Navigating crosswinds with confidence
The final quarter of 2025 was a moderated reflection of the year’s volatility, upside surprises and resilience. Equity and fixed income markets navigated headline-grabbing events, a record-long U.S. government shutdown, commodity price volatility and mixed signals from central banks. Despite this noise, the prevailing theme remained consistent: global markets rewarded fundamentals over fear.
Global overview
The U.S. Federal Reserve continued its cutting cycle late in the quarter, while also taking steps to keep money markets well positioned into next year by starting a new lighter version of quantitative easing. The Bank of Canada held the overnight rate at 2.25% after its October cut, effectively signalling that policy is now in a “wait and watch” zone. This collective shift helped calm markets and bolster investor optimism, with growth data accelerating.
The U.S. government shutdown early in the quarter briefly unsettled sentiment and delayed critical economic data, but its broader impact quickly diminished upon reopening. Investors refocused on earnings and found encouragement in a resilient corporate backdrop. Meanwhile, global equities advanced, with leadership expanding beyond the United States. For many, 2025 may be remembered as the year that saw renewed interest in opportunities outside traditional U.S. holdings, as Canada, Europe and Asia all contributed meaningfully to global portfolio returns.
Canadian equities
Canadian equities finished 2025 on a strong note, anchored by resilient performance across sectors and continued support from commodity markets. The S&P/TSX Composite Index advanced 5.6% in the fourth quarter, extending Canada’s position as one of the best-performing developed markets this year. Materials remained the top-performing sector, rising 11.6% in the quarter and over 98% for the year, fuelled by the ongoing strength in precious metal prices. Beyond materials, the financial sector contributed strongly as the Canadian banks reported consecutive quarters of better-than-expected profit gains.