Market volatility

The contrast between April and December 2025 was stark. After enduring some of the harshest daily drops since March 2020, investors witnessed a remarkable rebound over the following months. Navigating such extremes serves as a litmus test for any portfolio’s design.

To  assess whether an investor is being properly compensated  for the volatility they endure, we often look to the Sharpe Ratio. A ratio above or around 1.0 is usually considered to be adequate compensation for risk taken, while anything exceeding 2.0 is considered exemplary. 

By December 31, the one-year data revealed a significant divergence: 

• US-heavy portfolios experienced increased volatility that wasn’t adequately rewarded. 
• Canadian and international investors saw "above and beyond" results, with ratios of 2.4 and 1.6, respectively. 

The divergence in relative performance between US, Canadian and international markets underscores the strength and benefit of a globally diversified portfolio. 

Compass & Pools performance

2025 concluded with positive growth across all six Compass mandates. Although Q4 was the calendar year's lowest-performing quarter, our Canadian Equity allocation provided a substantial lift, advancing 3.6% between September and December.

The drivers of Q4 performance

Canadian equity

• Materials (+11.91%): Directly bolstered by record-breaking growth in gold and silver.
• Consumer Discretionary (+10.96%): Strong performance across the sector leading into the holiday spending season.
• Financials (+10.48%): Benefitted from a favourable interest rate environment.

Combined, these three sectors represent 45% of our Canadian Equity Pool exposure, ensuring our clients were well-positioned to participate in the underlying strength of the Canadian market.

US equity

US equities took a backseat to their international peers this quarter, as Information Technology and other growth-oriented names slowed down. 

International equity

ATBIS International Equity Pool was slightly positive over the quarter, driven largely by mixed performance across industrials and specific European financial stocks.

Q4 topic of interest: Real shine beats Artificial Intelligence

While 2025 was dominated by headlines of a digital revolution fueled by Artificial Intelligence (AI), "old-world" hard assets stole the spotlight. As investors raced to find the next tech breakthrough, gold and silver quietly delivered some of the most impressive returns of the year.

Gold and silver both rose over 140% over the year. Silver saw the majority of its growth toward year-end, climbing nearly 50% in the fourth quarter alone. A "perfect storm" of monetary, industrial, and geopolitical factors drove this rally:

1. Systematic de-dollarization & central bank buying
   Central banks, led by China, Poland, and Brazil, engaged in a massive shift away from US dollar reserves toward gold. By the end of 2025, the People's Bank of China reported its 14th consecutive month of purchases. This "official sector" demand created a solid price floor as sovereign institutions sought to insulate their economies from US fiscal deficits and the increased sensitivity surrounding the dollar's role in global trade.
2. Monetary policy & "debasement trades"
   The Federal Reserve's shift toward rate cuts in late 2025, combined with a resumption of asset purchases, contributed to a weakening of the US dollar. Investors favoured precious metals as a safe-haven play, treating gold and silver as a "value yardstick" in a climate where the dollar was increasingly out of favour.
3. Explosive industrial demand (silver-specific)
   While gold rose on monetary fears, silver outperformed gold due to its critical role in the green energy transition and the AI boom:
   
   • Solar PV: Solar installations reached record levels, making the sector the largest consumer of silver.
   • AI & data centres: The massive expansion of data centres required silver for high-performance computing hardware and power distribution.
   • Critical mineral status: The US officially designated silver as a "critical mineral" in late 2025, triggering strategic stockpiling by industrial users.
4. Severe supply deficits
   Both metals faced significant supply constraints, but the "Silver Squeeze" was particularly acute. 2025 marked the fifth year of a structural deficit for silver. Since 70% of silver is produced as a byproduct of mining other metals (like copper), production could not scale quickly enough to meet demand. This led to a physical shortage in major hubs like London and India, where silver began trading at massive premiums over spot prices.