Overview

Global markets closed out 2025 with mixed performance as investors repositioned portfolios and reset expectations for 2026. In the U.S., equity markets finished December essentially flat, as gains in Financials, Technology, and Communication Services were offset by weakness in Utilities, Real Estate, and select defensive sectors. International equities outperformed, with Emerging Markets and developed markets leading returns.

In Canada, the S&P/TSX Composite posted modest gains, supported by strength in Financials and Materials as commodity prices remained relatively firm. Investor sentiment continued to be shaped by central bank policy signals, easing inflation data, labor market trends, and ongoing geopolitical and trade-related uncertainty.

U.S. Market Performance & Policy

The S&P 500 ended December little changed, capping off a volatile but strong year. Sector leadership rotated, with Financials leading the market as rate expectations stabilized and balance-sheet quality regained investor focus. Technology and Communication Services also posted gains, while Utilities and Real Estate underperformed amid rising long-term interest rates.

The Federal Reserve cut the federal funds rate by an additional 25 basis points in December, bringing the target range to 3.50% – 3.75% and totaling 75 basis points of cuts in 2025. While the Fed acknowledged easing inflation trends, policymakers signaled a more cautious stance going forward. Market expectations for further near-term cuts declined, with attention shifting toward incoming inflation and labor data ahead of the January FOMC meeting.

Key U.S. Economic Data 

• Federal Funds Rate: Reduced by 25 bps in December; policy now viewed as closer to neutral. 

• ISM Manufacturing PMI: Declined to 48.2, indicating continued contraction in manufacturing activity. 

• ISM Services PMI: Increased to 52.6, reflecting ongoing expansion in the services sector. 

• Labor Market: Payroll growth exceeded expectations, while unemployment edged higher to 4.6%. 

• Inflation: Headline and core inflation resumed their downward trend, with November readings near 2.7%. 

Canadian Market Overview 

The S&P/TSX Composite recorded modest gains in December, supported by Financials, Materials, and Industrials. Gold prices moved higher, while oil prices declined modestly, contributing to mixed performance across resource sectors. Investor interest remained focused on high-quality growth names and companies with strong balance sheets. 

The Bank of Canada held its policy rate steady, reiterating that previous rate hikes are still working through the economy. Statistics Canada data showed easing inflation and mixed domestic demand, while international investor demand for Canadian equities remained supportive of the TSX. 

Outlook 

As markets enter early 2026, the investment landscape appears to be shifting away from a rate-dominated environment toward one driven by earnings quality, sector selection, and productivity trends. While economic growth is slowing, it remains positive, and inflation continues to moderate. For diversified portfolios, maintaining exposure to quality growth, value-oriented cyclicals, and resilient income assets—while closely monitoring central bank guidance and labor market conditions—remains a disciplined approach in a more balanced but still volatile market environment.

Overview

In the U.S., major equity benchmarks were little changed in November, with the S&P 500 edging up about 0.1% as strength in healthcare and select defensive balanced weakness in technology and other prior leaders. In Canada, the S&P/TSX Composite pulled back from mid‑month records but managed to hit a new all time high in the last day of the month, supported by gains in cyclicals, energy, and materials. Across both markets, investors focused on central‑bank communication, labour trends, and late‑year inflation data to gauge how far the current easing cycle can progress.​

U.S. Market Performance & Policy

The S&P 500 finished November essentially flat at +0.13%, extending an already strong year even as leadership broadened away from mega‑cap growth. Healthcare outperformed, while large‑cap growth and the Nasdaq underperformed as investors rotated out of crowded AI‑related trades and reassessed earnings expectations.​

Sentiment turned more cautious as consumer confidence fell sharply and manufacturing data remained in contraction, even as services activity stayed in expansion territory. The Federal Reserve, having cut rates earlier in the fall, maintained a data‑dependent tone and signalled that future moves will hinge on how inflation and labour conditions evolve from here. Key releases to watch into December and January include updated CPI prints, delayed jobs data, and fresh FOMC projections that will help clarify the likely pace of any 2026 rate cuts.​

Key U.S. Economic Data

• Federal Funds Rate: Target range around 3.5%–3.75% after recent 25‑basis‑point cuts, marking a gradual shift toward easier policy.​

• Unemployment Rate: The November employment report showed only modest job gains, with mixed signals around underlying labour‑market momentum.​

• Consumer Confidence Index: The Conference Board index dropped to 88.7 in November, the lowest since April, reflecting heightened concern over income, jobs, and tariffs.​

• ISM Manufacturing Index: Manufacturing PMI remained below 50, indicating continued contraction in factory activity.​

• ISM Services Index: Services PMI stayed above 50, pointing to ongoing though moderating expansion in the larger services economy.​

Canadian Market Overview

The S&P/TSX Composite experienced increased volatility through November, trading roughly 1.2% below earlier peaks mid‑month before ultimately revisiting and surpassing prior record highs late in the period. Strength in energy, financials, and resources that had driven gains earlier in the year gave way to more mixed sector performance as investors digested softer global growth signals and shifting expectations for U.S. monetary policy.​

