What a difference a few months make. Global markets are struggling with a variety of headwinds, and while Canada has benefited from strong commodity performance, the overall landscape has shifted. Most notably, the “Magnificent 7” leaders in the U.S. have lost momentum as last year’s AI tailwinds have turned into headwinds. We’re starting to see some AI “collateral damage” across industries as the technology rapidly evolves. Add in a shifting geopolitical landscape (with new surprises almost every week) and it’s easy to see why investors are more hesitant to take on risk.

 

Here are some of the key changes we’ve observed so far this year:

 

• AI Investment Reassessed: The surge in capital investment in AI infrastructure that powered markets in 2025 is now being questioned. Many of the largest tech companies are using most (or all) of their free cash flow for investment, rather than traditional buybacks and M&A.
• Business Model Disruption: New AI models are developing capabilities that put entire industries at risk. What started in software-as-a-service (SAAS) has spread to private credit, engineering, investment banking, data analytics, real estate, and more. While the long-term impact of AI is likely profound, the market’s reaction may be overdone—but only time will tell.
• Shift in Fund Flows: With AI uncertainty, rising geopolitical risk, and high valuations, we’ve seen a dramatic rotation out of Growth and into Low Volatility and Dividend indexes. This kind of shift has happened before, but the underlying damage this time suggests it could be more sustained. We’re also seeing increased flows into real assets and alternatives like gold—a sign that some investors are hedging against a potential end to the financial regime that’s driven performance for years.

 

Portfolio Construction is More Important than Ever

When all assets are rising, diversification can feel like a drag on performance compared to a concentrated portfolio. But when leadership changes and volatility returns, as we’re seeing now, the value of a well-constructed, diversified portfolio becomes clear.

Diversification is designed to help you weather periods of uncertainty and market rotation. It’s impossible for most investors to chase every trend or mimic the moves of institutional traders. The most reliable way to achieve your long-term goals is to maintain a portfolio with holdings that respond differently to changing market leadership, and to periodically rebalance between winners and laggards. This steady, disciplined approach won’t always feel exciting, but it’s what helps keep your financial plan on track through turbulent times.

Diversification may seem less exciting in bull markets, but it’s essential when the script flips. Staying committed to a long-term plan remains the best way to steady the ship and reach your goals.

 

**NEW** Understanding What You Own

Over the coming months, we want to provide everyone with a brief overview of our approach to building portfolios. At T.A.G., we believe it is essential to understand how your portfolios are constructed, and in today’s environment that holds true doubly so.

Portfolio Construction: An Art and a Science

 

Part 1: The Initial Building Blocks of Our Portfolios

 

The first step is to determine the optimal asset allocation to deliver the desired rate of return at a risk level appropriate for each client. Each asset class offers distinct sources of return, volatility, and relationships with other asset classes. Below is our perspective on each asset class represented in your portfolio pie charts:

 

Cash:
Cash carries low, or no risk and is used for immediate or short-term liquidity needs. At best, it keeps pace with inflation. Occasionally, we hold excess cash if we have sold an investment and are waiting to reinvest, or when we believe it is the safest option at the time.

 

Bonds:
Bonds are investments that generate current income with limited capital appreciation. They are designed to meet annual income requirements and support lifestyle needs. As a lower-risk asset, bonds can also serve as a source of capital to rebalance into riskier assets during market selloffs. Currently, bonds can deliver returns that are two to three times the inflation rate. Since interest income is highly taxed, we prefer to hold bonds in RRSPs or RRIFs to shelter this income.

 

Canadian Equity:
We focus on lower-risk, dividend-paying stocks to provide tax-efficient income and modest capital appreciation. The limited diversification in the Canadian market, combined with the tax advantage of Canadian dividends, has made this strategy effective, particularly on a risk-adjusted basis over the long term. Dividends are more tax efficient than interest, and the yields of many stocks are competitive with bonds. These stocks also offer the potential for capital appreciation.

 

Global Equity:
Global equity serves as the growth engine of the portfolio, with a focus on capital appreciation to offset inflation and increase wealth over time. Many global brands we use daily are included in this allocation. We invest worldwide and in sectors not available in Canada. This allocation generates capital gains, which is the most tax-efficient form of income.

