Welcome to Our Monthly Newsletter - Pharus Perspectives!

In markets defined by sudden policy pivots, global uncertainty, and stretched valuations, staying ahead isn’t a luxury—it’s a necessity. This month’s Pharus Perspectives delivers clear, actionable insights so you can make confident decisions amid today’s market noise. Dive in as we tackle current challenges and chart a course toward a robust, prosperous financial future—together.

What You’ll Discover Inside

• Special Feature: Interest Rate Cuts
• Market Trends: Unpack the drivers behind US equities’ recent surge, assess expensive valuations, and explore what lies ahead for investors.
• Liquid Alternatives Demystified: Discover how this nimble asset class can add resilience and opportunity to your portfolio.
• Financial Brain‐Teaser: Tackle a lighthearted riddle that reinforces the value of disciplined investing.

Special Feature: Central Bank Decisions and Market Implications

Today marked a significant moment for financial markets, as both the Bank of Canada (BoC) and the US Federal Reserve held their highly anticipated policy meetings. Each central bank announced new decisions on interest rates, reflecting their ongoing efforts to respond to evolving economic conditions. Below, we summarize the key outcomes from both meetings and what these changes may mean for markets and investors.

Bank of Canada Interest Rate Cut: Key Highlights

Rate Cut Announced: The Bank of Canada (BoC) lowered its overnight rate by 25 basis points to 2.50%, marking its first rate cut since March.

Approach: The BoC emphasized a cautious, data-dependent stance, providing little indication about future rate moves. Decisions will be made "one step at a time" based on evolving economic data.

Rationale: The cut reflects both a weakening Canadian economy and reduced inflation risks, partly due to stable US tariffs and the removal of Canadian retaliatory tariffs.

Labour Market: While trade-sensitive sectors remain weak, the BoC noted broader signs of slowing employment growth.

Forward Guidance: No clear signals were given about additional cuts. Governor Macklem stated the Bank will respond to economic changes on a meeting-by-meeting basis.

Market Reaction: Bond yields and the Canadian dollar remained stable post-announcement, as investors await further guidance and the upcoming US Federal Reserve decision.

US Federal Reserve Rate Cut: Key Highlights

Fed Rate Cut Announced: Federal Reserve Chairman Jerome Powell announced a 0.25 percentage point rate cut, the first since December.

Context: The decision comes as inflation continues to rise, partly driven by recent US tariffs. Powell has previously cautioned that tariffs can contribute to inflationary pressures.

Balancing Mandates: While the Fed typically raises rates to manage inflation, recent jobs data has shown sluggish employment growth, prompting the Fed to act in support of its dual mandate to contain inflation and maintain low unemployment.

Political Pressures: The announcement follows heightened political pressure on the Fed’s independence, with President Trump attempting to influence central bank decisions and appointments.

Recent Developments: This week, the US Court of Appeals blocked the administration’s attempt to remove a sitting Fed governor, and the Senate confirmed a new Board member who also holds a high-level advisory role.

Implications of Rate Cuts in Canada and the US: CIBC Asset Management Insights

CIBC Asset Management reviewed past periods when the US Federal Reserve paused and then resumed rate cuts, analyzing S&P 500 Index performance.

Key Findings:

In the three months before renewed Fed rate cuts, the S&P 500 averaged a 4.1% gain.

After rate cuts resumed, average S&P 500 returns were:

• 3 months: -2%
• 6 months: +7%
• 12 months: +19%

The 2008 financial crisis was the only period with negative returns (-23%) in the three months prior to resumed cuts.

Excluding 2008, investors who remained invested from three months before to 12 months after rate cuts saw an average cumulative return of +27%.

Key Takeaways for Clients

Both the Bank of Canada and the US Federal Reserve have initiated rate cuts, reflecting concerns over economic growth and inflation.

Political dynamics in the US are adding complexity to monetary policy decisions, but central banks remain focused on their mandates.

Market reactions have been muted as investors seek further direction from central banks.

Historically, periods of resumed rate cuts—especially in the US—have generally been positive for equity markets, with the notable exception of major crises.

Staying invested during these periods has historically rewarded investors, underscoring the value of a long-term perspective.

Monthly World Markets Report

U.S. Markets Surge Through the Noise

This month’s snapshot highlights how U.S. stocks have navigated trade headlines and macro uncertainty to deliver solid gains in 2025, powered by AI-led earnings rebound and supported by expectations for easier monetary policy.

