Investing Perspectives Q2 2025
We are now three months removed from President Trump’s “Liberation Day” tariff announcement, and few would have predicted the resiliency of equity markets in the face of escalating global trade friction. While volatility spiked to near-record levels in April, markets rebounded swiftly, recovering losses in a matter of weeks.
Beneath this surface-level recovery, however, we are seeing clear and consequential structural divergences, particularly in global monetary policy and regional economic performance.
Since its peak of 5% in early 2024, the Bank of Canada has implemented seven consecutive rate cuts, bringing the overnight rate down to 2.75%. These actions reflect the central bank’s response to muted domestic growth, elevated household leverage, and easing inflationary pressure. In contrast, the U.S. Federal Reserve has taken a more restrained approach, cutting rates only three times, with the last move occurring in December 2024. Since then, the Fed has held its target range at 4.25% to 4.50%, citing persistent labour market tightness and inflationary stickiness, particularly in services and trade-exposed sectors impacted by tariffs.
This monetary policy divergence briefly pressured the Canadian dollar, but that weakness proved transitory. The Loonie has since rallied, gaining over 5% against the U.S. dollar year-to-date as of mid-July. Canada’s relatively stable inflation trajectory and the prospect of a soft landing have contributed to this reversal.
The April tariff shock—the now infamous “Liberation Day”—triggered the sharpest four-day selloff in the S&P 500 since the COVID-19 crisis, with the VIX volatility index surging to 60, placing that event among the most extreme 1% of historical episodes. Yet by mid-April, markets had already staged a near-complete recovery.
This now-familiar pattern, rapid dislocation followed by equally rapid normalization, has become emblematic of post-2009 market dynamics. It reflects the influence of abundant liquidity, reactive policymaking, and persistent investor faith that downturns will be short-lived.
We are not embracing that narrative wholesale.
Our equity positioning remains focused on quality: businesses with durable competitive advantages, conservative balance sheets, and disciplined capital allocation. We continue to avoid the more speculative corners of the market, which often dominate in the early stages of a rebound but rarely deliver sustainable long-term returns.
This discipline, coupled with diversification through fixed income and private assets, served clients well from the stock market highs in February 2025 through the start of recovery about a week after “Liberation Day”. While the S&P 500, Nasdaq, and TSX Composite fell -18.9%, -22.9%, and -12.2%, respectively, over that period, a typical Bridgeport client portfolio declined by approximately 5% to 7%, a testament to our investment process and portfolio construction.
Importantly, we were able to take advantage of the dislocation early in the quarter to selectively add to existing equity holdings and initiate new positions.
In the Bridgeport U.S. Equity Fund, we established a new position in Thermo Fisher Scientific, a global leader in life science tools, diagnostics, and biopharma services. The stock has fallen out of favour after an unsurprising post-COVID growth reset, creating an opportunity to buy a best-in-class operator at a discounted valuation. We believe Thermo Fisher remains exceptionally well-positioned to compound value as a core enabler of scientific innovation and healthcare advancement. On a year-to-date basis, Bridgeport US Equity Fund returned 0.3% in Canadian dollars and 3.5% in U.S. dollar terms, with the difference driven by the depreciation in the U.S. dollar (offset by partial currency hedges).
In the Bridgeport Canadian Equity Fund, we initiated a position in Cameco, a leading uranium producer with vertically integrated capabilities across mining, refining, and nuclear fuel services. Cameco’s strategic ownership of Westinghouse also provides exposure to the growing demand for nuclear technology and energy transition infrastructure. We acquired our position before the recent run-up in the stock, at a time when the market was pricing in a stagnant future for nuclear energy, offering an attractive entry point well below intrinsic value. Bridgeport Canadian Equity Fund posted a gross return of 8.0% for the six months ended June 30, 2025.
Bridgeport Small & Mid Cap Equity Fund added Warner Music Group as a new holding. Warner is a global music rights and entertainment company with a diversified catalogue of songs and a growing share of digital and streaming revenues. We believe that the music rights are significantly underpriced, giving Warner the ability to increase prices at above-inflation rates for decades to come. The fund delivered a 2.8% gross return over the first half of 2025.
Bridgeport High Income Fund also had a strong start to the year, returning 3.7% before management fees. Returns were primarily attributable to the high quality, dividend-paying equity component of the portfolio and appreciation in our North American corporate bond holdings due to shrinking risk premiums.
As a reminder to clients, Daniel Bain has recently joined us along with his clients from Thornmark Asset Management and the firm’s two pooled funds. Thornmark Enhanced Equity Fund and Dividend Income Fund both gained about 1.5% on a gross basis in the second quarter. New positions added to Thornmark Enhanced Equity Fund include Bank of Nova Scotia, Rogers Communications, CDW Corporation, Fiserv and Diageo. Thornmark Dividend & Income Fund invested in a number of new stocks just after quarter-end including Constellation Brands, Becton Dickinson and Tourmaline Oil.
In private markets, we are seeing signs of renewed opportunity following a period of valuation reset and risk repricing. Real estate assets are repricing to reflect higher financing costs. Private credit continues to offer attractive yields, with improved covenants and deal structures. And in niche private equity and special situations, deal flow quality has begun to improve.
We are selectively increasing exposure where our underwriting confirms sound fundamentals, defensible downside protection, and strong manager alignment. While returns across our private asset portfolios have been relatively muted so far in 2025, we continue to view these funds as essential portfolio diversifiers, particularly as public market valuations appear increasingly stretched in many segments.
If there’s one clear theme so far this year, it’s that clarity remains elusive! Economic data is noisy, policy moves are reactive, and investor sentiment swings are abrupt. In this type of environment, we believe resilience flows not from prediction—but from process.
That’s why our investment philosophy remains grounded in discipline: diversified portfolio construction, quality asset selection, and a long-term orientation. This approach has consistently helped protect capital during periods of turbulence and positioned us to act decisively when opportunities emerge.
As always, we thank you for your trust and continued partnership. Should you have any questions about the quarter or your portfolio, please don’t hesitate to reach out.
Wishing you a restful and enjoyable remainder of the summer.
Yours truly,
John Fisher