Quarterly Strategic Review - 3rd Quarter (Jul-Sep, 2025)
Third Quarter 2025 – October, 2025 – Price vs. Narrative
Too many investors (even some of you) spend too much time and mental energy trying to make sense of the headlines and news events that we see happening (or are told are happening) and trying to draw conclusions about what it means for our investment portfolios, our retirement plans/projections and it frankly pulls on our emotional strings. This happens to EVERYONE. It’s not something to feel bad about, it’s just something to be aware of and it’s a bias that is hard to avoid.
It happens to professional investors too. Having had many conversations throughout the recent conferences I attended in both Malaysia and Dubai this fall, many are always looking to make sense of things (or prove the market is wrong). They say the market is too expensive, they say that Trump’s tariffs will ruin the economy, they say that a recession is surely looming, they say…….. (fill in the blank). In reality, these headlines may (or may not) have any impact, but markets are forward looking discount mechanisms. And I promise you (from experience) that even IF, we are correct in forecasting certain events, we cannot be necessarily correct in gauging what the markets will do in response. Like stocks that go up after poor earnings reports, or vice versa, money flows matter, demand and supply can be observed and the big money (the pensions, the sovereign wealth funds & the hedge funds) cannot hide their tracks. When they aggressively buy stocks, stocks rise in price and of course, the opposite too, happens. Our investment process can (and does) adapt to changing conditions and our charts light the way forward.
What If The Market Peaks? Or Did It Already?
I think this is a great time to discuss where we go from here. Have stocks gone up too far in the past three years? Bigger-picture, we live in a world where all governments are money-printing their way forward and inflating their otherwise unsustainable debts away. That means that loans and capital are created by the system and ultimately, it ends up in the system we live in. It creates inflationary pressures, raises the cost of all goods and that too, means the price of inflationary investment assets (think stocks, gold, Bitcoin and so forth). Our investment portfolios are hedges against the deteriorating purchasing power of our money that we work hard to earn and save.
Governments have three legitimate options: 1) cut spending and implement austerity measures (never popular), 2) raise taxes (Canada already has some of the highest taxes globally and you should see the expression others give me when I explain that I pay a 53.5% marginal tax rate living in Canada) or 3) inflate the money supply. For years, we have continued to go with door number 3 and I think we’ll continue to largely see more of the same. The downside is that the spread between those with assets and those without, will only grow, continuing to create social frustration amongst the young generation (our kids and (your) grandkids).
Last week, we saw the “biggest bar against” in the broad stock markets and that is “a top” in my playbook. Remember, as markets ebb and flow, they are regularly able to go up and then correct and they can correct (go down) either gently or harshly. April, 2025 would be an example of rather harshly. That said, I never know if “a top” becomes “the top” or conversely, whether “a bottom” becomes “the bottom”. Just like when we put on risk as I declared a bottom was made in mid-October, 2022 (there were no headlines or narratives that possibly could substantiate such claims at the time), we also (and always), take off risk at “a top” because we never know what can happen next and you should all know that I believe “anything can happen” and that belief feeds into our investment process.
In the event that the stock markets peak, what would we do to protect capital and preserve the gains we have made in recent years? Firstly, we reduce reduce exposure by eliminating (or reducing) our most volatile stocks/exposures, and we rotate, perhaps sectorally, or perhaps tactically into a variety of instruments that can be used to mitigate downside. There are an increasing number of active equity ETFs that do just that and I hope you understand that we’re never sitting around at the office twiddling our thumbs (ask Avery & Kieran if they agree) and are always preparing for the next big shift that lays ahead. You surely realize I don’t believe in finger crossing when markets start to fall and our technical models work to provide the ongoing #marketpulse to what is happening.
Am I worried about future calamity and/or the next bear market down the road? Nope! Never, because I know that just like a pilot, we have instruments at our disposal that help us to manage and adjust our risk to changing conditions and so it’s in your best interest to simply accept that you’ve hired us here at Financially INsync to navigate challenging conditions, so you don’t have to worry about them! Your job is to live your best life, day-by-day, surrounding yourselves with your families, friends and in pursuit of your passions & interests and hopefully touching others along the way, cause I believe that is what we can leave behind. As the most read book in the world says, “do not be anxious about tomorrow, for tomorrow will be anxious for itself. Sufficient for the day is its own trouble.” (Matthew 6:34).
