Explore the 2025 economic landscape with David Wong, as he shares expert insights on building a resilient investment strategy amid volatility, tariffs, and inflation.
Market volatility isn’t new, but over the past year it has intensified due to tariff tensions, unpredictable interest rates, and persistent inflation, leaving investors to navigate contradictory and confusing economic signals. This raises a critical question for investors: how can you make wise decisions when news cycles outpace policy changes and traditional indicators seem unreliable?
In this episode of Smart Advice, host Carissa Lucreziano welcomes back David Wong, Chief Investment Officer and Head of Total Investment Solutions at CIBC Global Asset Management. With decades of experience guiding investors through economic storms, David brings clarity to a chaotic moment. He breaks down what’s really happening with Canadian and global markets, discusses the potential for recession amid tariff uncertainties, and highlights the evolving roles of fixed income, gold, and alternatives in a diversified portfolio. Additionally, David also explores the impact of artificial intelligence as a future growth driver and its potential implications for investment strategies. He emphasizes the importance of staying invested during turbulent times and offers insights into low-volatility equity strategies as a practical approach to managing risk.
This episode provides a strategic perspective on investing, offering practical insights on managing risk and refining your investment strategy amidst the noise of the headlines.
[02:41] David: “More than anything, the uncertainty surrounding where tariffs will ultimately settle is creating challenges on planning for investments from businesses and big ticket purchases from consumers.”
[09:07] Volatility and market reactions
[13:08] Investment allocation and diversification
[20:33] Risk management and investment approach
[21:06] David: “Reward and risk are related concepts, and you simply can't get reward without taking some level of risk.”
[26:07] Final thoughts and investment framework
[26:49] David: “The fear of missing out can be just as dangerous as overreacting to negative news. It's the Scylla and Charybdis of investing.”
David is responsible for CIBC Global Asset Management’s managed solutions investment process and portfolio management. His Total Investment Solutions team helps to determine the asset allocations and the construction of portfolios, researches, evaluates, and helps select the managers, and monitors the investments of the firm’s roughly $80 billion managed solutions programs. The team is also responsible for trading execution, beta management, and performance and risk oversight across all of CIBC Global Asset Management. In addition, David is a member of the CIBC Family Office’s Leadership Team and provides institutional asset allocation advice to ultra-high net worth individuals and families.
David joined CIBC Global Asset Management in July 2011, and served as Managing Director, Investment Management Research (IMR) until June 2021. David has more than 26 years of industry experience in New York and Toronto.
Connect with David Wong on his LinkedIn.
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Carissa: Welcome to Smart Advice, a podcast connecting you with timely financial advice, investment strategies and economic trends, empowering you with insights to make informed decisions about your money. I'm CIBC's financial advice expert, Carissa Lucreziano.
Whether you're mapping out your retirement, fine tuning your portfolio, or trying to ride out the latest market swings, today's episode is all about helping guide you towards the right investment strategies and opportunities while staying the course in an unpredictable market. Markets came out swinging in 2025 and volatility isn't taking a back seat. The month of April threw investors a curveball with a sharp drop and a lightning fast rebound, especially south of the border. Bonds have been feeling the heat too, as policy and global trade shock waves from the US continue to influence and affect the world around us.
So here's the real question: how can Canadians make smart investment decisions and stay on track even when markets swing with every headline? It's a timely topic, and the perfect moment to get some expert perspective. That's why I am thrilled to welcome today's guest, David Wong, Chief Investment Officer and Head of Total Investment Solutions at CIBC Global Asset Management. With decades of market wisdom, David is here to cut through the noise and focus on what really matters when it comes to growing and protecting your wealth. He brings great insights and experience to the conversation.
David, it's a pleasure to have you on this episode of Smart Advice.
David: Thanks very much, Carissa, and congratulations on three seasons of your podcast. It's really great to see.
Carissa: Thanksfor that. I know you were a very special guest on our first season. So thank you so much for being back.