 

Alternative Strategy:
Since 2022, bonds and stocks have been moving more closely together than in the past two decades. Alternative strategies provide an additional layer of diversification. As I like to say, these investments are designed to “zig when the others zag.” Returns are expected to be higher than bonds but lower than stocks, with risk somewhere in between. 

 

Rebalancing:
Rebalancing is the “secret sauce” of asset allocation. It is a disciplined process that requires selling the best-performing asset class and buying the worst-performing one. While this may seem counterintuitive, it is designed to mitigate the human emotions of fear and greed, and it has proven effective. Rebalancing also facilitates strategic allocation when new cash is deposited into the portfolio.

 

Coming Next Month: 

Part II: How We Invest in Each Asset Class

 

 

TAG Partners

Feature of the Month

Nick Sarjeant, CFA
Research Analyst - CIBC Wood Gundy

Nick holds the position of Investment Analyst for the Bay Adelaide Investment Committee where he is responsible for spearheading fundamental investment research and managing the quantitative equity and relative strength software systems that inform the branch’s strategic direction. Tasked with evaluating a broad spectrum of potential investment opportunities, Nick provides ongoing portfolio management advice, drawing on a disciplined analysis of fundamental, financial, and statistical trends.

 

As the principal architect of the branch’s discretionary investment portfolio reviews, Nick leads weekly meetings in which he scrutinizes market developments, assesses portfolio performance, and refines investment strategy. His commitment to delivering superior risk-adjusted returns is reflected in his methodical approach—immersing himself in market data, economic indicators, and industry research to ensure the branch’s portfolios are positioned for long-term success.

 

Nick’s academic credentials include a Bachelor of Commerce (Honours) from Queen’s University, with a specialization in finance, and the distinguished Chartered Financial Analyst (CFA) designation. 

 

Recognized for his analytical acumen and professional integrity, Nick plays a pivotal role in guiding the branch’s investment philosophy and maintaining disciplined portfolio oversight.

 

 

T.A.G. Team Spotlight

Maddie Tanzola
Associate Wealth Advisor

The Applegath Group believes that true partnerships go beyond numbers, it’s about understanding your story, supporting your dreams, and helping you navigate every chapter of life. Our team has grown and evolved with these values at the heart of everything we do, and we’re excited to introduce you to the dedicated professionals who make it all possible.
As part of our ongoing series of T.A.G. Talks, we’ll thrilled to reintroduce you to Maddie Tanzola. We hope these stories help you feel even more connected to the people behind The Applegath Group.

Maddie joined The Applegath Group after completing the CIBC Private Wealth Rotational Program, where she gained broad experience across National Office, Private Banking, and Wood Gundy.

 

She holds a Bachelor of Arts in Applied Economics and a Certificate in Business from Queen’s University and is currently pursuing her Chartered Investment Manager (CIM®) designation.

 

With a strong analytical foundation and creative spirit, Maddie is passionate about guiding young professionals and second and third generation clients as they chart their unique financial paths. She believes every investor’s journey is deeply personal and takes pride in empowering the next generation through education, encouragement, and tailored financial strategies. Her thoughtful, strategic approach helps emerging investors find clarity and confidence, turning what can feel overwhelming into a meaningful and manageable experience.

 

As part of our intergenerational practice, Maddie provides holistic support beyond investment management, including financial planning, budgeting tools, workplace benefits reviews, insurance guidance, home purchase advice, and financial literacy education. Whether working with young adults just starting out or families planning for the future, she is committed to helping clients build lasting financial wellness and peace of mind. Her genuine care and steady guidance make her a trusted partner for those ready to take the next step in their financial journey.

 

This passion for empowering the next generation extends beyond her work with clients. Maddie is a volunteer with Junior Achievement and also co-leads a Young Women’s Thought Leadership group, creating a space for women to connect, grow, and support one another early in their careers. 

 

 

T.A.G. Admin: Income Tax

 

By now, you will have received most of your 2025 income tax slips and/or summaries related to your CIBC Wood Gundy accounts.  Hang tight!  This is a general reminder to everyone that you must have ALL of your necessary tax slips before filing your 2025 income tax return.  Please be patient and ensure you have all your slips. Please note that some slips are not sent out until late March.  If you file too early, you may run the risk of needing to re-file with Revenue Canada and paying the associated penalties.  

If you still have pending slips by the first week of April, give Mara Draper a call and she can follow-up on your own personal situation.