August 2025 Portfolio Construction
Alfred Lam, MBA, CFA, Senior Vice-President & Chief Investment Officer, CI GAM | Multi-Asset Management
Richard J. Wylie, MA, CFA, Vice-President, Investment Strategy, CI Assante Wealth Management
Interest rate picture remains clouded
The Bank of Canada last announced that it was lowering administered interest rates at the conclusion of its March 12, 2025, monetary policy meeting. The range for overnight borrowing was set at 2.75% to 3.00%, with the official benchmark Bank Rate at 3.00%. At that juncture, it was the sixth consecutive rate cut (totaling 225 basis points) and took administered interest rates to their lowest level since September 6, 2022. Despite continued signs of weakness in the domestic economy, interest rates have been unchanged since then. As can be seen in the accompanying graph, the U.S. Federal Reserve’s benchmark Federal Funds rate has been unchanged despite being at a higher rate for a longer period (4.25% – 4.50% since December 18, 2024).
The Bank now faces a dilemma. The temporary elimination of the consumer carbon tax has lowered headline inflation to 1.9% (June data), but core inflation is running much higher (2.6% per June data).
Further, the gap in interest rates between Canada and the U.S. has left the Canadian dollar vulnerable to selling pressure on international markets, as investors view the U.S. as a lower risk investment environment that is offering higher interest rate returns. However, recent employment data reveal continued weakness in the job market.
As can be seen in the accompanying graph, the U.S. Federal Reserve’s benchmark Federal Funds rate has been unchanged despite being at a higher rate for a longer period (4.25% – 4.50% since December 18, 2024). The Bank now faces a dilemma. The temporary elimination of the consumer carbon tax has lowered headline inflation to 1.9% (June data), but core inflation is running much higher (2.6% per June data).
U.S. industrial output sees modest gains
The U.S. Federal Reserve (Fed) announced that industrial production rose by 0.3% in June, following a revised no-change result in May. At the same time, capacity utilization for the total industry rose to 77.6% during the month, from 77.5% in May, but was down from the 78.2% level reported a year earlier.
On a year-over-year basis, industrial production was reported to have been up 0.7%. With a few monthly exceptions, production results had shown annual declines from June 2023 through November 2024. The recent streak of positive results has seen some stabilization but at a relatively low level. There is some optimism in various industries that the U.S. “re-shoring” of industrial activity will provide a boost to domestic production and plant usage. Regardless, the forward-looking purchasing managers index revealed a fourth consecutive monthly contraction in June. It remains unclear as to how successful this strategy will be in time.
The longer view
The global economic landscape became more complicated in April when President Trump followed through on his promise to impose new tariffs on imports to the U.S.
While the announcement was anticipated, the specific tariff rates were not, sparking a four-day selloff that sent the S&P 500 Index down 12%. Acting as a voting machine, capital markets exerted enough pressure to prompt the administration to reconsider. Ultimately, a 90-day negotiation period was granted following four business days of market turmoil.
Looking out longer, last year’s top investment theme—artificial intelligence—faced some turbulence. Expectations that the launch of DeepSeek in China would shift the AI landscape were tempered as major U.S. tech firms like Microsoft, Meta, and Alphabet announced expanded capital expenditure plans. Sovereign wealth funds are now expected to overtake hyperscalers as the largest investors in data centers over the next two years.
Meanwhile, adoption of agentic AI platforms such as ChatGPT and Meta AI continues to grow. Looking ahead, the next major AI frontiers are likely to be full selfdriving technology and humanoid robotics. Full self-driving is already being implemented and is expected to evolve into a smartphone-like ecosystem.
By 2035, it’s anticipated that both factories and households will commonly utilize humanoid robots. We believe we are still in the early stages of what will be a long and transformative trend in AI.
Important Disclaimers
The information contained herein consists of general economic information and/or information as to the historical performance of securities, is provided solely for informational and educational purposes and is not to be construed as advice in respect of securities or as to the investing in or the buying or selling of securities, whether expressed or implied. This document may contain forward-looking statements. These statements reflect what the authors believe and are based on information currently available to them. Forward-looking statements are not guarantees of future performance. We caution you not to place undue reliance on these statements as a number of factors could cause actual events or results to differ materially from those expressed in any forward-looking statement, including economic, political and market changes and other developments. Neither CI Private Wealth nor its affiliates, or their respective officers, directors, employees or advisors are responsible in any way for any damages or losses of any kind whatsoever in respect of the use of this document or the material herein. CI Private Wealth is a division of CI Private Counsel LP CI Assante Wealth Management is a registered business name of Assante Wealth Management (Canada) Ltd. CI GAM | Multi-Asset Management is a division of CI Global Asset Management. CI Global Asset Management is a registered business name of CI Investments Inc. This document may not be reproduced, in whole or in part, in any manner whatsoever, without the prior written permission of CI Private Wealth. © 2025 CI Private Wealth, a division of CI Private Counsel LP. All rights reserved. 25-07-1414450 (07/25)