So, let's kick it off. The investment landscape and Canadians and how to invest is a really big topic, so if we kick it off with the big picture, I know you're going to do an amazing job of distilling it for us. What's your take on the current economic landscape and how Canadian investors should be thinking about it? If you had to describe the Canadian economy in one word today, what would that be? I know that's hard, but what would it be?
David: Yeah, well, in a single word, unfortunately, I think the word for the Canadian economy these days is “challenged”. The current tariff situation has created meaningful challenges, looking out over the next several months now. Canada's two way, goods and services trade makes up two thirds of our economy, and the US is our main trading partner. It's just hard to make up for any disruption to this like we're seeing.
More than anything, the uncertainty surrounding where tariffs will ultimately settle is creating challenges on planning for investments from businesses and big ticket purchases from consumers. Things like housing are starting to slow down as a result of the uncertainty. So, all of the data that we typically view to be critical continues to be important, but it's almost like we're looking at it through a fun house mirror lens. There's lots of distortion in the numbers. The April headline inflation data in Canada was distorted by the elimination of the consumer carbon tax, for example.
And of course, there's a lot of potential for data to become outdated quickly, because everything can change with the latest update on tariffs. So, all of this is going to create challenges for the Bank of Canada as it tries to make sense of the data and what to do with interest rate policy.
It's a tightrope act, because so much of it depends on what's going to happen with tariffs. Now the Bank of Canada in its April monetary policy report, actually broke from its usual stance, which, usually they provide a base case on economic outlook. This time around, it's very telling. They were actually unable to do that, given the uncertainty in the economy due to tariffs. They instead provided two scenarios, one where most of the recent tariffs are negotiated away, and that's going to lead to some softness in the economy, certainly not a great outlook for the economy, but not a worst case scenario.
Then the other scenario they have where tariffs persist and a global trade war ensues, and that would create higher inflation and recession. So, the word challenged definitely describes the economy right now.
Carissa: Yeahabsolutely. It's like you said, it's hard to see through the fun house mirror. I like that analogy, and that's interesting on interest rates. So like, Canadians are thinking, if they drop or if they hold, and you mentioned inflation ticking up again in April. So, how should Canadians be thinking about their investment portfolio without getting caught up in all the noise? This is extremely hard to do, even for the savvy investor. Then I think the second piece here is, how will an interest rate move or increase inflation affect portfolio performance in the short term?
David: Yeah, thanks, Carissa. So you know, central banks are typically biased on the side of caution around inflation. Here in Canada, the Bank of Canada has a single mandate, which is singularly focused on keeping inflation within that 1-3% target. Clearly they're going to be more focused on the higher inflation that we're seeing in the core number.
In the US, they have more of a dual mandate. So they do balance inflation against unemployment. But even there, the expectation right now seems to be focused on the concerns for the potential for stubborn above target inflation. Of course, the fiscal situation in the US is really making it difficult for bond yields right now. We're seeing bond yields rise across the curve, regardless of how the administered rates are expected to change. That's going to further complicate the flow through of interest rates into the real economy.
Now, if we look at the Chicago Mercantile Exchanges FedWatch tool, which is widely available on the internet, you can take a look there and see the probabilities of rate cuts decline really quickly here. In the month of June, they've got a forecast for about 5% probability of rate cut, whereas a month ago, those odds were up near 60% and now the market really isn't predicting a rate cut until September and two cuts for the rest of the year in total. So in the US, when you look at the backdrop of a strong labour market, it really does give the Fed a reason to be patient in lowering its interest rates and taking a more data dependent approach as relates to the tariff impacts into the economy.
In Canada, there are signs that the economy is weakening. Unemployment is up to 6.9% now in Canada. Manufacturing job losses certainly in scope here with tariffs on the horizon, and at the same time, core inflation is concerning, right? We're starting to see it above the target range of the Bank of Canada. So the odds of a rate cut are getting lower and lower. At the same time the risks of recession, maybe not the base case yet, I would say, for many, but it remains a non-trivial probability. And of course, that could change the path for interest rates if we really do see a slowdown from this point on.
