Canada has significantly underperformed the rest of the world over the past decade. Just look at the graph below. So you may ask yourself why we are becoming more constructive and optimistic on Canada?

One of the best ways to grow a portfolio is to favor markets where improving fundamentals are not yet fully reflected in valuations, and Canada fits that profile. Economic data has started to turn. Real GDP rebounded strongly in the third quarter, unemployment has fallen to its lowest level since mid-2024, and business confidence is improving with greater willingness to invest and hire. Late 2025 was meaningfully better for Canada than most expected.

Now, I realize that challenges remain. Household deleveraging, CUSMA uncertainty, and years of underinvestment in productivity and capital spending continue to weigh on long-term growth. OECD data clearly shows how far Canada has lagged the U.S. in real investment since 2015, and government policy must now work to reverse that trend.

However, that trend seems to be reversing. Just take a look at the TSX 300 in 2025. It actually outperformed the S&P 500 for the first time in many years. As all of you know, we’re big believers in Newton’s first law - “an object in motion stays in motion until acted upon”. Canada’s stock market started in motion in early 2025 and improving fundamentals suggest that this trend will continue. Rising commodity prices, renewed investment momentum and “hopefully” a change in government attitude has brightened Canada’s future. We increased our Canadian exposure last year and it contributed positively to the portfolios. We believe 2026 will be no different!!

I have also included a piece from our CIBC Economic team entitled “Paying no attention to that man behind the curtain”.

As always, if you have any questions, please feel free to give us a call at any time.

Have a great weekend.

Milan