December in review
Markets finished the month with varied performance, while returns for 2025 reflected stronger momentum across most asset classes. Canadian equities rose 1.3% for the month and posted a 31.7% gain for the year, compared with U.S. equities, which increased 0.1% in the month and 17.9% over the year. Fixed income markets in Canada and the U.S. were mixed, reflecting diverging monetary policy paths between the two central banks. Canadian bonds declined 1.3% for the month, while U.S. bonds fell 0.2%, though both delivered positive annual returns of 2.6% and 7.3%, respectively. Commodity performance was mixed, as gold gained 2.0% for the month and 55.5% for the year, while oil and natural gas declined 1.5% and 16.6%, respectively with both finishings the year down 15.1%. Emerging markets advanced 3.0% for the month and 34.3% for the year.
Here are some of December's most notable events:
Canada’s economic growth softens in October. Canada’s real GDP declined by 0.3% in October, reversing September’s gain, as weakness was broad-based across both goods- and services-producing industries. Manufacturing was a key contributor to the slowdown, with total sales falling 1.0% to $71.5 billion, led by declines in the chemical, wood product, and transportation equipment subsectors. Despite the monthly pullback, manufacturing sales remained 0.7% higher than a year earlier, Newfoundland and Labrador (26.3%), Prince Edward Island (15.9%) and Manitoba (14.1%) posting the strongest year-over-year gains. Preliminary data suggested modest stabilization in November, with GDP estimated to increase by 0.1%.
Bank of Canada (BoC) holds rates as inflation eases. The BoC held its policy interest rate at 2.25% on December 10, following discussions that highlighted easing inflation pressures alongside mixed economic signals. CPI inflation slowed to 2.2% in October, reflecting lower gasoline prices and slower increases in food costs, bringing inflation closer to the Bank’s target. Governing Council members noted some improvement in Canada’s labour market, though economic growth has remained uneven and bumpy. Globally, major economies were seen as resilient to U.S. trade protectionism, despite elevated uncertainty. The Council agreed to hold the policy rate while continuing to assess incoming data on inflation, economic activity, and labour market conditions heading into 2026.
| Index† | Change (%) | Index Level | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Treasury Bill (FTSE Canada 60 Day T-Bill) | 0.19 | 2.78 | 2.78 | 190.88 |
| Canadian Bonds (FTSE Canada Universe Bond) | -1.28 | 2.64 | 2.64 | 1,199.79 |
| Canadian Equities (S&P/TSX Composite) | 1.33 | 31.71 | 31.71 | 31,712.76 |
| U.S. Bonds (Bloomberg U.S. Aggregate Bond, US$) | -0.15 | 7.30 | 7.30 | 2,348.85 |
| U.S. Equities (S&P 500, US$) | 0.06 | 17.86 | 17.86 | 6,845.50 |
| Global Equities (MSCI World, US$) | 0.84 | 21.63 | 21.63 | 4,430.38 |
| Emerging Markets (MSCI Emerging Markets, US$) | 3.00 | 34.29 | 34.29 | 1,404.37 |
| Currencies† | Change (%) | Exchange Rate | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| C$/US ($) | 1.83 | 4.80 | 4.80 | 0.7286 |
| C$/Euro (€) | 0.58 | -7.61 | -7.61 | 0.6204 |
| C$/Pound (£) | 0.06 | -2.66 | -2.66 | 0.5408 |
| C$/Yen (¥) | 2.39 | 4.50 | 4.50 | 114.258 |
| Commodities (US$)† | Change (%) | Price | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Gold Spot ($/oz) | 2.03 | 55.53 | 55.53 | 4,341.10 |
| Oil WTI ($/barrel) | -1.49 | -15.06 | -15.06 | 57.42 |
| Natural Gas ($/MMBtu) | -16.57 | -15.13 | -15.13 | 3.69 |
†Total Return, as at December 31, 2025. Indices are quoted in their local currency.
Source: Bloomberg
Indices are not managed, and it is not possible to invest directly in an index.
Federal Reserve cuts rates as growth moderates. The Federal Reserve lowered its target range for the federal funds rate by 25 basis points to 3.50%–3.75%, citing moderate economic growth, slowing job gains, and a gradual rise in the unemployment rate, in its December 10 policy decision. Policymakers noted that inflation remained somewhat elevated after increasing earlier in the year, while downside risks to employment had grown in recent months. The Committee emphasized that future policy adjustments would remain data dependent, guided by incoming economic information and the evolving balance of risks.
Did you know?
According to Statista, the PNC Christmas Price Index—which tracks the cost of purchasing all the gifts mentioned in The Twelve Days of Christmas—reached more than US$51,400 in 2025, marking a 4.5% increase from the prior year. First introduced in 1984 as a light-hearted seasonal measure, the index now highlights the long-term effects of inflation. In fact, the highest value in the index’s history was recorded in 2025, underscoring how persistent price increases can meaningfully erode purchasing power over time.
Insights from our Portfolio Managers
It's a new year, but the same question remains: Are we in a bubble? After three consecutive years of double-digit returns, investors are right to wonder if markets are running on genuine momentum or borrowed time. The answer is refreshingly straightforward: the bull run is grounded in real earnings and can keep running. Yes, valuations are expensive and mega-cap concentration extreme, both legitimate concerns. But here's what matters more: companies are genuinely making more money, the labour market has stabilized without triggering the recession everyone feared, and artificial intelligence is delivering measurable productivity gains that extend well beyond stock prices. For 2026, that earnings foundation remains intact, but risks persist: sticky inflation, stretched consumers, and trade and geopolitical uncertainty.
“We delivered strong returns for our investors in 2025 by positioning portfolios across asset classes, regions, and sectors, capturing both the Magnificent Seven's AI momentum and emerging markets' outperformance. That diversification, combined with active management's ability to adjust for valuation shifts, is what separates good returns from great returns. And as we look to 2026, this same discipline positions us well.”
— Craig Maddock, VP & Senior Portfolio Manager, Head of Multi-Asset Management
