Market Commentary – December 31st, 2025
Canadian markets delivered strong performance in 2025, led by financials and gold stocks, with the S&P/TSX advancing significantly despite US tariff uncertainties muddying equity markets in the first half of the year. US equities also saw solid gains, fueled by AI capital spending, policy easing, fiscal stimulus and rebounding consumer confidence.
Items to watch include persistent inflationary pressures, the midterm elections, and geopolitical risks.
You will find below an article that takes stock of the situation at the start of 2026.
Featured article: Navigating 2026 growth, AI momentum, and election-year dynamics
In summary:
Looking ahead to 2026
Equity markets enter 2026 on reasonably solid footing, with expectations for moderate, single‑digit gains rather than a repeat of the outsized returns of recent years. Conditions that support this view include easing inflation, the potential for a few additional interest rate cuts, and continued, if slower, corporate earnings growth across major regions.
The role of AI
Artificial intelligence remains a key market theme, both as a driver of capital spending today and a potential source of productivity gains over the longer term. At the same time, markets are watching practical challenges: the cost of building data centers, energy constraints, and how quickly businesses can integrate AI into everyday operations, all of which can add to short‑term volatility.
Election‑year dynamics
2026 is a U.S. midterm election year, and history shows that these years often come with at least one notable pullback in equity markets before recovering. Election headlines can amplify swings in both directions, but over time markets tend to refocus on fundamentals like growth, earnings, and interest rates.
What this could mean for portfolios
For 2026, if your financial needs remain typical, stay invested with your equity allocation suited to your investor profile. Beyond the headlines, recession risk is considered moderate and earnings forecasts remain positive; thus, a neutral equity allocation is recommended within a well-diversified portfolio.
2025 Performance
Canadian dollar returns for the quarter ended December 31, 2025:
+6.3% – Canadian S&P/TSX Index
+1.2% – U.S. S&P 500 Index (in CAD)
+3.1% – Europe–Asia–Far East Index
-0.3% – FTSE TMX Canadian Bond Universe Index
Portfolio performance: Balanced portfolios returned +1.0% to +2.0% in Q4 2025, and +8.0% to +9.0% over the past 12 months, in Canadian dollars. It is to be noted that the Canadian dollar appreciated 4.6% in regard to the US dollar, which muted US dollar-denominated returns.
As winter wraps us in its quiet embrace this new year, remember that even the coldest seasons nurture resilience beneath the snow – steady growth awaits with patience and preparation.
“In the midst of winter, I finally learned that within me there lay an invincible summer”
-Albert Camus
Mathieu & Anthony
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