also the first half of the year has been characterized by volatility.
We think that volatility continues.
Why is?
Because we think there's going to be a lot of.
Back and forth when it comes to tariff negotiations, this will create volatility at the margin. And when you look at trade uncertainty or economic policy uncertainty over the VIX, which is a measure of volatility for the broad S&P 500, it's a very strong relationship, so.
I think we should be very honest with ourselves.
And remind ourselves when it comes to communication with our clients or even asset allocation portfolio construction, that volatility is likely to continue.
When we look at the drivers of return Cav over the past couple years, it has been interesting 'cause, we think it's going to be a change in not narrative, but change in the driver right in that car the past couple years, especially in the US when you look.
At what's been the driver evaluate or driver of returns?
I gave it up.
It has been valuation.

Kevin Headland   
Yeah.

Macan Nia   
Early 2023, PES for the S&P 500 was roughly 18. Over the next couple of years, and went up to 28.
Valuation was a primary driver, whereas in Europe what you saw was it was flat basically that first year and then slightly higher the following year.
But you've seen a strong increase this year, obviously in Europe, driven by valuations.
Now the question becomes moving forward, what's going to be that primary driver of return?
Because we know there's three drivers, dividends, valuations and earnings.
And they can all change depending on what part of the cycle we're in.
So we've coming from a valuation driver.
And we think that that.
Providial the relay race, the the baton is going to be passed on.

Kevin Headland   
I think the key is we're not seeing really any obvious opportunity from a valuation perspective, looking at trailing P/E basis over the last 12 months or even a forward price range ratio for the next 12 months, really anywhere in the world. There's no real obvious valuation gap there.
Was perhaps coming into this year, U.S. equity SP500 Mark CAP weighted index versus MSCI Europe.
MSCI Efe that valuation gap seems to have closed.
Because of the kind of this reversal in return, our leaders towards Europe and the rest of the world relative to the US, when we look at 4 P, that's a key for us really in terms of valuation. And really everyone thinks in line, some would say us is.
Expensive, but that's not a mark win basis. When you look at equal weight index, it's right in line.
So when you look across the board, whether it's Canada, Russell, Midcaps, emerging Markets, Europe, international equities.
U.S. equity index.
Everything's in line with the five and 10 year average.
That doesn't mean we should be invested.
There it just speaks to the opportunity set from an active management perspective.
I know we talked about ad nauseum right now.
It just the the selection of key companies for portfolios remains very attractive and we look at earnings growth. You know that opportunity going forward. You talked about volatility.
It's going to be choppy.
There is some volatility in earnings growth.
Likely because of the drivers of manufacturing.
Right, uncertainty manufacturing is denoting that uncertainty.
Where is earnings growth going go if it's going higher, but less than expected on aggregate?
The job is to find those companies at a reasonable price that are going to have.
Quality earnings maybe better earnings than expected, but also I, I would argue more predictable earnings.
You know which is steady earnings look a lot about cash flow.
You know, we'll use that as well.
These are kind of all the metrics we're looking to identify quality businesses.

Macan Nia   
OK.
So that being said, question, we all get a lot of is European equities.

Kevin Headland   
Yeah.

Macan Nia   
So when you look at these indices today, at a time of recording, so this is roughly mid June, you have the Dax up 20, you have the Footsie 100, the UK benchmark up 9%, the euro stocks 50.
So broad base is up 10.
You have the S&P 2 1/2, NASDAQ one TSX 7.
What? What's your view towards European equities?

Kevin Headland   
I got this question recently and you know the question came up is the international trade done?
And my answer back was the international equity market should not be a trade. If anything, if anything this year has really shown that the need to be diversified. You know there's gonna be times where you wanna be overweight, underweight us did so well for the last two years.
Relatively speaking and we've got a kind of a a turn. Now Europe's doing well.
This idea of you should be owning you know, a combination of these areas.
At all times. And while diversity portfolio makes so much sense, I think Europe is still going to move higher.
This valuation can move higher as well, although earnings are not as attractive perhaps in Europe as they are in the US as a whole, there's still a lot of attractive business in Europe and I think you know the fiscal spending and the focus finally from austerity measures of.
European governments towards some spending measures and even perhaps tax cuts.
That is going to help businesses and I think we should.
We we need to be identifying those opportunities and just open up our eyes to a broader opportunity set, you know, instead just focusing my attically on Europe surging on the US or even North America, there are some great businesses outside of North America.