Our Strategy & Our Allocation
AllINsync (also known as RJI237) had a very solid quarter, making that two quarters in a row posting strong returns. The flexibility inside of AllINsync affords all of us many advantages, some that you see and realize, others you most certainly do not. We are still in the very early innings since the launch of AllINsync and I must say that I’m proud of this significant milestone in 2025.
Balancing risk and reward (returns) isn’t easy, and anyone that has been investing for a long time knows full-well that markets go up and they come down (they tend to come down faster). We have the ability to steer the fund quickly and without hesitation in new directions as required. We are able to better focus our allocation, strategically, using position sizing to our advantage given how simple it is for me to add to a stock in our portfolio and/or trim one to make it smaller and less impactful.
At the risk of complicating this write-up unnecessarily, I will point out that our ability to use options as a way of introducing growth (where more significant gains are possible) to the portfolio is a gamer-changer. Early results are showing excellent promise. We are able to capitalize on the volatile areas of the market in a more measured way by buying call options and/or selling put options and have been doing just that. This allows for more patience in allowing volatile stocks to breathe and operate without so quickly having to cut losses (or take gains) given the time horizon of the options. It’s a fascinating world and I keep saying the same thing. We’re in the early innings of implementing these powerful tools inside of AllINsync to maximize the value they can offer us as investors. I’m reading several books, turning to other experts on the subject and doing all I can to fully take advantage of them. More to come!
Given the recent “biggest bar against” and knowing the magnitude of the recent rally, we raised cash as of late and while it’s misleading to state so simply that our cash position is ~29.1% (as I write this), but we also have ~13.5% that is required to “cover” the put options that we have written). This means our actual cash position is ~15.6% (29.1% - 13.5%). Translation: we have adjusted our risk exposure to be more cautious as volatility has increased in the past week. We are down to a small basket of our best ideas and convictions (stocks & ETFs) and have benefitted strongly from our position in gold & silver bullion (and the related precious metals equities) this past quarter.
Recent institutional surveys indicate that big investors (and my own studies have suggested retail investors too) have managed to miss having gold in their investment portfolios (much to their chagrin), as we have been exposed for several years. While we did trim our position recently, we are sitting with approximately ~13.6% gold/silver bullion and an additional ~2.5% in gold/precious metal mining stocks. In the short-term, my decision to take some profits in this area perhaps appears short-sighted, but I can’t attempt to manage the merit of our decision-making from day to day, or even week to week. We have to zoom out more than that. I ran this recent survey on X (formerly Twitter) and I thought you might be interested.
I consider all of those reasons to be biases that get in the way of our own results, and successes.
A Few Reminders & Closing Thoughts
I hope most of you have had the chance to correspond or speak with either (or both!) Kieran O’Donnell or Avery Kelly by this point, but needless to say, Financially INsync is heading into the fourth quarter in a position of strength. They’re (Kieran & Avery) both still busy working towards licensing requirements, but despite my travel schedule full of learning opportunities and speaking engagements, the technology used and deployed by Raymond James allows for a comfortable and practical way to handle necessary workflow and manage portfolios, no matter if I’m half way around the world or sitting at my desk in front of my screens.
I’m looking forward to seeing several of you in B.C. shortly (and sorry it’s such a short visit, which does limit all I can do)!. I’ll also mention that we’re having a full day strategic planning session for Financially INsync on October 23rd, 2025, held away from the office (we’ll be hunkered down in my apartment!). Avery has organized for some kind of crazy post-day exercise team-building challenge (I’m a little anxious about trying to keep up with these two young athletes in my old age!), but what’s good for the goose, is good for the gander!! Right?
I hope you find this review helpful in some way and your feedback, questions and/or comments are always welcome!
Sincerely,
David Cox, CFA, CMT, FMA, FCSI, BMath
Senior Portfolio Manager, Wealth Advisor
Raymond James Ltd.
Phone: 519.883.6031
Unit 1 – 595 Parkside Drive | Waterloo, ON | N2L 0C7
www.financiallyinsync.com
@DavidCoxRJ
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