Q4 2025
With 2025 in the history books and as we review the 4th quarter of 2025, we are reminded of the fact we just completed the first quarter century of the 21st century. Wow, a lot has happened. We recently read an article that summarized some of the key economic events of the 25-year period. China’s rise, emerging markets growth, globalization, tech domination, weakening demographics, rising leverage, commodity super cycle. This list names only a few of the larger themes that have encompassed the last 25 years in terms of the global economy. It certainly does not include the more memorable events like 9/11, the global financial crisis and the pandemic. The list of larger themed items does require one to think a bit bigger picture and with a longer-term outlook. They are only seen in the rear-view mirror and rarely make daily headlines where they may result in daily market reaction.
What about the next 25 years? What will the run up to the mid-point of the century look like? China continues it’s ascent? Deglobalization? Tech still dominating with artificial intelligence? Climate change? Rising global middle class? Demographic crunch? We will not try to predict the outcome but instead, manage the economic fundamentals and own high-quality companies.
Global equity markets closed 2025 on a constructive note, with North American equities demonstrating resilience amid a complex macroeconomic and political backdrop. While volatility resurfaced at various points during the quarter, markets were ultimately supported by moderating inflation trends, clearer interest rate expectations, and steady and growing corporate earnings. Investor sentiment improved as uncertainty around monetary policy and political developments became more defined, allowing fundamentals to reassert themselves as the primary driver of equity performance. For long-term investors, Q4 reinforced the importance of maintaining diversified equity exposure while emphasizing quality, balance sheet strength, and reliable income generation through dividend-paying stocks.
Inflation remained a central theme throughout 2025, but Q4 marked further progress toward normalization across major developed markets. In North America, price pressures continued to ease compared to the post-pandemic highs, reflecting a combination of stabilizing supply chains, softer commodity price movements, and more balanced labor market conditions. While inflation remained above long-term central bank targets in certain categories, particularly services, the overall trend helped restore confidence that the most disruptive phase of inflation is behind us. This moderation supported consumer spending resilience and improved visibility for corporate margins, both of which were positive for equity markets heading into year-end.
After several years of aggressive monetary tightening globally, Q4 2025 saw central banks shift further toward a more neutral policy stance. In North America, policymakers emphasized a data-dependent approach, reinforcing that future decisions would be guided by sustained progress on inflation rather than preset timelines. This clearer framework helped reduce market uncertainty and contributed to a more stable valuation environment for equities. Long-duration assets, including growth-oriented stocks, benefited from declining rate volatility, while higher-quality dividend-paying equities continued to appeal to income-focused investors seeking stability in a still-elevated rate environment.
Political developments, particularly in North America, remained a source of headline risk during Q4. However, markets largely demonstrated an ability to absorb political uncertainty as policy priorities became more visible. Investors focused less on rhetoric and more on practical implications for fiscal policy, taxation, regulation, and trade. The US mid-term elections in November will continue to gain media attention as we work through 2026. Historically, markets have shown an ability to adapt across political cycles, and 2025 was no exception. Equity performance reflected confidence that economic growth and corporate profitability remain driven more by fundamentals than by short-term political developments.
As we so often mention, dividend-paying equities played an important role in portfolios during 2025, offering a combination of income, downside resilience, and participation in equity upside. In an environment where interest rates were coming down, dividend strategies provided a compelling balance between growth and income. Companies with consistent cash flows, strong balance sheets, and disciplined capital allocation continued to stand out. Dividends also helped offset periods of market volatility, reinforcing their value as a core portfolio component for clients focused on long-term outcomes. In our portfolio, we had 10 companies raise their dividend this quarter with one special dividend paid. This brings the total for 2025 to 39 dividend increases and 4 special dividends paid.
As we move into 2026, the investment landscape appears more balanced, and we hope to see equities move on more fundamental data than macro shocks and day-to-day headlines. Inflation pressures have moderated, interest rate expectations are clearer, and equity markets are increasingly driven by company-specific fundamentals rather than macro shocks.
We continue to post timely reading pieces to our website so please be sure to view our Publications page for updated and timely articles. We not only try to keep you informed as to what is happening in the economy and the markets, but we also want to pass along information related to financial and estate planning, health, and topics of interest.
As always, feel free to reach out to our team with any questions you may have. We are always glad to hear from clients and happy to help. All the best to you and your family in 2026.
Warm regards,
Bow Valley Wealth Management Group
This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that any action is taken based upon the latest available information. The strategies and advice in this report are provided for general guidance. Readers should consult their own Investment Advisor when planning to implement a strategy. Interest rates, market conditions, special offers, tax rulings, and other investment factors are subject to change. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. â / ™ Trademark(s) of Royal Bank of Canada. Used under licence. © RBC Dominion Securities Inc. 2025. All rights reserved.
