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.
Executive summary
Uncertainty around U.S. tariffs remains, but the worst-case scenario has largely been ruled out as progress toward trade deals is being made. In our base case scenario, economic growth should slow, but not stop, and any rise in inflation should prove temporary. Stocks can perform well against this backdrop if policy, earnings and investor sentiment cooperate, and bonds offer decent return potential with only moderate valuation risk.
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Canada
Analysts are anticipating that Canada’s economy will expand at a below-trend rate of 1.2% in 2025, down from 1.5% in 2024, and that growth will slow even further - to 1.0% - in 2026.
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United States
Based on U.S. Federal Reserve surveys and explicit guidance provided by companies in first-quarter earnings reports, America’s largest companies can expect a hit of about 10% to after-tax profit margins, which could result in a decline in S&P 500 earnings growth this year to about 4% from 8%.
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Europe
The commitment of Europe’s two largest economies to higher government spending makes us more optimistic about European equity markets over the medium term, as we will finally see some much-needed momentum for domestic European demand.
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Asia
Tariffs and weak global demand could slow Asia’s exports and capital expenditures in the second half of 2025.
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Emerging markets
Emerging markets have outperformed the U.S. so far this year and it is conceivable in our view that this trend continues.