Economic Outlook

We think Canada is in the later stage of the economic cycle, though we don’t see a recession emerging this year, which should provide ongoing support for the bull market.

Asset Class Returns chart
Source: Factset, 1/31/2018. Housing investment represented by the real estate, rent and leasing component of GDP.


Slower growth as consumers carry less of the load – Following healthy growth of 3% in 2017, we think the pace of domestic GDP growth is likely to slow to 1.5%-2.0% this year. Positively, labour market conditions are fairly strong, underpinned by the lowest unemployment rate since the mid-’70s. But the expansion downshifted heading into 2018 and we believe household consumption (60% of GDP) will be curbed by weaker housing investment and rising savings to combat restrictively-high consumer debt levels.

End of the housing boom – We don’t anticipate a collapse in Canada’s housing market but, having accounted for nearly 8% of GDP recently, we think tighter mortgage regulations and higher rates will moderate housing investment, a new headwind for the economy. Home sales activity has dropped notably in Toronto and Vancouver, while inventory levels remain high, a combination that we believe will put additional downward pressure on real estate prices and contribute to more moderate household spending.

A mixed outlook for trade – We anticipate a rebound in exports this year, helped by stronger U.S. demand and the weaker loonie. Policy uncertainties are a risk, however. A global trade war would be punitive to growth and we anticipate the NAFTA negotiations will drag on. Ultimately, we think some concessions from Canada will be required, but a NAFTA resolution this year could unlock pent up investment demand.

Important Information:

Equity investments carry risk, including the loss of principal. There are special risks inherent in international investing, including currency, withholding taxes and high levels of taxation, political, social and economic risks.

Find an Advisor

Find an Advisor

Enter a Province and then enter a last name