Summary

• U.S. equities are up over 9% year-to-date through August, extending a bull run that began in late 2022.
• A tariff scare in early April triggered a two-day sell-off, sending the S&P 500 down roughly 10% (and as much as 17% intraday), but the index bounced back sharply and hasn’t experienced a 5% pullback since the low.
• The artificial intelligence surge remains the dominant market driver:
  • Mega-cap tech firms reported strong Q2 profits and boosted full-year guidance.
  • Investors view hefty AI infrastructure spending as essential for sustaining long-term growth.
• Monetary policy expectations support equities:
  • Cooling inflation has markets betting on Fed rate cuts later this year.
  • Political pressure on Fed Chair Powell—and talk of his replacement—adds uncertainty around the timing and pace of easing.
• Fiscal stimulus and currency dynamics:
  • President Trump’s proposed “big, beautiful” tax bill could boost growth but widen the deficit, pressuring the dollar and pushing up long-term yields.
• Valuations are rich, especially in tech, leaving markets vulnerable to softer economic data or earnings disappointments.
• The July jobs report—weakest payroll growth in over a year—briefly rattled investors, underscoring how quickly sentiment can shift.

Key Takeaways

• Strong earnings momentum and AI optimism have powered gains despite tariff fears.
• Elevated valuations raise the bar for continued upside; any earnings miss or tariff-related drag could spark a pullback.
• Late summer and early fall are historically choppy—expect possible consolidation or mild corrections.
• Volatility dips may offer attractive entry points into secular growth themes, with 2026 earnings forecasts still pointing to robust, double-digit gains.

Monthly Performance Update

Source: Click Here for Monthly World Market Report.

Observed Trends from Our Research Models

Recent market conditions have prompted several notable trends in how investment portfolios are being managed. These trends reflect a focus on balancing risk and return in an uncertain environment:

• Modest Equity Underweights and Fixed Income Overweights: Many portfolios are reflecting a slight reduction in equity exposure, with a corresponding increase in fixed income allocations.
• Emphasis on Active Management: There is a growing tendency to leverage active management strategies, aiming to take advantage of market inefficiencies and unexpected corporate earnings results.
• Broad Diversification: Portfolios are increasingly diversified across regions, sectors, and asset classes to help reduce concentration risk and achieve more stable performance.
• Currency Hedging Practices: Hedging USD/CAD exposure has become more common, aiming to mitigate currency-driven volatility and preserve gains from U.S. equities.
• Maintaining Cash Buffers: A noticeable trend is the retention of cash reserves, providing flexibility to respond to potential market pullbacks or dislocations.
• Close Monitoring of Economic Indicators: There is heightened attention to central bank communications and inflation data, enabling timely adjustments to portfolio positioning.
• Slight Extension of Bond Duration: Some portfolios are modestly extending bond duration to capture attractive yields, while remaining mindful of interest-rate risk.

These observed trends reflect the dynamic nature of market conditions and the diverse strategies being explored to navigate them. As always, individual circumstances and objectives should guide any investment decisions.

Financial Planning Feature

The Executor’s Equation: Trust, Tasks, and Trade-offs

Being asked to serve as an estate executor is a sign of trust, but it also brings a host of legal, financial and interpersonal obligations. From locating the original will and safeguarding assets to navigating tax rules and potential family disputes, the role demands careful planning and impartial judgment. The following points outline what you need to know before accepting—and how to protect yourself and honour the deceased’s wishes.

• Being named as an executor is an honour but involves complex legal, financial, and interpersonal responsibilities that can span months or years
• Key duties include locating the original Will, acting as a fiduciary, managing and safeguarding assets, paying taxes and debts, satisfying gifts, and distributing the remaining estate to beneficiaries
• Before accepting, verify your residency status—non-residents or Canadian residents who are U.S. Persons may trigger adverse tax consequences for the estate
• Assess personal dynamics and potential conflicts of interest with beneficiaries to ensure you can remain impartial and trustworthy throughout the administration process
• Evaluate your availability: executor duties are time-intensive and must be balanced against your existing personal and professional commitments
• Recognize personal liability risks, including exposure from premature distributions, insolvent estates, and creditor claims if debts remain unpaid after asset distribution
• Anticipate possible litigation or beneficiary disputes and consider executor’s insurance to mitigate errors or omissions—while noting coverage exclusions for major liabilities like taxes
• Understand your right to renounce the appointment if you haven’t yet handled any estate assets; once you’ve intermeddled, a court application is required to step down
• Upon acceptance, prioritize finding and interpreting the Will, and engage legal and financial professionals to guide you through each step

Key Takeaways

Serving as an estate executor can be deeply rewarding but carries significant time commitments and potential personal liability. Carefully weigh your capacity, conflicts, and willingness—and seek professional advice—to make an informed decision that honours the deceased’s wishes.

Source: Click Here for the Article.

CIBC Smart Advice Feature

Smart Advice Spotlight – How an investment expert plans for rising education costs

As students head back to campus, Canadian families are confronting the reality of skyrocketing tuition fees. A four-year degree now hovers around $75,000—and for children born today, that figure is on track to surpass $100,000.

Michael Keaveney, Vice President of Managed Solutions at CIBC Asset Management, and Carissa Lucreziano, bring a combined four decades of experience guiding Canadians through every market cycle.

They’ll show how a disciplined, long-term approach—anchored by tax-sheltered accounts, government grants and consistent saving—can transform the daunting task of funding post-secondary education into an achievable plan.