Economists are starting to shift their views on the potential recession as reality is setting in on tariffs. We're seeing exports decline. We're seeing uncertainty continuing around tariffs, which means business investment, housing, activity. All the big things that drive an economy are starting to slow down. So, recessions are also a bit more subjectively determined than simply, the old standby definition of two consecutive quarters of negative growth. In the US, the National Bureau of Economic Research declares recessions based on the depth, diffusion and duration of any downturn.
In Canada, the C.D. Howe Institute's Business Cycle Council is one of the trusted sources for information that similarly looks at a wider set of indicators. So, what's interesting is that recessions are often declared after they start, and they can often be finished by the time that the recessions are actually declared. While investors do have reasons to be concerned about the impacts of recessions on their portfolio returns, after all, in the past five Canadian recession, since 1974, we've had negative returns in the four most recent ones, and quite negative in some cases, but Canadian stock returns in all five of those recessions since 1970.
In the year after the recession, the Canadian stock market return has been very positive. The range of return in the market for a year after the recession is between 11.6 and 38%. All of those are above the long term average return for stocks. So after recessions, it tends to be really, really strong environments for the market. Given the subjectivity in declaring a recession that I just described, it's hard to actually try to time this in a portfolio by getting out of assets like stocks, because you need to get out before the recession is actually declared. Furthermore, you'd need to get back in the market before the recession is declared over in order to benefit from those strong returns that seem to follow a recession, at least historically.
We believe it is really important for investors to be prepared with diversification in their portfolios to reflect the range of outcomes that could happen but even more importantly, to not hit that panic button on their portfolios if they have a long investment horizon ahead of them.
Carissa: Yeah, and based on that lagging indicator of the recession, as you mentioned, do you think some of the volatility in the market is already baked in? Like, have we experienced some of that already?
David: I think so. I think we're starting to see a lot of the negativity in the market play out in April, but the concerns would be that you'd see a continuation of that simply for the simple fact that the market has overreacted and underreacted in both directions. It's been very dependent on the one factor that's really mattered so far this year in the market, which is the evolution of the US tariff policies. We saw recently the markets get roiled by the talk of the 50% tariffs on Europe and President Trump putting Apple in the crosshairs to bring manufacturing back to America.
Those over and under reactions which are reflected in the performance in the market want to believe that all of this will go away. So, anytime you get an olive branch that seems to try to bring things back to what the market wants, which is normalcy, you get a very sharp up move in the markets. But then Trump has very consistently gone back to making it hard for anyone to export in the US. I think that's been the consistent theme. On days like that, you see the sharp downturns in the market.
I think the story on tariffs is not over. As we get closer to the end of the 90-day reprieve from Liberation Day reciprocal tariffs, and you know more from the more recently initiated 90 day truce with China, I think we're going to start seeing volatility pick up again. It doesn't mean that the markets won't trend upward. I think it just means that the ride to get there might be a bit more uncomfortable than than would be ideal, but certainly we have witnessed a lot of volatility already, and so, there's some hope that we could see some some calmer waters ahead, with respect to kind of the biggest concerns around the volatility, would be on the inflation front, right?
We never did get the all clear on post COVID inflation, and now we're already wondering how transitory the inflationary impacts of tariffs will be or won't be. So inflation will continue to be something to keep a very, very close watch of as time passes here.
Carissa: Yeah, and I think it goes back to what you said around the two different scenarios, like the softness of the tariffs, as opposed to the persistence around global trade, like, how long, from a duration perspective, does that last? I know in your role, you are always connecting with Canadian investors across the country. What are the questions that are on their mind? What are they asking you?
David: Yeah,that's a great question. Speaking with everyday investors is actually probably the most fun I have in my job. The main question that we've been getting these days is, how should investors prepare for volatility and whether they should make wholesale changes to their portfolios? As you know, we're big believers in investing for the long term, especially if you have a long investment horizon measured in decades. So, if you're invested in a plan that's designed to meet the outcomes that you need for retirement, I think it's never a great idea to make major changes unless something is truly broken in the portfolio. But we also understand that investors might want to find strategies that you know could benefit from the volatility and also give them comfort in the face of the uncertainty that we're facing.
