Market Insights: 2025: A Year in Review

Macroeconomic and Market Developments: 

• North American markets were mixed this week. In Canada, the S&P/TSX Composite Index closed 0.72% higher. In the U.S., the Dow Jones Industrial Average fell 0.67% and the S&P 500 Index increased 0.10%. 
• The Canadian dollar decreased this week, closing at 72.42 cents vs 72.65 USD cents last week. 
• Oil prices were down again this week, with U.S. West Texas crude closing at US$56.57 vs US$57.45 last week.  
• The price of gold rose this week, closing at US$4,369 vs US$4,330 last week. 
• U.S. labour market conditions remained resilient in November, with 64,000 jobs added, beating expectations, and private-sector hiring strengthening, particularly in health care and construction. While headline employment was weighed down by continued government job cuts tied to administrative restructuring, private payrolls have now posted solid gains across October and November, and civilian employment rose as the labour force expanded. Wage growth slowed to 3.5% year-over-year, easing inflation concerns, while rising participation pushed unemployment modestly higher — a healthy sign of confidence in job availability rather than labour market stress. Overall, the data reinforce the view of a cooling but stable expansion, consistent with a soft-landing narrative rather than deterioration.  
• U.S. consumer spending showed underlying resilience in October, with headline retail sales flat but core sales rising a strong 0.6%, beating expectations and pointing to steady momentum heading into Q4. Weakness was concentrated in autos following the expiration of EV tax credits, while online and non-store sales jumped as early holiday spending began. Excluding volatile categories, retail activity remains on track to grow at roughly a 3.3% annualized pace in Q4, reinforcing the view that consumer demand is cooling in an orderly way rather than rolling over.  
• U.S. inflation showed further meaningful progress in November, with CPI rising just 0.2% over the past two months and the year-over-year rate easing to 2.7%, well below expectations. Core inflation slowed to 2.6%, its lowest level since 2021, as housing costs continued to cool and price declines broadened across key services categories such as airfare, hotels, apparel, and auto insurance. Encouragingly, real wages are now clearly rising, with real hourly and weekly earnings up 0.8% year over year, signaling that disinflation is increasingly benefiting consumers rather than weighing on demand.  
• Canadian retail sales slipped 0.2% in October, pointing to a muted start to the holiday shopping season, as declines in alcohol sales (–10.6%), groceries, and some discretionary categories weighed on overall activity. However, early data suggest momentum improved in November, with Statistics Canada’s advance estimate showing a 1.2% rebound, led by stronger spending on durable goods such as furniture and electronics, while vehicle sales also edged higher.  
• Canada will begin formal talks with the U.S. in January to review the Canada–U.S.–Mexico Agreement (CUSMA), with Prime Minister Mark Carney framing the negotiations as an opportunity to deepen continental cooperation in key sectors such as autos, steel, aluminum, energy, and forestry. While Washington has flagged concerns around Canadian dairy access, digital services rules, alcohol distribution, and provincial procurement policies, Carney reiterated Ottawa’s commitment to protecting supply management and signalled openness to sector-specific solutions, including potential tariff relief and a renewed forest products deal aimed at easing U.S. affordability pressures. 

 

Weekly Diversion: 

Check out this video: Some of the best GoPro footage of 2025 

2025: A Year in Review 

As 2025 comes to a close, the year was defined by political continuity in Canada, a strong and resilient U.S. economy, and a global environment shaped by geopolitical conflict, monetary easing, and structural economic realignment. Below is a consolidated, year-level summary of the major developments that influenced markets and investor sentiment. 

Canada: Politics, Economy & Policy 

Federal Election & Political Continuity 

• Canada held a federal election in 2025, resulting in the Liberal Party remaining in power. 
• Mark Carney, a former senior minister in Justin Trudeau’s cabinet, became Prime Minister. 
• The result represented leadership change without a change in governing party, and markets broadly viewed the outcome as policy continuity rather than a regime shift. 

Fiscal Policy & Economic Strategy 

• The new government introduced “Budget 2025: Canada Strong,” positioning it as a generational reset aimed at improving economic self-sufficiency and reducing reliance on a single trade partner. 
• The budget emphasized: 
• Cutting operating spending and inefficiencies 
• Middle-class tax relief 
• Cancellation of the federal consumer carbon price 
• Enabling roughly $1 trillion in investment over five years 

Economic Growth & Inflation 

• Canada’s real GDP growth for 2025 was estimated between ~1.1% and ~1.5%, below long-term trend but showing signs of stabilization later in the year. 
• Inflation averaged near the Bank of Canada’s 2% target, with goods inflation easing while shelter costs remained elevated. 

