Global equity markets have remained remarkably resilient despite rapidly rising interest rates, elevated energy costs, and ongoing geopolitical uncertainty. Much of that resilience has been driven by confidence in the AI theme and the expectation of significant future growth tied to AI-related infrastructure and computing demand.

At the same time, beneath the surface, market leadership has been narrow and volatility has been more pronounced than headline index performance suggests. As we move into earnings season, four themes help explain current market behaviour: Concentration, Crowding, Leverage, and Valuation.

Concentration

One of the defining features of today’s market is how much performance has been driven by a relatively small group of companies tied to the AI theme.

If you add up the AI and AI-related names, close to 50% of the market capitalization of the S&P 500 is tied to this trend. Since 2024, more than 65% of the S&P 500 return has come from this narrow group of companies. The rush to fund the infrastructure needed to support future AI-related computing demand has created a tremendous economic tailwind, with the effects being felt across both equity and bond markets.

This concentration matters because overall index resilience can mask greater fragility underneath. It also means that any shift in the AI thesis, whether due to earnings, policy, funding conditions, or changing expectations, could have a meaningful effect on overall market direction.

Crowding

The U.S. market is not only concentrated, but also crowded, with many investors owning the same stocks and expressing similar views.

This dynamic can work well while momentum remains positive, but it can also create instability when sentiment changes. While market volatility appears subdued at the index level, swings underneath the surface have been much more pronounced. The semiconductor space has been at the centre of much of this activity. After peaking in late June following a massive rally, the sector experienced two large selloffs and two modest rallies. At the same time, much of the rest of the market has gone through a repricing, with many companies moving into correction territory.

Leverage

The scale of financing behind the AI buildout has also been significant. While the investment required to support future computing demand has been a major growth tailwind, the financing behind that expansion has also been enormous.

This matters because leverage can amplify market movements in both directions. In strong markets, it can help fuel momentum and support asset prices. But when conditions change, whether through higher rates, earnings disappointments, or weaker sentiment, leverage can magnify the downside just as quickly.

History suggests that when concentration, crowding, and leverage exist together, markets become more sensitive to surprises.

Valuation

The final theme is valuation. Longer-term U.S. equity valuations remain historically high, even as interest rates have risen meaningfully. That makes the market environment more demanding, because expectations are elevated and assets must continue to justify premium pricing.

At the same time, bonds are beginning to offer more compelling competition. The bond market has continued to struggle under the weight of rising rates, but the flip side is that U.S. Treasury yields are now the highest they have been in decades. One could argue that the yield on a 10-year Treasury is at or near the S&P 500 earnings yield, offering a more attractive risk/return trade-off than investors have seen for some time.

If one believes in efficient markets, then the poor performance of bonds over the past ten years may now present a more attractive entry point for the next ten.

Canada: Rates, Sector Pressure, and Cash Flow Discipline

September was a difficult month for Canadian equities. Information Technology was almost the only sector that delivered positive performance. Rising interest rates put pressure on already oversold telecoms, as well as utilities and real estate. Lower gold prices also weighed on materials, the second-largest sector after financials, while financials were down slightly.

In this environment, we remain committed to lower-volatility, dividend-paying stocks, as we believe cash flow will matter even more going forward. In a market increasingly shaped by higher rates and greater selectivity, businesses with resilient cash generation may be better positioned.

Staying Disciplined Through Earnings Season

Maintaining discipline during periods like this remains essential. Good portfolio construction, together with thoughtful risk management, can help smooth volatility and protect capital if conditions shift suddenly.

We have been pleased with how portfolios have performed over the past couple of months, but we remain diligent in monitoring both the risks and the opportunities emerging as earnings season progresses.

As earnings season approaches, markets remain supported by optimism around AI and economic resilience, but they are also increasingly shaped by narrow leadership, crowded positioning, leverage, and elevated valuations. For investors, this is a time to stay disciplined, remain diversified, and focus on portfolio construction that can withstand a wider range of outcomes.