Low volatility equity strategies have worked quite well in 2025 so far. We've made some allocation into these strategies at the margins in our own portfolios. I think they can also make strategic sense for clients as well. It's been a way for us to be able to address concerns in the current investing climate. At the same time, these could be long-term holds, because they historically provided lower volatility returns, but also equity-like returns over the long term. This is something that can address concerns while also addressing the long term need to stay invested.
More than anything, investors are asking for guidance on how to think about risk right now, and have been consistent in the message of not trying to time things. So it's nice to know if needed, there are things at the margin that can help investors stay invested and be responsive to the uncertainty.
Carissa: Yeah,and on that, investors have a lot of questions like, should they be thinking more along the lines of tilting to the US, staying overweight in Canada? As Canadian investors, we usually have a Canadian bias and then, not to mention the thought of, should there be more international exposure in a portfolio? Like, where should investors be leaning in, in an environment where there's so much noise about how to maybe not change their portfolio, but for future growth? The allocation, if you will.
David: Yeah, so, the big question we have for ourselves these days is around that US equity exposure. For many investors, that might be a little bit more home biased, focused. I think having some US exposure is probably not a bad thing. Certainly, recent history has proven that to be true. But for many, maybe, they might be a little overexposed to the US market. The US exceptionalism has been a theme in the market now for several decades, and so it's tempting to want to fade that exposure, given the current uncertainty from the US administration.
The counter argument would be to think about all the advancements that have taken place in artificial intelligence and the impact of that really hitting the economy through total factor productivity. Eventually, that's going to find its way into the economy. It hasn't necessarily done so yet, but eventually it will, and will likely mean positive things. It'd be a tailwind for the markets, tailwind for individual companies. We're very early days in this. I think most of us that have experienced this, which I think is most of us at this point that have experienced, is interacting with a chatbot kind of knows the power that they can harness with artificial intelligence.
But when you look at companies, there's a study by McKinsey that showed that 90% of the firms they survey, they've adopted AI to some degree, but only 1% of those companies say it's mature in its use inside the company. Firms like Goldman Sachs in their forecast are looking at AI to have a bigger impact 10 years out, but they certainly don't see any impact to GDP before 2027. The potential is really there, even if the exact magnitude remains to be seen. It's not just going to be an NVIDIA story or a hyperscaler story. I think we're starting to see potential for it to really help financial firms in things like fraud detection, pharmaceutical companies with faster drug discovery.
All of these things are on the horizon. So for investors that might be home country biased to get some non-domestic exposure in the portfolio, is going to round out the portfolio. Then when you think about all of the things that have been in the portfolio the last couple of years, the other side of that equation would be being too over indexed to certain parts of this portfolio. Say you were overly exposed to growth stocks as one example, right? There's the potential that you've let your portfolio get out of balance.
Investors should lean in on diversification, invest across countries, sectors, companies, styles, taking a multi asset perspective across traditional assets and alternative assets if you have access to the right advice.
Carissa: On that David, investments like gold, fixed income, alternatives that may be overlooked. How do Canadians get access to these types of investments in their portfolios, and how can they benefit the balance of a diversified portfolio?
David: Yeah, so gold, fixed income and alternatives are all investments that can be defensive in periods of volatility. While we were— we're definitely in a period where the ingredients for persistent volatility are present. That doesn't mean markets won't be up for the year. So, we need to keep a sense of balance with respect to how to incorporate assets that specifically cater to the concerns of the moment.
Now that said, these are durable assets as well, potentially for portfolio inclusion. Thinking about fixed income, they've been volatile this year. The trend on yields has been up of late, but bonds overall are still holding onto a small positive return year to date in Canada. The question is, can we get negative returns from bonds this year based on the yield and duration profile on the main bond index in Canada? If yields across the curve move up by 50 basis points, then we could see some negative returns on the main index over the next year.
Keep in mind, your starting yield is very much related to your returns in bonds over 10 year time frames. If you plan on being a long term holder, then bond yields are attractive relative to what we've seen for a very long time. We touched a low on the 10-year yield in Canada at about 52 basis points back in July of 2020. Today, we're well into the 3% rate for yield, and that's a good thing for long term returns. However, if you do have a shorter term timeframe, this might not be appropriate for an investor, and so maybe something shorter term, like GIC might be a better option for that kind of investor.
