Executive summary

Our base case is for modest economic growth and inflation calm enough to allow for a resumption of interest-rate cuts. In this environment, we expect decent returns from bonds and even better performance from stocks, especially in regions outside North America where valuations are relatively appealing.

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• Canada

  Canadian equities have performed well against the unsettled backdrop, supported by expectations for higher earnings driven by rising gold and base-metals prices and a better outlook for banks. Analysts expect Canada’s economy will grow at a below-trend rate of 1.3% in 2025 and 2026, restrained by trade uncertainty.

• United States

  Looking ahead, the central theme to the U.S. market continues to be investments in AI and the benefits that many industries hope to derive from its applications. Given that the stock market trades at relatively high valuations, strong earnings will be required to sustain the consistent gains of recent years.

• Europe

  With macroeconomic data holding up well and trade uncertainty reduced, we continue to expect good performance for European equities for the rest of 2025.

• Asia

  Higher U.S. tariffs and weaker global growth are likely to sharply slow Asia’s exports and growth in capital expenditures for the remainder of 2025.

• Emerging markets

  Emerging-market equities have so far overcome the uncertainty presented by the Trump administration’s trade war given the fact that the impact will likely be limited for most countries. The weaker U.S. dollar has been beneficial to recent performance, and history shows that additional weakening in the greenback would be positive for emerging-market equities.

Economy

Next year should be somewhat better with the worst of the tariff adjustment complete and U.S. tax cuts acting as a tailwind.

Fixed income

Central banks are proceeding with caution as they weigh U.S. policy uncertainty and competing priorities of economic weakness and inflation strength calling for opposite action.

Equity markets

The tariffs sparked an intense sell-off that pushed many technical and sentiment indicators to extremes and shifted leadership away from U.S. stocks.

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