Macan Nia   
Yeah, two points before we move on to bonds.
Number one is we all know the importance of divers diversification.
I think the European experience really highlighted that this year you never know what the catalyst is going to be to unlock evaluation discount.
It's very hard to do.
No one would have called that it was going to be the Trump administration and their views.
That was the catalyst that unlocked German fiscal spending.
That was a catalyst.
Go through the list so it points to.

Kevin Headland  
Yeah.

Macan Nia   
It shows to me that yeah, you can have overweight underweights, but you need to have a diversified portfolio of high quality companies within regions because you never know what that callus is going to be to unlock that.
So that's one.
#2 is when you're going to invest in Europe, the European indices, many of them.
Are I don't know what the right word is.
I like calling it flawed, but I don't think that's the right or inefficient.
But they're not constructed.
They're not diversified.
They're not constructed in a way that is a diversified index, unlike the S&P 500.
They're very TSX, light, big sectors, big weights, companies like SAP, for example, in Germany is roughly 16% of the index. If you're going to invest in that part of the world, be mindful of the inefficiencies of the broad based indices.
And I think that's part one part of the world where active management.
Is very important in selecting good like you mentioned. Good companies maybe be a little bit mindful of because the defense names too in Europe have valuations have blown out. So you want to be very mindful of pockets of extreme valuation also within the European market.

Kevin Headland   
I think you you said the European market and the individual indices are are flawed.
I would argue that almost all indices right now are flawed in terms of concentration risk.
You look at Canada concentration risk in you know, what do we I think it's like 65% almost in three sectors, materials, energy and financials.
The TSX when I started.
You know, I'm gonna date myself as I usually do on this podcast. It was the TSC 300 and it's nowhere near that.
It's like the TSC 240 or something like that.
It's like so many companies are taking out.
Europe, the same way you said high concentration US 35 plus percent in the top 10.
Names. We're seeing this concentration risk and This is why perhaps we're seeing some flaws in investing in indices.
And this is where I think you know, it's rare that we see valuation across the board on a kind of average weight that should stream. Active managers have the opportunity to outperform.
They don't always outperform, and the the note is all the average active manager doesn't outperform the Mscs ever.
Well, identify better active managers.
Is that proven to outperform?
And that's the key, right?
It's find your active managers and then of course bonds.

Macan Nia   
So. So Kev, is it fair to say to summarize equities in a nutshell, is the pessimism towards us. Exceptionalism is dead is likely overdone, even as we move throughout the year.

Kevin Headland  
Oh here, yeah.

Macan Nia   
No clear investment opportunity based on valuations in earnings should be the next driver of performance versus valuation, which was the driver over the past couple years.
So yeah, I'm just asking you whether that's true.

Kevin Headland   
Yeah. Yeah. No, no.

Macan Nia   
I know you're gonna say yes.

