{"id":1859,"date":"2025-12-12T18:09:48","date_gmt":"2025-12-12T18:09:48","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/?p=1859"},"modified":"2025-12-16T14:56:05","modified_gmt":"2025-12-16T14:56:05","slug":"december-2025-preparing-for-policy-shifts","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/trivestwealthcounsel\/december-2025-preparing-for-policy-shifts\/","title":{"rendered":"December 2025: Preparing for Policy Shifts"},"content":{"rendered":"

INSIDE<\/b><\/span><\/h3>\n

The Road to 2026: Liquidity, Inflation, and Market Strategy<\/strong><\/span>
\nLiquidity is the defining force as both corporations and governments lean heavily on leverage. Tech giants, once cash rich, are issuing record debt to fund an artificial intelligence (AI) arms race, while U.S. fiscal policy relies on short-term Treasury issuance, raising systemic funding risks. Near-term, a dovish U.S. Federal Reserve pivot and Japan\u2019s stimulus inject liquidity and fuel carry trades, but policy uncertainty looms with potential Federal Reserve friction and U.S. midterm election politics. A weaker U.S. dollar favours hard assets like gold, while the K-shaped recovery deepens wealth divides, amplifying volatility. Canada faces recession risk beneath resilient headlines, constrained by policy inertia. Traditional bonds remain vulnerable to sovereign risk premiums, making structured notes and defensive strategies more attractive. In this environment, discipline matters: stay invested, pair risks, prioritize balance-sheet strength, and prepare for policy swings and liquidity shocks.<\/span><\/p>\n

Navigating Debasement and Delivering Results<\/strong><\/span>
\nOverall, the portfolio adjustments we made during the spring correction delivered strong results in the second half of the year, outperforming both our goals-based targets and passive benchmarks. In total, we posted a 14.7 per cent return year-to-date in the fund compared to 12.3 per cent for the Global Passive Balanced benchmark. This brings our five-year annualized return to 9.1 per cent, well ahead of passive returns of 6.4 per cent. Our disciplined approach, combined with the strategic changes we implemented in late 2019\u2014including the active use of structured notes as a fixed-income replacement\u2014has significantly improved our upside capture without sacrificing downside protection.<\/span><\/p>\n

Key Risks Heading into the New Year<\/strong><\/span>
\nAs we move into 2026, markets face a complex web of vulnerabilities that could reshape liquidity, policy, and asset pricing. U.S. midterm elections and potential shifts in Federal Reserve leadership may alter the reaction function at a critical juncture. Treasury supply dynamics and stress in money-market plumbing\u2014repo rates and dealer balance sheets\u2014pose systemic funding risks. Meanwhile, tech-driven private credit is rapidly replacing traditional bank intermediation yet remains untested through a full default cycle. Geopolitical flashpoints from Ukraine to Taiwan, coupled with evolving trade frameworks like the Canada\u2013United States\u2013Mexico Agreement (CUSMA), add layers of uncertainty. Finally, sovereign funding pressures\u2014linking deficits, issuance, term premia, and currency stability\u2014represent a structural challenge that could reverberate across global markets.<\/span><\/p>\n

Discipline Over Drama <\/strong><\/span>
\nStaying invested is essential in these types of markets\u2014market timing often proves costly, as those who went to cash in late 2022 missed three years of strong gains. Instead of chasing macro calls, focus on pairing high-beta positions with low-risk counterparts and favour companies with strong balance sheets, consistent cash flows, and disciplined capital allocation. Extend risk management beyond equities: avoid stretching for yield in credit, plan for policy volatility, and maintain liquidity buffers. Carry trades and leveraged strategies can unwind quickly, so keep hedges and optionality ready. In short, discipline\u2014not prediction\u2014should guide portfolio construction in 2026.<\/span><\/p>\n

Please reach out to any of our team members should you have any comments or questions about markets, your portfolio or just wanting to catch up. Wishing you a Very Merry Christmas and all the best over the New Year.<\/span><\/p>\n

\"\"<\/h2>\n

December 2025: Preparing for Policy Shifts <\/strong><\/span><\/p>\n

Key Themes for 2026:<\/strong> Liquidity is the defining force as both corporations and governments lean heavily on leverage. Tech giants, once cash-rich, are issuing record debt to fund an AI arms race, while U.S. fiscal policy relies on short-term Treasury issuance, raising systemic funding risks. Near-term, a dovish Federal Reserve pivot and Japan\u2019s stimulus inject liquidity and fuel carry trades, but policy uncertainty looms with potential Federal Reserve friction and U.S. midterm elections politics. A weaker U.S. dollar favours hard assets like gold, while the K-shaped recovery deepens wealth divides, amplifying volatility. Canada faces recession risk beneath resilient headlines, constrained by policy inertia. Traditional bonds remain vulnerable to sovereign risk premiums, making structured notes and defensive strategies more attractive. In this environment, discipline matters: stay invested, pair risks, prioritize balance-sheet strength, and prepare for policy swings and liquidity shocks.<\/span><\/p>\n