If BMO Global Asset Management has one mantra heading into the back half of the year, it’s simple: “Don’t fight the momentum.” Rather than pushing back against the strength of this market, the team is choosing to ride it—with some tactical caution. In their latest House View, Chief Investment Officer Sadiq S. Adatia and his colleagues—Brittany Baumann, Steven Shepherd, and Marchello Holditch—lay out a measured but confident strategy. The mood? Bullish, but grounded.
Momentum Over Maybes
“We’re overweight Equities,” Adatia states. Why? Because despite ongoing uncertainty and political noise, “the worst of tariff-related uncertainty is likely behind us.” Some investors, he suggests, are still missing the bigger picture: the consumer is strong, and earnings might be better than expected.
“Better-than-expected job numbers for June highlighted that the labour market continues to hold up better than many analysts anticipated,” he adds. That resilience, along with improving sentiment, gives the U.S. a chance to close the gap with Canada and other global markets. As for rate cuts? BMO sees one as likely, possibly two—especially if the Fed gives in to growing political pressure.
“The stage is set for another quarter of strong potential upside,” Adatia concludes. But don’t mistake optimism for naivety—volatility hasn’t vanished.
U.S. Economy: Emerging From a Soft Patch
— Brittany Baumann, Vice President, Investment Strategist
Baumann describes the U.S. economy as regaining steam, powered by three forces: expected Fed cuts, tax stimulus from the “One Big, Beautiful Bill,” and improving trade relations.
She’s not blind to risks. “Immigration flows are expected to slow significantly this year,” she warns, hitting sectors like agriculture and hospitality hard. Meanwhile, a “Fed funds rate at 4.5% is starting to look increasingly restrictive.”
She believes we’ll likely see two cuts by year-end—unless the Fed overdoes it. “The risk in our view is that they overshoot and cut by more.”
Canada: Disappointment, But Not Despair
— Brittany Baumann
At home, the mood is more subdued. “Canada’s economy has disappointed,” Baumann admits, with Q2 GDP expected to dip into negative territory. Sluggish PMIs and a manufacturing slump signal weakness. But there are bright spots: thanks to USMCA, many Canadian goods are faring better than global peers.
BoC cuts are almost inevitable, she argues: “The backdrop increasingly opens the door to potentially several more rate cuts by the BoC.” Inflation may have surprised recently, but it’s expected to settle. Baumann also anticipates prolonged uncertainty around Canadian trade in steel, autos, and aluminum until USMCA negotiations kick off next year.
International Markets: Gaining Back Ground
— Brittany Baumann
Global sentiment is thawing. “Forecasts are rising in the face of data that are proving to be more resilient throughout International, EAFE and Emerging Market countries.” Japan remains an inflation outlier, but may be nearing a peak. China continues to lag—but is likely to benefit from USD weakness and more stable trade relations.
Risk Appetite: Alive and Well
— Steven Shepherd, CFA, Director, Portfolio Manager
The first half of 2025 ended on a high. “We’ve witnessed a rapid turnaround in valuations, sentiment and momentum from the April lows,” Shepherd says. In just 54 days, the market climbed back to February’s all-time highs. Tech is back in the lead, and investor risk appetite is clearly returning.
The team has shifted Equities to +1 (slightly bullish) and Fixed Income to -1 (slightly bearish). They’ve seen enough to reallocate: “To conclude that this is a bearish market seems largely incorrect.”
On bonds, Shepherd is blunt: “Despite President Trump’s bullying tactics towards the Fed, they’re doing the right thing by not cutting rates.” Still, rate cuts are likely. That’s why BMO prefers the short end of the yield curve while staying neutral on Duration.
Equities: U.S. Reclaims the Spotlight
— Marchello Holditch, CFA, CAIA, Head of Multi-Asset Solutions
Holditch sees U.S. outperformance returning. “The U.S. outlook… has reasserted itself—a reversion of sorts to the ‘U.S. exceptionalism’ theme.” The three macro forces at play—tax policy, easing trade tensions, and likely Fed cuts—are giving U.S. markets a leg up.
Canada? It’s a mixed bag. “We don’t see a material probability of recession,” Holditch explains, but the investment climate is still tepid. He keeps the country neutral, expecting policy support to soften the blow.
On China, he’s slightly bullish. Everywhere else, the team remains neutral—for now.
Fixed Income: Short and Strategic
— Marchello Holditch
Holditch describes bond markets as stuck between opposing forces—deficit concerns on one side, dovish central banks on the other. “These opposing forces will inherently keep things rangebound.”
He’s trimmed Fixed Income exposure, preferring short-term debt and cash over long-dated bonds. “We’ve brought back our view on High Yield to neutral (0), where we had been underweight for some time.”
The market’s expectation of just one more BoC cut? Too conservative, he says: “That is an underestimation in our view.”
Factor Views: Growth Gets Breathing Room
— Steven Shepherd
“We see potential tailwinds for Growth,” says Shepherd, though factor scoring remains broadly neutral. Volatility is now back to neutral too, thanks to the VIX returning to long-term averages—a good sign for Growth stocks, especially Tech+.
Sector-wise, BMO likes cyclicals and communication services. “We wouldn’t be reducing positions in Growth at this point,” Shepherd adds, even if summer volume slows things down temporarily.
CAD & Gold: Time for a Pause
— Steven Shepherd
On the loonie: “We are hesitant that [CAD] has additional room to move higher.” It’s now rated neutral. Gold? Also downgraded to neutral after a strong run. “It is firmly overbought, particularly in the retail space,” he notes, and trade concerns have cooled enough to reduce its appeal as a hedge.
Final Word: Conviction, Not Complacency
BMO isn’t going all-in on risk—they’re leaning in where the data supports it. As Adatia puts it best: “If there’s one message we have as we enter the second half of the year, it’s this: don’t fight the momentum.”
The view for Q3 is optimistic, but not blind. Risk-on, yes—but always with a hand on the wheel.
1 BMO Global Asset Management. Sadiq Adatia, et al. "Don’t fight the momentum." 29 July 2025,
