Weekly market wrap

Six reasons to be thankful: Cutting through skepticism

Throughout the year, we believe it's been easy to get caught up in skepticism. Markets have navigated policy shifts, global uncertainty, and valuation concerns. Some of these worries will likely carry through next year. But this season is about gratitude, and we think markets have given us plenty to be thankful for. With U.S. Thanksgiving marking a turn into the homestretch for the year, here are six drivers that have helped investors make progress toward their financial goals, in our view. 

1. Strong equity gains

The TSX is on track for its strongest calendar-year return since 2009 and the S&P 500 is on pace for a third consecutive year of double-digit returns, up about 15%*. And that is despite a near bear-market correction in April, rewarding investors who stayed the course through volatility. Overseas equities have fared even better, with the MSCI All Country World Index (ex-U.S.) up 23%, driven by a weaker U.S. dollar and an improving global growth outlook*.

2. Fading recession fears 

Economic resilience continued in 2025, with growth holding up and recession calls fading into the background. While the Canadian economy contracted in the second quarter due to declines in exports and business investment as the U.S. imposed tariffs, economic activity stayed resilient, supported by solid consumer and government spending*. Consumer confidence remains subdued, but spending has held up, highlighting a disconnect between sentiment and behavior*. Similarly in the U.S., much of the same spending strength is concentrated among wealthier households that have benefited from significant stock-market gains, likely contributing to the gap between how consumers feel and how they spend, as lower-income cohorts face pressure from slower wage growth and rising essential costs*. Nonetheless, forecasts appear to point to a robust holiday season, with the U.S. National Retail Federation projecting retail sales to rise about 4% from last year, surpassing $1 trillion for the first time.

3. Rising corporate profits

Ongoing economic growth provided a solid backdrop for corporate earnings to not only grow but also consistently surpass expectations throughout the year*. Both Canadian and U.S. large-cap companies significantly outperformed GDP growth, with TSX profits on track to rise about 12% year-over-year and with S&P 500 profits on track to rise about 11% year-over-year*. While tariffs posed a challenge, U.S. companies offset the impact through cost-cutting, productivity gains, supply-chain adjustments, and selective price increases*. With likely limited room for further valuation expansion, we believe earnings growth will remain the primary driver of stock prices next year. Consensus currently calls for about 14% earnings growth for the TSX and S&P 500 in 2026*.

4. AI and tech Innovation

The launch of ChatGPT in late 2022 sparked billions of dollars in AI investment and fueled a powerful rally in the tech-heavy Nasdaq that has persisted through this year*. This wave of innovation has the potential to reshape the economy, unlocking new growth opportunities and boosting productivity. However, it also brings risks, such as overconcentration, stretched valuations, and possible disappointments if AI adoption falls short of expectations. We believe that AI trends remain durable and that technological adoption will continue to serve as a positive market catalyst. That said, we emphasize the importance of portfolio diversification, valuation discipline, and risk management. The AI trade remains intact, in our view, even as market leadership broadens beneath the surface.

5. Modest central bank policy and inflation relief

Throughout the year, the Bank of Canada continued cutting its policy rate, bringing it down to the lower end of its neutral range at 2.25%. This easing helped reduce the average conventional five-year mortgage rate to 6%, from 6.5%*. South of the border, after considerable debate and several shifts in interest-rate expectations, the Fed resumed its easing cycle this year following a prolonged pause*. While questions remain about the future path of rates, we expect the Fed to ease cautiously, with the overall trend pointing lower through 2026, in our view, providing support for economic growth and financial markets.

On the inflation front, WTI oil prices have averaged $65 per barrel this year, down from $76 last year, contributing to inflation relief*. Tariffs have led to some upward pressure on goods prices, though the Canadian government rolled back most of its retaliatory tariffs in September*. Services inflation remains persistent*, but with the labour market cooling, we expect it to resume its gradual decline. Overall, headline CPI is decelerating modestly, from 2.5% in 2024 to 2.0% so far in 2025*.

6. Income opportunities

With one month remaining, 10-year Government of Canada yields are poised to finish the year close to where they started the year, around 3.15%, but down from this year’s peak of 3.6%*. Despite the recent pullback, we think yields remain historically attractive, near their highest levels in 15 years, offering bond investors income that exceeds inflation*. Looking ahead to 2026, we anticipate solid bond returns, likely driven primarily by income rather than price appreciation.

2025 homestretch

The TSX posted its seventh straight month of gains in November, while the S&P 500 managed to cut most of its losses after a brief wobble tied to AI worries*. Seasonal trends appear to point to a strong year-end finish: historically, the post-Thanksgiving period has delivered solid returns for the S&P 500. Over the past 30 years, December has averaged a gain of about 1%, with markets rising roughly 70% of the time*. 

Closing thoughts: Gratitude and perspective

As we wrap up 2025, markets have navigated a complex landscape — policy shifts, global uncertainty, and valuation concerns — yet we believe have delivered meaningful progress for investors. The six drivers we’ve highlighted underscore a powerful theme: resilience. From strong equity gains and fading recession fears to innovation and income opportunities, these forces remind us that staying invested and disciplined pays off over time, in our view.

We think 2026 offers a constructive backdrop, even as risks persist. In our view, elevated valuations will require vigilance, but steady growth, lower rates, and rising profits provide reasons for optimism. In this season of gratitude, let’s appreciate any opportunities that markets continue to offer and help ensure portfolios are positioned for resilience and growth in the year ahead.

Angelo Kourkafas, CFA
Investment Strategist

^{Sources: *Bloomberg} 

Weekly market stats

^{Source: FactSet, 11/28/2025. Bonds represented by the Bloomberg Canada Aggregate Bond Index. Past performance does not guarantee future results. * Source: Morningstar Direct, 11/30/2025.}

The week ahead

Important economic data for the week ahead include the domestic labour force survey and U.S. ISM PMI data.