Summary

• Start early and prioritize RESP contributions to harness compound growth and capture the full Canada Education Savings Grant (CESG) match.
• Use TFSAs for flexible, tax-free growth alongside RESPs, and consider the Canada Learning Bond (CLB) if you qualify.
• Choose target-date RESP portfolios (e.g., CIBC’s 2030–2045 series) that automatically shift from equities to bonds as enrollment nears.
• Involve children and extended family—grandparents’ contributions and teachable savings moments build financial literacy and boost balances.
• Leverage RESP flexibility: keep accounts open until age 36, swap beneficiaries, or transfer funds to RRSPs/RDSPs or apprenticeships when plans change.

Key Takeaway:

By starting early, maximizing grants, deploying dynamic target-date strategies and engaging your family, you can transform escalating tuition costs into a clear, manageable savings journey.

Source: Click Here for the Article.

Financial Solution Feature

In this section, we educate the reader on different financial solutions. We discuss and elaborate each idea over a couple monthly editions. This section is not to be taken as specific advice.

Harnessing Alternative Investments

Investing has long relied on a mix of equities for growth and bonds for capital preservation. Today’s market dynamics—higher equity volatility, low bond yields, and increased asset correlations—are stretching the limits of that classic 60/40 approach. By integrating alternative investments, clients can aim for more resilient, better-risk-adjusted portfolios across their lifecycles.

Why Alternative Investments Matter

• Traditional portfolios face challenges extracting excess returns as public markets shrink and concentrate.
• Alternative investments fall into three broad categories:
  • Alternative assets (commodities, real estate, infrastructure, currencies)
  • Alternative strategies (long/short, event-driven, market neutral, global macro)
  • Liquid alternatives (private credit, private equity, direct real estate)
• Incorporating alternatives can:
  • Improve diversification and lower overall portfolio volatility
  • Enhance downside protection when equities and bonds move in tandem
  • Capture an illiquidity premium over public-market equivalents
• Strategic and tactical asset-allocation models guide how and when to blend illiquid alternatives with traditional holdings based on objectives, time horizon, and risk tolerance.

Trade-Offs to Consider:

• Benefits
  • Return premium over public markets
  • Lower correlation to stocks and bonds
  • Less frequent valuations can smooth volatility
• Drawbacks
  • Longer lock-up periods and limited liquidity
  • Reduced transparency in pricing and operations
  • Potentially higher “esoteric” risks in niche strategies

Examples of How Canadians Could Apply Alternative Investments

Example:

• A 45-year-old in peak earning years may allocate up to 30% of their portfolio to private assets, maximizing illiquidity premium.
• By age 65, the focus shifts toward income and liquidity, reducing alternatives to around 20% to support scheduled withdrawals and cash needs.

Key Takeaway

Integrating alternative investments alongside equities, bonds, and cash can help clients build portfolios that are more durable in volatile markets. Tailoring the mix of illiquid and liquid strategies to each investor’s age, objectives, and risk tolerance enhances diversification, improves downside protection, and seeks better risk-adjusted returns over the long term.

Conclusion

Investors who strategically integrate alternative investments can build more resilient portfolios that adapt to market challenges and personal goals throughout their lifecycle.

• Alternatives can deliver diversification benefits, smoother returns, and a premium for illiquidity.
• Allocation to alternatives should be highest during the accumulation phase and dialed back as income and liquidity needs rise.
• A disciplined, diversified approach—across asset types, strategies, and managers—helps manage risk while aiming for stronger risk-adjusted returns.

What’s Next

Over the next three-monthly issues we will explore:

• Alternative Assets – diving into physical and private-market exposures
• Alternative Strategies – decoding long/short, event-driven, and other approaches
• Liquid Alternatives – examining semi-liquid vehicles like private credit and evergreen funds

Fun Idea

Riddle of the Month:

I’m invisible but powerful, I grow when you wait, I shrink when you rush, I’m your future’s best mate. What am I?

Answer: Compound interest

Riding the Highs, Weathering the Lows: Why Staying Invested Matters

Markets may be sitting near all-time highs, but history reminds us that September and October often bring seasonal volatility. It’s tempting to react when headlines turn jittery—but pulling out of the market during short-term dips can disrupt the long-term growth that compound interest delivers.

Compound interest thrives on time and consistency. It’s the quiet force that turns steady investing into real wealth, especially when you stay invested through both the highs and the hiccups. Missing just a few of the market’s best days—often clustered around its worst—can dramatically reduce your returns.

So, while the autumn winds may shake the markets, staying the course is still the smartest move. Let compounding do its work and let your strategy—not your emotions—lead the way.

To stay up to date on market events, news, and reports, follow Pharus Wealth Advisory Group on our Social Media Pages. For Financial Literacy and Planning, visit Pharus Resources, where we upload timely articles on Financial Planning and Financial Literacy Resources.

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Pharus Wealth Advisory Group

The Beacon to your Financial Journey

1623 Avenue Road, Toronto ON M5M 3X8

Phone: 416 861-2460

Email: mailbox.pharuswealth@cibc.com

Website: www.pharuswealth.ca