Gold has proven to be a solid performer over the past couple of years, as concerns around inflation and uncertainty have risen. But it's not a financially productive asset, and it can be prone to bouts of volatility. The standard deviation of gold is on par with that of stocks. It's around 15% volatility, which is far more volatile than bonds as a defensive asset class. Unlike financially productive assets that generate cash flow lending to governments and companies in the case of bonds, or tied to taxes or earnings, all of those things are tied to cash flow.
When your investment goes down in a bond, as an example, you've got faith that there's something that is cash flowing associated with the investments. In the case of gold, when it starts going down, you have to have the faith that others will see the value of that asset again. It's not like a bond that has a par value that gets paid at maturity. There is no gravitational force that cash flow can provide, and so you're exposed to the forces of human psychology.
Again, for long run investors, equities have outperformed gold over the last 30 years. Gold is up about from $383 to over $3,300 and so the average person that looks like a really, really big gain, but when you break it down into percentage terms, on an annualized basis, that's about a 7% return, which, of course, is very good for a something that doesn't generate cash flow, but it is lower than the 10% or so returns from US stocks over that time frame. Even Canadian stocks are up about 9% over that period as well.
So, anyone with broad Canadian stock exposure, I ask about access. Anybody that's broadly invested in Canadian equities probably has access to gold stocks already. Gold is a pretty major part, or gold producers at least, are a major part of the Canadian stock index is at about 8% weight in our stock index. And then alternative investments, these are increasingly available to individual investors. There's hedge funds under what's called the liquid alternative regulation in Canada that makes them available to virtually all investors. Then private strategies, private equity, private credit, private infrastructure and private real estate. Those are typically available for accredited investors, but they're also increasingly being incorporated into multi asset mutual funds, taking advantage of the ability for a mutual fund in Canada to get up to 10% in exposure in things that are less liquid.
This has been something we've seen a lot more of in portfolios for all investors, and that's something that does require a long term mindset, but they have been proven to be fairly resilient in the volatile environment that we've had so far this year.
Carissa: That's a really good perspective, thank you. As CIO you and your team manage research, investment selection, portfolio construction, trading and risk monitoring, to name a few, for over $174 billion of assets under management, how has your approach to risk evolved over the past few years, given market volatility, macroeconomic shifts and everything we talked about, along with technological advancement, and as you evaluate large investment decisions today, what's top of mind for you and your team at CIBC Asset Management?
David: Well,reward and risk are related concepts, and you simply can't get reward without taking some level of risk. When we think back to the biggest risks in recent periods, we got through the COVID era with strength in markets since the start of 2020, to the end of April of 2025, the Canadian market's up 71% cumulatively, and the US market's up almost 100% cumulatively, despite a pandemic, inflation scares and now tariff concerns. That's something to really think about when you try to dissect the risks that are out there.
Now we tend to think about the worst things that have happened or might happen. But over the past five years, we've also seen some great advances, things like artificial intelligence and, advantages in medical science, the weight loss drugs, the GLP-1s that we've seen out there, all of these things have been very additive to stock market returns overall. It's far too easy to give up on risk when you start seeing the negative headlines, but by taking on a broad variety of exposures that serve a purpose, investors can be best served around the uncertainty that we're seeing.
Now, people often confuse standard deviation as being the definition of risk, and I would argue that it's just an outcome of risk. It's like saying that a cough is the cold, the cough is the outcome of the cold virus. You could get a cough without the virus. You could just have an itchy throat, for example, right? So some volatility might not be tied to any real “illness” in the market, but it tends to get lumped in with it all the same. If you think about when cash flowing investments get marked down simply because the market is selling off, cash keeps flowing becomes a pretty self correcting problem over time.
The key really is to study the fundamentals rather than just the outcomes, for a better understanding of risk. So study the virus and not the cough in the markets. To that end, our approach to risk really hasn't changed all that much. We continue to seek out fundamental diversification. We're always trying to find new ways to get more efficiency in our portfolios, and our Managed Solutions approach has a portfolio construction approach that looks at the total portfolio.
