In this article, we share some insights on what to expect in 2025.
Broadening Equity Market Returns
Equity markets delivered strong returns in 2024, driven by the earnings growth of a few players—the Magnificent 7, which includes Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, NVIDIA and Tesla. The rest of the market is expected to catch up in 2025 and deliver more balanced and diverse growth within and across sectors.
Policy Uncertainty
Economic uncertainty will be a defining theme in 2025:
- With Prime Minister Justin Trudeau stepping down, the fate of important policy proposals, such as the planned increase to capital gains tax, is now unclear. The upcoming leadership transition will play a key role in shaping Canada’s future economic policies.
- Trump’s proposed 25% tariffs on all Canadian exports, if implemented, could disrupt cross-border supply chains and have widespread economic ramifications, both for Canada and globally.
Interest Rates
After five consecutive interest rate cuts in 2024, Canadians can expect continued rate reductions in 2025 as the Bank of Canada seeks to stimulate economic growth. Lower rates should improve borrowing conditions, benefiting both consumers and businesses by lowering financing costs and stimulating demand.
Continued Growth of Private Markets
With many unknowns, asset classes that are uncorrelated to market fluctuations will continue to demonstrate value to investors as sources of risk-adjusted returns. In particular, lower interest rates and healthy economic activity are expected to be positive for private equity.
Conclusion
As 2025 unfolds, staying informed will be crucial to navigating an uncertain environment, capitalizing on emerging opportunities and turning potential challenges into avenues for growth.
If you would like to discuss investment opportunities and how to position your portfolio for the year ahead, contact us today and start a conversation.
