The following is a summary of key information for the Canadian and U.S. markets as of September 1, 2025.

Current Investment Market Conditions

• Canada: The Canadian economy is facing headwinds.¹ After a solid start to the year, Canada’s GDP contracted by 1.6% in the second quarter of 2025, its first decline in seven quarters.² This contraction was largely attributed to a significant drop in exports, which were hit by U.S. tariffs.³ While consumer spending has remained resilient, the overall economic picture is one of slowed growth.⁴ The Bank of Canada (BoC) is expected to consider a rate cut in September due to the weak economic data, which would be a departure from recent holds on the policy rate.⁵
• United States: In contrast to Canada, the U.S. economy has shown resilience, with a 3.3% annualized GDP growth in the second quarter.⁶ The U.S. labour market remains healthy, and consumer spending is strong. However, the Federal Reserve has held its policy rate steady, and some analysts are concerned about a potential slowdown in the latter half of the year due to the effects of tariffs and a potential cool-down in the services sector.

Recent Bull Markets

• Sustained Bull Market: Both the Canadian and U.S. markets have been in a bull market. In the U.S., large-cap stocks delivered a second consecutive year of strong gains in 2024, with positive momentum carrying into 2025.⁷ The S&P/TSX Composite Index also had its strongest year since 2009 in 2024.
• Moderate Gains and Broadening Leadership: While the bull market is expected to continue into its third year, returns are likely to be more moderate than in previous years.⁸ Market leadership is broadening beyond the technology sector, with industrials, utilities, and financials showing strong performance. This broadening suggests a healthier, more diversified market.
• Drivers: This ongoing bull market has been underpinned by a resilient consumer, rising corporate profits, and central bank easing; however, the path of interest rate cuts has become more uncertain due to concerns over economic data and inflation.

Potential Effects of Trump Tariffs

• Direct Impact on Canada’s Economy: The implementation of U.S. tariffs has already had a measurable negative impact on Canada.⁹ Exports, particularly in sectors such as motor vehicles, parts, energy, and consumer goods, have declined sharply.¹⁰ This has led to a record-high trade in goods deficit for Canada.
• Disrupted Supply Chains: Tariffs are disrupting highly integrated cross-border supply chains.¹¹ This is increasing costs for Canadian businesses and could lead to reduced profit margins and slower business investment.¹² 
• Canadian Countermeasures: In response to the U.S. tariffs, Canada has imposed its own reciprocal tariffs on certain American goods.¹³ While Canada has recently removed some of these counter-tariffs on a wide range of goods, it has kept tariffs in place on steel, aluminum, and automobiles as negotiations continue.¹⁴ 
• Economic Uncertainty: The ongoing trade policy uncertainty is a major concern. It can lead to market volatility, weaken investor confidence, and discourage investment. Businesses are facing higher costs and logistical challenges, which could lead to a permanent decline in economic output.¹⁵

Canada’s Economic Conditions and Concerns

Negative Concerns:

• Slowing GDP Growth: The Canadian economy contracted in Q2 2025, largely due to the impact of U.S. tariffs on exports.¹⁶ This has raised the risk of a recession and has led to expectations for a potential interest rate cut by the Bank of Canada.
• Trade-Related Shocks: The Canadian economy, which is heavily reliant on trade with the U.S., is particularly vulnerable to shifts in trade policy.¹⁷ This has already resulted in a significant decline in exports and a widening current account deficit.¹⁸
• Housing Market Wobble: Despite interest rate cuts, some parts of the Canadian housing market have been “wobbling” with slumping prices and construction activity.
• Softening Labour Market: The unemployment rate is continuing to rise, with job losses concentrated in trade-reliant industries.¹⁹
• Weak Business Investment: Trade uncertainty and a strong Canadian dollar are weighing on capital investment plans.²⁰

Positive Conditions:

• Resilient Domestic Demand: Despite the weak export picture, household consumption and government spending have remained strong, partially offsetting the negative external shock.²¹
• Inflation Control: Inflation has been on a downward path in Canada, compared to other major economies, giving the Bank of Canada room to cut rates if needed to stimulate the economy.²²
• Diversification and Resilience: Some Canadian regions, particularly the Atlantic and Prairie provinces, are outperforming the national average due to strong natural resource sectors and diversified trade beyond the U.S.²³
• Government Support: The Canadian government has implemented measures to support businesses facing trade challenges and address long-term issues, such as interprovincial trade barriers.²⁴
• Portfolio Diversification: The broadening of the bull market beyond a few key sectors underscores the importance of a diversified portfolio, which can help mitigate volatility and risk.²⁵