Individual asset class risks are viewed in relation to the interplay of the risks across the portfolio. Our portfolio construction framework is really built around purpose, structure and fulfillment. Purpose being the risk attributes, the reward attributes, the interplay of asset attributes and our conviction. Structure being our ability to find the tilts that we believe best positioned portfolios and fulfillment being our ability to identify great managers and strategies that can help deliver on outcomes.
Carissa: Yeah,and just before we leave this topic, because it's a lot of work that your team does around managing it, and as you've just articulated, like the fundamentals are the same. But do you find there's more pressure in this environment to balance short-term performance with longer term strategic positioning?
David:Yeah, there definitely is the need to take a balanced approach, and certainly your outcome and your timeframe for that outcome is critical when thinking about the types of investments that you can have in a portfolio. The adage of stocks for growth and bonds for diversification are proven to be effective if you have a long enough timeframe, and the current setup should not lead to any different conclusions for investors. Ultimately, earnings growth is what brings the returns for equities over the long run.
Over the last 60 years, the earnings growth profile of the S&P 500, it's been around 7% and so too has the price return of the S&P 500, it's also been around 7% so it lines up over the long term, as we should expect. Similarly for bond yields, if you think about bond yields over the long run, the returns of bonds very closely match up with the starting yield. All of this doesn't mean there won't be bumps along the way, and today's uncertainty is all part of the deal.
If one has retirement goals, which is a long time frame type of goal, one needs to get comfortable with the idea of trading off risk in the standard deviation sense for award in the form of investment returns. The shift in how people should be thinking of investing is in how they should think about the news and whether it impacts their portfolios with the time frame they actually have. I think April was a great reminder of why making reactive changes to portfolios is so dangerous.
The S&P 500 started April at a level of 5600 and it ended at close to 5600. But during the peak pessimism that hit on April 8, the level got below 5000 and so investors that were tempted to bail on the market because of risk at that time, if they did that, they would have missed out on 11% return for the rest of the month. If you can build in diversification and have a fundamental trust in the assets you hold and the return potential in them, you can sleep better at night, even if the short term use is negative. All of these things, I would say, would hopefully frame up how to think about things in the short term and the long term.
Carissa: Well said, and it really is to your point, it's what is your time horizon. What are your goals? Is there a short term goal? Longer term goal? Something like retirement? You want to assess all of that, so, thanks. Before we wrap up, it's been extremely insightful, a lot of great insights that you're that you've shared with us today.
David, I'd love to ask in everything that we've covered today, what is the one message you'd want Canadians to walk away with as they think about balancing the opportunity with long term planning.
David: Yeah, the one messagethat I'd want us to walk away with today is: have a framework for investing that considers the outcome you need and then put together a portfolio of assets that are purposeful, well structured, with managers that help you get invested and stay invested. Make sure you contextualize all the news flow that's coming up, especially the scariest headlines that we're seeing. Balance all that against what you're trying to achieve. The fear of missing out can be just as dangerous as overreacting to negative news. It's the Scylla and Charybdis of investing, it's the siren song of investing that can lead to the proverbial shipwreck. So stay diversified and disciplined in your investment approach and focus on the knowledge that earnings growth and bond yields are what drive returns over the long run.
Carissa: Yeah. Thank you, David and great tips and great insights. Thank you so much for joining us and sharing such thoughtful perspective with us today.
David: My pleasure. Thank you so much.
Carissa: And that's a wrap on today's episode. Financial markets will always have their ups and downs, but with the right insights and advice, you can stay focused, be confident in your plan, and stay the course.
Big picture thinking, discipline strategy and expert guidance, whether you're planning for tomorrow or building for the long term, CIBC can help you make decisions that align with your goals and keep you moving forward. Thanks for joining us for this episode of Smart Advice. I'm Carissa Lucreziano. If you enjoyed this episode, feel free to share it with your social network. To make sure you never miss an episode, follow Smart Advice on your favorite podcast platform. For more tips, tools and financial advice, visit cibc.com/smartadvice.