Our base case is for modest economic growth and inflation calm enough to allow for a resumption of interest-rate cuts. U.S. public policy remains the dominant macroeconomic theme, with tariffs and tax cuts both attracting close attention. The global economy has been resilient in the face of protectionism, but some areas of the economy have begun to soften modestly, including the labour market. Inflation resulting from President Trump’s tariffs is becoming visible although the net effect may be somewhat smaller than initially expected. We believe a U.S. recession remains unlikely, and our global growth forecasts are flat to slightly higher than a quarter ago.
In this environment, we expect decent returns from bonds and even better performance from stocks, especially in regions outside North America where valuations are relatively appealing. Global equities soared to records, extending their impressive rebound from earlier this year, with broad participation from international stocks. U.S. large-cap stocks, Canadian equities and Japanese equities are fully valued, but stocks in Europe, the UK and emerging markets appear to be attractively priced.
The massive U.S. economic, financial and trade policy reset is increasingly impacting global growth, as trade patterns, spending decisions, and purchasing behaviours by businesses are altered – sometimes dramatically – to respond to this new reality. Canada has not been immune, with GDP growth being materially and negatively impacted by recent U.S. trade policy changes. From employment to spending to investment, the country is being forced to reconsider and reassess their trade relationships and business strategies, deepening the economic uncertainty and clouding the path forward.
This uncertainty has led many of you to engage your Investment Counsellor to help you navigate through these challenging times. Whether it is to review your investment portfolios or your wealth plan, or to access the capabilities and global reach of RBC Royal Bank, we can help by delivering the expertise and insights you need to help you achieve your goals. In times like these, the power of advice and the trusted relationship you have with your Investment Counsellor is more important than ever. As always, we look forward to the challenge and opportunity to deliver for you and your family.
Sincerely,
Vijay Parmar
President, RBC PH&N Investment Counsel
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