Kevin Headland   
I think the key the key there is that that US passive isn't overdone. I think that's the idea. The pendulum of of only us to no us.
We all know pendulum always ends up the middle.
I think the key to equities diversified quality businesses identify those companies gonna do better over the next coming year and the fixed income we talked about, this is bonds, you know bonds are not dead. We've been saying this for quite some time.
If anything this year.
Has shown that bonds have been resilient and actually helped protect some of the downside volatility portfolios.
It's not easy because the in the yield curve, the pricing of bank Canada versus Federal Reserve rate cuts has been I quote all over the place even the last two years even more just earlier this year in actually in April, the bond market was pricing in or expect.
Four rate cuts by the Fed.
Now we're getting roughly two rate cuts and depending on based on the CPI data that was announced yesterday.
As it said, we're recording some June 12th.
You know it's better than expected, but not great.
Eight the bond market moved a little bit.
We're gonna be in this kind of whipsaw or volatile market for for expectations. So right now, the Federal Reserve or the market expects Federal Reserve to cut twice by end of this year.
I love the question.
How many cuts by end of this year?
I say, who cares?
It's about where they are going and when do they stop and that's the key for for me, for for bonds, likely probably less than two rate cuts this year, maybe moves into next year.
Bang Canada.
You mentioned this earlier.
Bank Canada.
Barely even one and a quarter rate cuts priced in.
What does that mean?
Means one full rate cut and only a 25 base point chance or 25% chance.
Excuse me of a second rate cut.
Given the weakened economic environment or weaker economic environment that we talked about in manufacturing and services data, maybe they have to cut more.
Maybe after maybe two or even three times this year, so that'll be quite interesting.
But I that should actually help the bond market.
That'll bring yields down.
And of course, as yields go down, prices go up and we're getting more return for our fixed income, which is quite attractive.

Macan Nia   
And the Fed is in this position where they don't necessarily have to move right now.

Kevin Headland   
No.

Macan Nia   
There's so much uncertainty in terms of things that may impact inflation.
IE tariffs, IE the budget, the big beautiful budget and the impact that that may or may not have on inflation and inflation is well behaved today. As you mentioned Kevin, like CPI is it's well behaved.
PPI came out this morning.
Well behaved.
And at the margin, you know the US economy is Brazilian.
So if I'm Jerome Powell, I don't need to move.

Kevin Headland   
Yep.

Macan Nia   
Now I have these proverbial bullets.
Monetary policy bullets.
I don't need to fire one of them off and when we look at other measures of inflation, I know Kev, you talk, you look at this one a lot.
Is the manufacturing basically they asked for prices paid?
It's a very good.
Relationship with CPI makes sense if manufacturers are paying more.
For their inputs, they're going to pass it along to the end client, and that has recently ticked up.
So you know, there are things to be worried about.
So for those that are expecting that the Fed is going to be cutting.
Consistently throughout 20, the rest of 2025, we'd be mindful of that and talk to us, Kev, about the move index, because this is where we know again another discussion point we've had with advisors throughout the past couple of years saying, you know what I want to.
Add to long duration.
I wanna add duration in My Portfolio.
We've been cautious with that view is active duration matters because it's not going to be A1 singular lying down if there's going to be, it's going to be a roller coaster trending lower, sure. But as we have seen, you've seen these sharp increases in yields in a.
Short period of time because of the US potential like losing its triple-A credit rating.
Whether it's the passing of the big beautiful budget so active duration management.
Is very important. Just being long duration.

Kevin Headland  
Yeah, that's so important because you look at the bond math and of course, when you think yields are going down, weaker economic growth you you think long term treasures, long term government bonds that makes a lot of sense.
It works really well and we've been in this Regency bias going back to the financial crisis of lower yields for longer and there's could be an argument that perhaps, you know, there's some anchoring impacts and anchoring effects on.
Longer duration bonds, especially in the US.
You call it the budget deficits and the risk of the big beautiful.
Bill, in terms of the expectations there of new issuance and increase issuance in tenured treasuries, decrease in demand from external buyers like foreign governments.
We talked last podcast about the Mar a Lago accord and is there something there?
So there's a lot of discussions there and maybe you know, it's not as easy game anymore.
It's not. Just, say, hey, we're going to go along duration and ride the wave down.
It really is.
Active duration management understand the opportunities that exist.
Across the board.
It used to be one game in town, you know. We call it Tina.
There is no alternative of 10 year treasuries.
Now it's perhaps Tara there are reasonable alternatives.
Just a different a different acronym. We love acronyms in finance and looking across the board, whether it's Canadian AG, US AG or US Agri Bond Index and Canadian Agri Bond index, global Aggregate bond index, investor credit in the US Investor Credit in Canada.
High yielding us some high yield Canada, any asset class anywhere you want to cut it?
Yield are attracted.
They're higher than long term average. We're probably getting paid income.
That's a good news story.
We haven't been receiving that quite some time yet.
We've kind of ignored that and on the flip side, prices are actually lower than par to gain valuation opportunity and bonds. You're getting higher yields.
So our bond managers are quite excited about this market. They're not excited about the short term volatility as you said with the move index.
Which essentially the VIX index which measures the volatility for the S&P 500. But the move index measures the volatility for the treasury market that hurts day-to-day moves of bonds. But bond investors need to be patient.
They are doing what they're supposed to do, driving income for the client, for the clients and tempering downside volatility for equities.