Labour data surprised positively: Canada added about 54,000 jobs in November, and the unemployment rate declined to 6.5%, its second consecutive monthly improvement and an encouraging sign for domestic demand. Against this backdrop, the Bank of Canada kept its policy rate at 2.25% in December, reinforcing October’s message that policy is now close to neutral and that further moves will depend on incoming inflation and growth data. With inflation moderating and growth steady but unspectacular, markets interpreted this stance as supportive for risk assets without signalling an imminent acceleration in easing.​

Key Canadian indicators to monitor into year‑end include headline and core CPI, additional labour‑market releases, and business sentiment surveys, all of which will shape expectations for any further Bank of Canada action in the first half of 2026.​

Outlook

Heading into December, both U.S. and Canadian markets face a familiar trade‑off: easier monetary policy and still‑healthy employment versus weakening confidence and patchy manufacturing data. For long‑term investors, the focus remains on whether inflation can continue to cool without a material deterioration in labour conditions, and how sensitive equity valuations are to any downside surprise in growth or geopolitics.​

Overview

U.S. equities delivered another strong month in October, with major indexes reaching new record highs. Solid corporate earnings, ongoing enthusiasm around AI-driven innovation, and a broadly supportive monetary backdrop continued to reinforce market momentum. While the government shutdown delayed several economic releases, investor sentiment remained constructive. As markets enter November, the focus turns to the Federal Reserve’s policy path, upcoming labour data, and inflation indicators that will guide expectations for the durability of U.S. growth. 

U.S. Market Performance & Policy 

The S&P 500 rose 2.3% in October, the Dow gained 2.5%, and the Nasdaq advanced 4.7%, extending multi-month rallies across all major benchmarks. Technology led the market once again, driven by strength in semiconductors and AI-related activity. Healthcare also performed well, while Materials lagged with a notable decline. 

Corporate earnings for the third quarter exceeded expectations, helping sustain investor confidence despite the ongoing government shutdown. However, market breadth narrowed, with mid-cap and value segments underperforming. Even with delayed data releases, optimism held firm as investors looked ahead to key monetary and economic signals.

The main policy event was the Federal Reserve’s 25 basis points rate cut, bringing the federal funds rate to a range of 3.75% to 4.00%. While the move reflected a more dovish stance, policymakers avoided committing to further easing, keeping future decisions dependent on inflation and employment trends.

Heading into November, markets are watching the next Fed meeting, along with updated inflation and labour reports, for confirmation that economic activity remains on stable footing. 

Key Economic Data 

• Federal Funds Rate: Lowered by 25 basis points to 3.75%-4.00%, marking a cautious shift toward easing
• Unemployment Rate: Official data was delayed, but private estimates place unemployment near 4.3%, mostly unchanged
• Consumer Confidence Index: Fell slightly to 94.6, indicating modest cooling in expectations
• ISM Manufacturing Index: Declined to 48.7, pointing to deeper contraction in factory activity
• ISM Services Index: Improved to 52.4, returning to expansion on stronger business activity and new orders

U.S. Market Outlook 

October underscored a market defined by resilient earnings, proactive monetary policy, and fiscal uncertainty. As November begins, investors will closely monitor upcoming labor and inflation reports, the potential resolution of the government shutdown, and additional signals from the Federal Reserve for direction heading into year-end.

With monetary conditions easing and corporate fundamentals holding firm, U.S. markets approach the close of 2025 with cautious optimism tempered by policy risks.

Canadian Market Overview 

The S&P/TSX Composite delivered a steady 1% increase through October. Energy was the strongest contributor as oil prices advanced on global supply concerns, supporting broader market resilience. Materials also gained, benefiting from a mild rebound in gold prices that helped lift mining names. Financials added stability, with banks showing consistent domestic performance and steady credit conditions. While corporate earnings were generally constructive, market sentiment remained balanced by uncertainty around monetary policy and the potential impact of evolving trade measures. 

The month’s primary policy event was the Bank of Canada’s widely anticipated 25-basis-point rate cut, bringing the policy rate to 2.25%. The decision signalled a more cautious stance, with policymakers indicating a preference to pause before considering additional easing. This approach reflects an effort to support a cooling economy while remaining attentive to stubborn inflation dynamics. Looking ahead, investors will focus on labour market strength, upcoming inflation data, and global trade signals, particularly given recent volatility in commodity markets. 

Key Economic Data

• Bank of Canada Rate: The policy rate was lowered by 25 basis points to 2.25%, the lowest since mid 2022, with officials suggesting a near-term pause
• Unemployment Rate: Unemployment held near 7.1%, highlighting continued weakness in goods-producing industries
• Consumer Confidence: The Ipsos index remained slightly negative at –6, reflecting cautious sentiment toward the macro backdrop
• Manufacturing PMI: The PMI improved slightly to 49.6, still below expansion levels but showing signs of stabilization