To help you better understand the performance of funds presented in your quarterly statement, Jean‑François Dumais*, Investment Strategy Manager at the Bâtirente financial services firm, takes a look back at the economic and market highlights of 2025.
The economy in 2025
Inflation
As of November 30, 2025, the inflation rate had eased to 2.2% in Canada, moving closer to its 2% target after having peaked at 8.1% in the summer of 2022. In the United States, the inflation rate stood at 2.7% on the same date.
Key interest rates
Since the end of 2024, the Bank of Canada has lowered its policy rate by 0.25% four times, bringing it from 3.25% down to 2.25%. No additional cuts are expected in 2026, as the Bank appears intent on limiting the risk of renewed inflationary pressures.
In the United States, the Federal Reserve (Fed) has reduced its key interest rate three times by 0.25%, moving it from 4.5% to 3.75%. Further cuts are being considered in 2026, despite inflation remaining high. Pressure from the US president to continue easing could also shape future inflation dynamics.
Recession or no recession?
Canada’s economic growth is slowing, with its gross domestic product (GDP) increasing by 1.2% year over year. However, a recession still appears unlikely: the labour market remains strong, and most economists expect positive growth in 2026.
In the United States, economic growth remains solid, with GDP rising by more than 4%. There too, the likelihood of a recession remains low.
Markets in 2025
Equities
The economic backdrop outlined above translated into notably strong market performance.
The global all-country equity index delivered a robust return of 16.6% (in Canadian dollars), driven largely by exceptional results outside the US. Developed markets’ equities (Europe and Asia) posted gains of 25.7% (in Canadian dollars), while emerging markets’ equities reached 27.3% (in Canadian dollars).
Meanwhile, Canada’s main equity index (S&P/TSX) stood out with an impressive 31.7% return, propelled primarily by the remarkable surge in gold and silver stocks, which advanced by 144.5%.
Bonds
Short-term bond yields declined, largely due to key interest rate cuts by central banks and concerns about a potential economic slowdown. As a result, the FTSE Canada Universe Bond Index posted a positive return of 2.6%.
2026 market outlook
The United States could have a significant influence on financial markets in 2026, with Donald Trump’s presidency expected to introduce some volatility.
Key risks to monitor include:
- After three consecutive years of strong performance, equity markets valuations are high.
- Midterm elections will be held in the United States. In the past, stock market returns have been weaker around this time.
- Sustained pressure to lower the key interest rate could contribute to renewed inflation.
- The US public debt level remains high.
- Several geopolitical factors remain a concern, including Venezuela, Greenland, Taiwan, tariffs-related tensions, and the conflict in Ukraine.
In the current market environment, adopting a portfolio diversification strategy, such as the one offered by Bâtirente Funds, is essential.
Sources: Bloomberg and Desjardins Financial Security
*Jean-François Dumais has worked as an Investment Strategy Manager at Bâtirente since 2019. Along with a Master of Business Administration (MBA) degree (Finance specialization), he has over 20 years’ experience in financial markets.