2025 review: AI dominates

In 2025, the global and Canadian economies were shaped by several key trends.

Artificial Intelligence dominated equity markets, with valuations for AI-related stocks—particularly NVIDIA—reaching unprecedented heights. Major tech firms ramped up capital expenditures, but concerns over market concentration and a potential bubble reminiscent of the 1990s dot-com era surfaced. While U.S. equities posted a 17.9% return, Canadian markets outperformed with less exposure to tech, and the S&P 500 lagged other major indices for the first time in two decades.
The economic landscape saw the return of a K-shaped economy: wealthier consumers benefited from rising asset values, while lower- and middle-income earners felt the strain of high costs and stagnant wages, leading to declining consumer sentiment. This discrepancy presents ongoing policy challenges for U.S. leaders.
Gold was a standout performer, surging over 60%—its strongest annual gain in decades—driven by Federal Reserve rate cuts and global geopolitical tensions that boosted its safe-haven appeal.

Canada’s 2025 budget focused on capital spending rather than program spending; economic diversification, particularly exports; incentivizing business spending; increasing defence spending; and rightsizing government, though execution risks remain.

2026 outlook: Cautious optimism

The U.S. is expected to see slower but positive growth, supported by lower interest rates and increased government spending, though high tariffs, a cooling labour market, and immigration trends may limit expansion. The Federal Reserve’s future actions, especially amid leadership changes, add uncertainty.
Equity leadership is broadening, with energy, healthcare, and utilities poised to outperform tech-heavy sectors. The AI sector faces a “show me the money” moment, as high capital expenditures and debt financing spark fatigue and increased competition for monetization.

Trade and tariffs remain front and centre, especially between the U.S. and China. China’s dominance in global mineral supply chains gives it leverage in negotiations, while the U.S. seeks a lasting agreement.

On the Canadian front, the future of CUSMA is not guaranteed. Recent developments in Venezuela could reduce U.S. reliance on Canadian crude, potentially giving the Trump administration more negotiating leverage. Canada’s best option for diversifying exports is to ensure the construction of a new bitumen pipeline to the West Coast. This move, once simply logical, is now critical for Canada’s economic future.

Expanding Venezuela’s oil industry will be a monumental task, requiring years and billions of dollars to achieve meaningful production increases. Even with U.S. government subsidies, private investment from American oil companies is unlikely in the short term. For Canada, bold action is needed to secure its own energy and trade interests in this shifting global landscape.

Bottom line, Canada still has what the world wants.

If you would like to discuss your portfolio, please connect directly with your investment advisor. 
 

Disclaimer

I, Theresa Shutt, have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of Harbourfront Wealth Management Inc. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this should be viewed as a reflection of my informed opinions rather than analyses produced by Harbourfront Wealth Management Inc.