Macan Nia   
And just to give you like to quantify what bond volatility is. So for the movie index for example, over the last year there's been I think four periods where you've seen them move index move by more than 30% to the upside, right?
So there's a lot of volatility in that space. Volatility creates opportunity, but I think we would be very cautious for those.
I think, OK, the US are just going to come down in a straight, linear, orderly fashion.
With when with uncertainty likely to continue.
You.
Volatility is gonna continue, but I I like that because it means it's opportunity.
So I think Kathy, you know, I think overall with bonds, maybe it's a good time to like wrap it up. But overall with bonds, what's the view?

Kevin Headland   
Yeah.
Yeah, I think we like bonds. I think it's important part of these are portfolio. But as we've mentioned more and more active management is important, maybe even more important fixed income than as an equities.
I think it's really an opportunity set.

Macan Nia   
You mentioned, Kevin, that 70% of active U.S. equity managers underperform their INDE index.
It's actually the exact opposite when it comes to bond managers, 70% of active bond managers outperform their index.
So it's just shows you the underlying indexes are not flawed, but they're not constructed in an efficient way where active management is important in equities, but.
Bond managers are much more likely to outperform their passive.
Benchmark.

Kevin Headland   
It's it's essentially when you say that is bond indices are constructed with the greatest weights like equity managers, market capitalization, but bond indices. That means the biggest weights are to the biggest issuers, which are the most indebted.
So do you really want to overweight your portfolio to the biggest large indebted companies on a corporate bond?
Index it's kind of interesting the way it works there, but let's just you know, let's wrap it up and let's talk about exactly.
What we mentioned in the beginning, I think it's clear based on what we talked about.
Global economy is slowing. Doesn't necess mean recession, but slower that translate in likely slower earnings growth for companies, more choppiness in the company?
Earnings volatility is a result of uncertain around tariffs being diversified.
You know that pendulum?
We don't want to be only us.
We don't want to be no us. We want to be international, US, Canada, find the best companies playing the biggest sandbox box.
Excuse me where you can find the best equities earnings are going to be driving performance. We think given valuations are fair, some areas are full but valuation earnings are are going to be driving performance and fixed income. The path to cuts is more you know down we're going.
To get cuts.
Rates are going to come down.
That's good for bonds.
But we have to be active in terms of duration management, understanding that you need to be patient for fixed income. And I think that's going to be key as we see the rest of this year play out and of course into 2026.

Macan Nia   
2016.

Kevin Headland   
I know I've been.
I've been doing so much research on on that period before.
COVID and stuff.
So I I don't know what year it is anymore.

Macan Nia   
So we want exactly. Also when you have kids, time just pauses it seems.
Or flies, but want to thank everyone for tuning in. As we always mention, if you find this podcast of use, please rank us.
It helps us getting our message across to people with like minded. Yeah. If you have anything less.

Kevin Headland   
Only five stars.

Macan Nia   
Don't wait us if it's five star, please go ahead and rate us.
That means a lot for us. Also, if you are on LinkedIn.
Reach out to Kevin and I and we'd love to be a part of each other's network.
Works a lot of the things we talk on the podcast.
We update regularly on LinkedIn, so just putting that plug out there if you're on LinkedIn and we're not a part of each other's networks, please feel free to reach out.
So I think that's a good place to pause.
Thanks for the discussion, Kev.
I want to thank everyone for listening in and we'll we'll until next time.

Kevin Headland   
Yeah, great discussion. Talk soon.
Take it.
Take care.

Macan Nia   
Take care.
Thank you everyone. Bye.