October 2025 - Monthly Update

“US stocks posted their fifth consecutive month of gains with the S&P 500 … hitting another series of records along the way. Much of the momentum was driven by the highly anticipated Fed rate cut which it delivered on by reducing its target rate by 25 bps at its September 17 meeting... Nonetheless, we do not expect the path to be a smooth one, as investors continue to debate the size and scope of the Fed’s renewed easing campaign, as well as all the uncertainty surrounding the macro environment. That being said, we continue to be staunch advocates of a “buy the dip” strategy since we believe US stocks remain firmly within a bull market that has at least a few more years of life to it if history is any sort of guide....The stock market recovery that no one believed, was widely panned and even more loudly doubted when we first published our view that Canada was entering a prolonged period of outperformance relative to the US way back in mid-2024, has reached heights that even we thought were lofty. Yes, the TSX has eclipsed our base case … in part due to surprising economic strength and sustained gold momentum. However, MACRO does not lead – FUNDAMENTALS do. That is why we have been prioritizing the improving and consistent fundamental conditions of Canadian stocks with respect to earnings growth and revisions, operating performance, cash... After all, the stock market is a market of stocks – and STOCKS are NOT the ECONOMY. This fact has never been more prevalent in our view than the past two years in Canada. [T]hanks to the broadening positive revision cycle that our models have shown over the last six months… This now positions the TSX to exhibit low double-digit earnings growth by the end of 2025, implying a higher earnings multiple that is likely to remain above the long-term historical average. After all, you pay for what is working – and Canadian equities are working. With respect to its neighbour to the south, we still believe Canadian outperformance versus the US will moderate. However, Canada is well-positioned to at least keep pace with the US into year-end and ultimately outperform on a year-over-year basis by one of the widest margins on record.” Portfolio Strategy – October 2025. BMO Capital Markets.