DIARY OF A PORTFOLIO MANAGER
November 28th, 2025
“I wanna go party, I wanna have fun
I wanna be happy, could you show me how it's done?
You look so pretty, pretty like the sun
I could watch forever while you shine on”
Black Friday, Tom Odell
Good afternoon,
Tonight is the big Manotick Santa Claus parade so that is how I will kick off the weekend. Good times…
Approaching the final stretch of 2025, the Canadian and U.S. economies appear well-positioned to extend their expansions. I guess that there is no Black Friday sale going on in the markets. Why is this? Strong earnings delivery, a favourable policy mix, and abating trade uncertainty are helping to bolster growth prospects and support financial markets.
1999 Redux?
I hear once in a while that the current market is reminiscent of 1999 and I couldn’t disagree more. For one, the current market is being driven by actual earnings and revenues which was not the case in 1999. However, if we are repeating the past, the chart below shows we are closer to 1996 than 1999 which would then mean we have three very strong years ahead.
Macro Musings
Canada’s economy is on track for a rebound after the sharp contraction in Q2, with the recovery fueled by normalizing trade flows and improving labour market conditions. A pickup in job creation in October helped nudge the unemployment rate lower, while real GDP is projected to rise by 0.5% in Q3 as resilient domestic demand offsets weakness in trade-oriented industries. Looking ahead, momentum is expected to build further, with growth forecast to accelerate to 1.0% in Q4 2025 and reach 1.5% by Q2 2026 before settling near 2.0% in the second half of next year. However, the upcoming USMCA re-negotiation is a key risk.
South of the border, the U.S. economy remains firmly in expansion mode, with real GDP expected to advance by 2.9% in Q3 before slowing to 1.0% in Q4 and returning to steady pace of around 2% in 2026. Household spending remains the primary driver, with government outlays and business investment also adding modest tailwinds. Although consumers have so far absorbed tariff-related pressures relatively well, recent retail sales data underscore risks tied to an uneven “K-shaped” economy in which spending strength is increasingly reliant on higher-income households. Nevertheless, solid wage gains, strong household balance sheets, and the prospect of lower borrowing costs should help sustain consumption over the coming quarters.
Corporate Fundamentals
A broadly constructive outlook for corporate profits remains an important pillar for equity markets. Does anything else matter in the long term for an equity investor? For both the S&P/TSX Composite and S&P 500, earnings are on pace to grow roughly 13% this year, with another low double-digit increase anticipated in 2026. This is not something we would have predicted this past April. While valuations remain elevated relative to historical norms (although not nearly as much as headlines would have you believe) —providing a narrower margin of safety against negative surprises—consistent earnings delivery can help companies grow into these valuation levels and provide a fundamental anchor for equity markets to sustain their uptrend over the next 12 months.
Takeaway
Equity markets have continued to climb the proverbial “wall of worry”, delivering worthwhile returns for investors year to date. While risks persist―including U.S. policy unpredictability, rich valuations, and increased market concentration in AI-linked companies―the ongoing economic expansion offers a constructive backdrop for corporate earnings, which should remain supportive into 2026. Balancing the risks and opportunities, we remain invested and diversified, maintaining equity exposure near long-term strategic allocation levels, and prepared for occasional challenges to the global equity market’s three-years-and-counting uptrend.
Should you have any questions, feel free to reach out