Our Thankful Journal

I’m thankful to live in Canada, a country where the rule of law is respected and people’s rights and freedom are valued. I’m also grateful for my family and their health so that we can continue to enjoy the special moments and laughs together. Last, but certainly not least I’m thankful for our TAG team and the dedication and positive attitude they bring to work every day. Thanksgiving is a reminder to take a moment to appreciate the people and freedoms we take for granted. Stuart

As Thanksgiving approaches, I’ve been reflecting on how important it is to appreciate not only the big things we’re grateful for, but also the smaller moments in everyday life. This year, I’ve been especially thankful for the warmer autumn weather, which has made the season feel less fleeting than it often does in Toronto. Since my son Warren started kindergarten, we’ve spent many evenings at his school playground, walking whenever we can to pick up groceries and household essentials, and enjoying fall traditions like apple picking and visiting Springridge Farm, a multi-generational family favourite. Carter

One of the things I love most about living in Canada is having the opportunity to experience all four distinct seasons. Each one brings something different, not just in the landscape, but in the way we spend time with the people around us. Some of my favourite memories are tied to simple traditions like summer weekends on the lake, fall hikes, holiday time with family, and that first stretch of spring when the city starts to feel alive again and patio season begins. I also love how much there is to explore here in Ontario, and how even a short weekend getaway can feel special. Maddie

I am thankful to live in southern Ontario in Canada, as we have moderate weather, plenty of water, arable land, political stability, and an open society. Tom

This Thanksgiving, I’m thankful to call Canada home, where we feel safe and our kids, Mackenzie and William, have access to a great education and the opportunity to make lifelong friends. Most of all, I’m thankful to be part of such an amazing community where people look out for one another. Sometimes it’s easy to take these things for granted, but they’re truly what make a place feel like home. Matt

I am grateful and feel very fortunate to call Canada home for many reasons but here are some that come quickly to mind - Our national anthem – “True North Strong and Free” – whenever I sing these words I tear up and my pride of being Canadian fills my heart. Our beautiful country from coast to coast – from the BC Islands to the Halifax shores we have some of the most spectacular landscapes in the world. The change of seasons – I love the spring when my garden comes alive after a long cold winter and watch the snowdrops and croceus and start popping their heads out of the ground. Our Canadian Way – We Canadians have a global reputation for warmth, politeness, and being quick to help. When I meet a newcomer from other countries who are so happy to be here in Canada, it reminds me how fortunate I am to be a Canadian. Lisa

I’m especially grateful to call Canada home. Our country has earned a reputation around the world for kindness, courtesy and politeness, values that are worth celebrating and preserving. I hope we never underestimate the power of these simple gestures and the beautiful impressions they leave on the world. Throw in a few good Michelin restaurants and we’ve got it made. Susy

This year, I’m feeling especially grateful to be Canadian. We’re fortunate to have access to such an incredible variety of parks, lakes, beaches, and wildlife. This year, I had the chance to explore a new area with a group of girlfriends—Essex, Ontario—where we spent a weekend at a beautiful spa and beach retreat along Lake Erie. Experiences like these are a wonderful reminder that there are always new places to discover and local businesses to support. Mara

 

T.A.G. Feature: Carter Whitehead

Carter is a seasoned wealth management professional known for his thoughtful, relationship-driven approach and deep commitment to helping clients navigate complexity with confidence. With more than 15 years of experience in wealth management and strategic leadership, he combines strong industry expertise with a highly personalized style, grounded in trust, insight, and long-term partnership.

Throughout his career, Carter has built a reputation for understanding what matters most to clients and delivering advice tailored to their unique goals and circumstances. He believes wealth management is about more than strategy alone, it is about listening carefully, building meaningful relationships, and helping clients make informed decisions through both opportunities and challenges.

Carter’s professional background includes roles at CIBC Wood Gundy and Deloitte, where he worked with several Canadian financial institutions. Early in his career, his expertise was recognized by senior leaders at CIBC Wood Gundy, leading to an opportunity to join CIBC’s head office team. There, he spent four years supporting strategic growth initiatives across CIBC Wood Gundy, CIBC Trust, and Private Banking, while also contributing to the advancement of a high-net-worth asset management platform.

He is especially energized by the dynamic nature of his work and the opportunity to develop genuine, lasting relationships with clients. His approach is rooted in listening, learning, and collaborating, with a focus on providing thoughtful guidance and practical support. Whether working directly with clients or drawing on a trusted network of partners, Carter is motivated by the opportunity to make a meaningful difference and to find creative solutions in a wide range of situations.

Carter holds a Bachelor of Commerce from Queen’s School of Business and an MBA from the Richard Ivey School of Business, where he served as Class President and was named Valedictorian.

Outside of work, Carter enjoys life in Toronto with his wife, Katie, and their son, Warren. He is a proud supporter of Katie’s business, Hot Smart Rich, and together they are active volunteers in the Bedford Park community. In his personal time, he enjoys home improvement projects, exploring Toronto’s neighbourhoods, playing squash, water skiing, and staying current on news and cultural developments in Canada and around the world.