Monetary Policy & Labour Market 

• The Bank of Canada reduced its policy rate to 2.25% by year-end, marking a clear pivot from restrictive policy. 
• The unemployment rate averaged roughly 6.8%–7.1%, reflecting a cooling labour market after prior tightening. 
• Higher housing starts and stronger exports late in the year supported a more constructive outlook. 

Energy, Infrastructure & Critical Minerals 

• Ottawa announced a multi-tranche nation-building program exceeding $100 billion, spanning: 
• Nuclear power expansion (including Darlington) 
• LNG projects 
• Critical mineral development (graphite, tungsten) 
• Trade and transport corridors 
• These initiatives were framed around energy security, defence supply chains, and positioning Canada as a long-term energy and resource supplier. 

Trade & Domestic Challenges 

• Trade relations with the U.S. became more strained, with new tariffs introduced on select goods, increasing uncertainty for exporters. 
• Affordability and housing remained dominant domestic issues. 
• Labour unrest emerged, highlighted by a nationwide Canada Post strike disrupting mail and parcel services. 

United States: A Strong and Resilient Year 

Economic Performance 

• The U.S. economy materially outperformed most developed peers in 2025. 
• Full-year real GDP growth averaged ~2.8%, with a standout quarter delivering 3.8% annualized growth driven by consumer spending and business investment. 
• Inflation moderated to approximately 2.7% year-over-year by late 2025, supporting real income growth. 

Labour Markets & Monetary Policy 

• The U.S. unemployment rate averaged ~4.4%–4.6%, remaining historically low despite some cooling. 
• The Federal Reserve cut rates multiple times, ending the year with a policy range of ~3.50%–3.75%, improving financial conditions. 

Trump Administration – Year One 

• President Donald Trump’s return to office in January 2025 set the tone for a decisive policy year. 
• Key features included: 
• A clear pro-growth and pro-business policy posture 
• Strong emphasis on domestic energy production 
• A more assertive and nationalist approach to trade and foreign policy 
• U.S. equity markets responded positively to policy clarity, earnings resilience, and improved business confidence, reinforcing the U.S. as a primary destination for global capital. 

Global Developments

Geopolitics & Security 

• The Russia–Ukraine war entered its fourth year, with no durable resolution. 
• The Israel–Gaza conflict saw a ceasefire alongside significant diplomatic engagement. 
• Additional conflicts in Sudan, Pakistan, and heightened U.S. military actions abroad underscored ongoing global instability. 

Religion, Society & Governance 

• The death of the sitting pope and election of Pope Leo XIV marked a rare and globally significant Vatican transition. 
• Protest movements and political unrest appeared in several regions, often driven by younger demographics and social media policy disputes. 

Climate, Energy & Health 

• Renewable energy overtook coal as the world’s largest source of electricity, driven primarily by wind and solar expansion. 
• Extreme weather events continued globally, reinforcing long-term climate and insurance considerations. 
• Global health outcomes showed progress, with declining chronic disease mortality in most countries. 

Sports & Cultural Highlights 

Four Nations Face-Off  

• Canada won the 2025 Four Nations Face-Off, defeating the United States 3–2 in overtime. 
• The best-on-best tournament drew strong North American viewership and reinforced hockey’s continued cultural relevance. 

MLB World Series 

• The 2025 World Series was an all-time classic, with the Los Angeles Dodgers defeating the Toronto Blue Jays in seven games. 
• The series was capped by an 11th-inning Game 7 victory, with Yoshinobu Yamamoto earning MVP honours. 

NHL Stanley Cup Final 

• The Florida Panthers defeated the Edmonton Oilers in six games to win a second consecutive Stanley Cup. 
• Sam Reinhart scored four goals in the clinching Game 6, while Sam Bennett captured the Conn Smythe Trophy. 

Calgary Stampede 

• The Calgary Stampede again attracted over 1.4 million attendees, highlighting its economic and cultural importance to Alberta. 

Sources:  Yahoo Finance, First Trust, The Canadian Press, CBS, Yahoo Sports, IMF World Economic Outlook 2025, Bank of Canada; Federal Reserve; FOMC statements, Government of Canada; global energy agencies, Calgary Stampede official attendance reports, Hockey Canada, FOMC Summary of Economic Projections, Federal Reserve, U.S. Bureau of Labor Statistics, Statistics Canada Labour Force Survey, Elections Canada, CBC, CTV, RBC, Britannica.

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