'It's made the rest of the world look at their own economic policies and try to find ways to improve their own growth potential,' says Chhad Aul
One of the more prominent themes in Sun Life Global Investment’s mid-year outlook report is around “America First.”
If you were to ask Chhad Aul why that was the case, he’ll admit it was always under scrutiny, particularly from his team. And in his view, the first half of the year didn’t just challenge the thesis, it dismantled it.
“We called into question the idea of America First,” said Aul, Sun Life Global Investment’s CIO and head of multi-asset solutions. “We thought it was a little bit overdone. And as it played out, the first half of this year has really unwound that idea. It’s probably played out to an even larger degree than expected and has been really the major theme of the year. Obviously, it’s about America First policies. But it's also been a theme of economic outperformance for the US.”
He first highlighted that while US equities, particularly the so-called “Magnificent Seven,” were riding high on AI optimism and economic resilience, 2025 brought an abrupt shift as a stronger US dollar, surging equity markets, and economic exceptionalism gave way to policy volatility, trade uncertainty, and currency weakness.
He acknowledged that the US dollar’s sharp decline - down more than 10 per cent against major currencies - is evidence that global investors are reassessing exposure to the US, with funds rotating into international and even Canadian markets. That move, he noted, was accelerated by erratic tariff policies and broader political uncertainty.
That growing uncertainty around US policy has triggered a noticeable shift in global investor behavior, with capital flowing out of the US and into international markets, including Canadian equities.
“You're seeing the currencies really reflecting that at the same time. That theme unwound very quickly and it's absolutely an interesting thing. The kind of thematic view on markets over the last couple of years is things do move relatively quickly and get priced into their max, and then often, the pendulum potentially swings too far,” said Aul.
While Aul emphasized Sun Life’s belief in globally diversified portfolios and continues to advocate for that, he cautions against overcorrecting though as he doesn’t believe US dominance is over.
“Those that are calling US exceptionalism completely dead, we would say that’s probably going too far,” he said, adding that the US remains home to some of the most innovative companies and could still post relative strength later this year.
Aul emphasized markets are also showing signs of fatigue around US trade policy headlines, with investors increasingly viewing tariff moves as posturing rather than permanent shifts, referencing the return of trade tensions via targeted letters to countries following April’s so-called Liberation Day.
Despite the noise, Aul believes markets are approaching the issue with caution rather than panic, noting the market is taking more of a “wait and see approach,” he said, adding that equities are trading in a tight range near record highs.
Yet, he expects a blended tariff rate around 10 per cent could be where things settle, a level he thinks the US economy can absorb.
“It ends up being ultimately a consumption tax, like many other countries have. It's just a different way of labeling it and marketing it to the consumers in the US.”
At the same time, however, Aul pointed to the US tax bill as another key policy shift. While the equity markets haven’t fully priced it in, bond markets are paying closer attention “to anything that may raise the deficit,” he said, noting that long-term rates could stay elevated as a result.
Still, Aul said hard economic data - particularly labour market readings - remains resilient on both sides of the border.
Aul ultimately sees a silver lining in the policy instability coming out of the US as it's prompted other countries to take a harder look at their own economic strategies. In his view, governments worldwide have responded by pushing forward growth-oriented reforms, which in turn have attracted investor attention.
“One positive that’s come out of this policy uncertainty is it made the rest of the world look at their own economic policies and try to find ways to improve their own growth potential,” he said.
As a result, capital has begun flowing into markets where governments are seen to be actively supporting their economies, creating new opportunities for globally diversified portfolios.
“It's actually quite positive for globally diversified investors,” said Aul.
Canada first?
Even Canada has been a clear example of how countries have responded to shifting US trade tactics, Aul said, noting that it faced pressure earlier than others this year. While certain sectors still feel the impact, he believes that much of the broader risk has eased.
The United States-Mexico-Canada Agreement (USMCA) also appears to be offering some protection, while the recent change in federal government has accelerated growth-oriented policy initiatives, causing global investors to now see Canada in a more favourable light, helping to drive recent strength in the Canadian dollar.
“Some positive policy changes in the pipeline would make it a more attractive economy to invest in. I think that's key to unlocking our potential here in Canada,” said Aul.
