Northern Trust Pension Universe Data: Canadian Pension Plan Returns Advanced for Q2 as Equity Markets Rebounded from Tariff Shock Waves

National Post

2 days ago

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TORONTO — Canadian pension plans marked a positive finish to the first half of 2025, according to the Northern Trust Canada Universe. The median Canadian Pension Plan returned 0.6% for the second quarter and 1.8% year-to-date for the period ending June 30, 2025.
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The second quarter saw conflict in the Middle East and many similarities to the first three months of the year, including tariff friction, geopolitical tension, and their cascading impact on global growth. One factor that remained consistent throughout this period was the unpredictability surrounding tariffs and trade. The U.S. administration threatened historic tariffs only to pull them back at times to stimulate trade negotiations.
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This constant push and pull exercise coincided with significant declines and rallies across financial markets, underscoring the heightened points of volatility observed during the quarter. Central Bank policymakers watched for punitive impacts from tariffs but continued to focus on underlying data points, namely inflation and employment, to guide their decisions. As a result, both the Bank of Canada (BoC) and the U.S. Federal Reserve (Fed) maintained their benchmark policy rate and range, respectively, throughout the quarter.
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'Beneath the mounting tensions and waves of volatility witnessed year to date, pension plan investments have performed reasonably well, contributing to the healthy rise in plan assets this year. This positive performance serves as a cushion providing further support to long term plan sustainability as plan sponsors navigate through uncertain times,' said Jeff Alexander, President and CEO of Northern Trust Canada.
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The Northern Trust Canada universe tracks the performance of Canadian institutional defined benefit plans that subscribe to performance measurement services as part of Northern Trust's asset service offerings.
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Amid significant market swings during Q2, equities produced attractive returns while Canadian bonds were impacted by the rise in yields, causing a modest decline as witnessed by the Canadian bond universe. A noteworthy move occurred in the currency market, with the Canadian dollar appreciating over 5% relative to the U.S. dollar, concluding the period at 73.48 cents USD.
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Canadian Equities, as measured by the S&P/TSX Composite Index, advanced 8.5% for the quarter. All sectors posted positive returns, with the Information Technology and Consumer Discretionary sectors generating the strongest results, while the Energy sector posted the weakest performance.
U.S. Equities, as measured by the S&P 500 Index, rose 5.2% in CAD for the quarter. The Information Technology and Communication Services sectors led the way with positive double-digit returns. Meanwhile both the Energy and Health Care sectors experienced double- digit declines for the period.
International developed markets, as measured by the MSCI EAFE Index, gained 6.2% in CAD for the quarter. The Communication Services sector was the top performing segment, while Energy and Health Care sectors were the only two sectors generating negative returns for the period.
The MSCI Emerging Markets Index generated 6.4% in CAD for the quarter. The Information Technology and Industrial sectors were the best performers, while the Consumer Discretionary sector was the only segment generating a negative return over the period.
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The Canadian economy continued to face headwinds from tariff and trade uncertainty. Despite some signs of an economic slowdown, pockets of resilience remained. Wage growth was above inflation, personal savings rates remained healthy, and banks have controlled credit losses and built reserves to absorb economic volatility. The unemployment rate nudged up to 6.9% in June from the 6.7% posting in March. The Bank of Canada (BoC) maintained its overnight rate at 2.75% at its June meeting. The BoC cited continued uncertainty around tariffs, a 'softer but not sharply weaker' economy and firmness in recent inflation data as reasons to hold the lending rate at its current level while it continues to assess the timing and strength of downward pressures from a weak economy and upward pressures from rising costs.
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The Canadian Fixed Income market, as measured by the FTSE Canada Universe Bond Index, posted -0.6% for the quarter. Corporate bonds generated a positive return while both Federal and Provincial bonds declined during the period. Short-term bonds witnessed a modest gain while mid- and long-term durations generated negative returns for the quarter.
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The U.S. economy held up steady in the face of tariff pressures, trade tensions and a weakening dollar. The annual inflation rate climbed to 2.7% in June from 2.4% in May, representing its highest level since February. The unemployment rate dropped to 4.1%, its lowest reading since February and down from the 4.2% posted in March. The Federal Reserve (Fed) maintained its fed funds rate at a target range of 4.25% to 4.50%, a level it has held since December.
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International markets generated healthy returns for the second quarter. The European Central Bank (ECB) cut rates for the eighth time this cycle, taking the deposit facility rate to 2%. Meanwhile, the Bank of England (BoE) maintained its rate at 4.25% at its June meeting, with inflation remaining above the Bank's target. The Bank of Japan (BoJ) also held its benchmark rate steady at 0.5% in June and announced its plans to slow government bond purchases from April 2026.
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Emerging markets witnessed solid returns for the quarter. At its June meeting, the People's Bank of China (PBoC), held its one-year loan prime rate (LPR) and its five-year LPR steady at 3.0% and 3.5% respectively, based on data suggesting the country remains on track to meet its GDP growth target despite U.S. tariff pressures. The Central Bank of Brazil raised its key Selic rate by 25 basis points to 15.0%, citing sticky inflation and uncertainty driven by U.S. trade policies and volatile global markets. The Reserve Bank of India (RBI) chose to cut interest rates by 50 basis points in June driven by easing inflation and uncertainty surrounding global trade tensions.
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About Northern Trust
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Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking services to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 24 U.S. states and Washington, D.C., and across 22 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of June 30, 2025, Northern Trust had assets under custody/administration of US$18.1 trillion, and assets under management of US$1.7 trillion. For more than 135 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit us on northerntrust.com. Follow us on Instagram @northerntrustcompany or Northern Trust on LinkedIn.
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