As we move through the second half of 2025, markets continue to reflect both resilience and uncertainty. The S&P 500, after falling more than 20% earlier this year, has since rebounded to new highs. Bond markets, meanwhile, have been largely stagnant as yields slowly grind higher in response to rising deficits and growing government borrowing globally.
Rather than try to forecast each macro event, it helps to focus on long-term risk/reward dynamics in areas where structural tailwinds may be underappreciated. Today, several of those themes stand out.
Key Takeaways
- AI infrastructure is quietly driving an energy demand boom, creating opportunity in utilities, storage, and electricity producers.
- The U.S. housing shortage, especially in senior housing, remains a long-term structural issue, supporting exposure across the mortgage and REIT landscape.
- Canadian preferred shares offer tax-efficient yield, limited interest rate sensitivity, and favourable supply/demand dynamics.
- Macro conditions remain volatile, but inflation is easing, and excess liquidity persists in the U.S. economy.
- Traditional bonds face structural headwinds, emphasizing credit themes with durable, secular support.
The AI Buildout Is Fuelling a Quiet Surge in Power Demand
The growth of artificial intelligence isn’t just changing software; it’s reshaping energy infrastructure. Large-scale data centres require enormous amounts of electricity. As that demand accelerates, names across the energy ecosystem stand to benefit.
We believe this isn’t short-term noise; it’s a structural shift, comparable in scope to the infrastructure investment wave we saw in China in the early 2010s.
Housing Supply Constraints Are Creating Investment Opportunities
Despite elevated mortgage rates, U.S. housing demand remains robust, particularly in underserved segments like senior housing. Weekly mortgage application volumes continue to rise, and homebuilders are still struggling to keep up with demographic-driven demand. Again, it’s our belief that this trend presents a multi-year investment opportunity, not a short-term trade.
Canadian Preferred Shares Remain an Attractive Yielding Asset
In a world where bond markets are delivering little in the way of real return, Canadian preferred shares stand out. These securities offer tax-efficient income, high credit quality, and limited interest rate sensitivity due to their reset features. With the market shrinking as banks call securities at par, supply/demand dynamics also support the asset class.
The Broader Landscape: Liquidity, Rates, and Fiscal Pressure
When looking at these opportunities, it’s worth keeping the broader picture in view:
- The U.S. economy still reflects excess liquidity left over from pandemic-era stimulus.
- Inflation is trending lower than expected, despite rising global trade tensions.
- The U.S. fiscal position remains stretched. The recently passed One Big Beautiful Bill Act has further increased the deficit, and interest payments now exceed defence spending.
Traditional bond markets may face structural headwinds for years, if not decades. We believe that fixed-income strategies must account for these shifts.
The Bottom Line
Successful investing isn’t about predicting the next macro move. It’s about identifying durable trends, managing downside, and ensuring that your portfolio isn’t built on assumptions that require perfect foresight.
It’s time to remain cautious but constructive. Consider focusing on secular opportunities where you believe the upside still outweighs the risk.
Looking to learn more?
Our approach to investing is disciplined and straightforward. The credit investment team applies industry-specific knowledge and experience to analyze and appreciate risk/return potential in every investment. Learn more about our investment approach here.
— Sandy Liang, CFA, is the Head of Fixed Income at Purpose Investment Partners
The information in this article draws on is provided by Bloomberg unless otherwise stated.
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