Economies worldwide were on an uncertain path during the third quarter of 2025. In the United States, consumer spending remains resilient, especially among higher income households. Large corporate investments, most notably in artificial intelligence and its supporting supply chain, stimulate overall growth. At the same time, a deteriorating labour market, and tariffs and trade disruptions are weighing on the outlook. These themes are also present in the Eurozone, China, and in Canada.
Central banks shifted their focus towards labour market risks. Both the Federal Reserve and the Bank of Canada cut their overnight rates by 0.25% in September, signaling a tilt toward supporting growth and employment.
Canada’s second-quarter GDP contracted on the back of a sharp decline in exports. China faces growing youth unemployment and, like Canada, is also buffeted by the trade war.
Business activity accelerated from a low level in the Eurozone but is expected to remain weak heading into 2026.
The steepening of the Canadian yield curve seen during the second quarter continued in the third, amid future inflation concerns and elevated government debt issuance, but also in the context of a near term weak economy and poor labour market.
Interest rates thus moved lower across maturities under 17 years but turned slightly upward beyond that point. The FTSE Canada Universe Bond Index advanced 1.5%, with its yield to maturity declining to 3.4%, while the TSX Preferred Share Index gained 4.3%.
The benchmark’s equity indices all had strong returns: S&P/TSX Composite Index (12.5%), S&P 500 Index (10.2%), and MSCI EAFE (6.8%). It was a risk-on market with the beta style factor dominating and the resources and growth-oriented sectors outperforming: Energy, Materials, and Information Technology.
The Triasima Balanced Income Fund had a 4.1% return this quarter, versus 7.2% for its benchmark.
The underperformance can be entirely ascribed to Canadian equity security selection. The Canadian market had a large risk-on rally favoring cyclical and growth industries while the dividend style factor, always very overweight in the Fund, was totally out of favor.
Amid buoyant equity markets and a relatively calm fixed income environment, the Fund’s fixed income allocation declined from 36.6% to 34.2%, moving further below the benchmark’s 40%. Concurrently, the equity allocation rose from 63.4% to 65.8%.
Within equities, positions in defensive companies were reduced and replaced by others, usually more cyclical or growth oriented. Attractive securities were also added to the Health Care sector. Canadian equities became underweighted, while non-Canadian ones moved up to large overweight.
Bonds duration slightly drifted downwards to 7.1 years, keeping it in line with the benchmark. The Fund’s current income yield stands at 2.6%.
On the quantitative side, the equities held by the Fund have better risk metrics than the equity benchmark. Profitability, Expectations, and Revenue and Earnings Growth are also higher. Valuation metrics indicate the Fund is more expensive.
Overall, interest rates were largely unchanged in Canada in the quarter. On the equity side, all three equity indices included in the benchmark had strong upward trends.
The fundamental background improved somewhat for equities. American tariffs have so far proved less destructive than feared, while interest rates are stable and earnings growing.
The posted rate of return is a historical total rate of return compounded annually, except for periods of less than one year, which are not annualized. The rate of return shown takes into account fluctuations in unitholder value and the reinvestment of distributions. The posted rate of return does not take into account investment management fees and income taxes payable by the unitholder, which would have the effect of reducing the return. The Funds are not guaranteed, their value fluctuates, and past performance is not indicative of future results.
The benchmark for the Triasima Balanced Income Fund is composed of the following indexes: 5% FTSE Canada 91 Day T-Bill, 30% FTSE Canada Universe Bond, 5% S&P/TSX Preferred, 35% S&P/TSX Composite, 15% S&P 500 Net (CAD) AND 10% MSCI EAFE Net (CAD).
Data on the FTSE Canada 91 Day T-Bill, FTSE Canada Short Term Bond and FTSE Canada Universal Bond reference indices are provided by FTSE Global Debt Capital Markets Inc. (“FTSE”). Data on the S&P/TSX Income Trust, S&P/TSX Preferred Share, S&P/TSX SmallCap, and S&P/TSX Composite reference indices are provided by TSX Inc. (“TSX”). Data on the S&P 500® Index are provided by Standard & Poor’s Financial Services LLC (“S&P”). Data on the MSCI EAFE, All Country World, and World reference indices are provided by Morgan Stanley Capital International Inc. (“MSCI”). Lastly, the classification of securities according to the Global Industry Classification Standards (“GICS”) is provided jointly by MSCI and S&P. (FTSE, TSX, S&P, and MSCI are hereafter collectively referred to as “indices and data providers”.)
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