Join Paul Holba, President and CIO, Empire Life Investments Inc., as he navigates the 2026 market outlook where geopolitical volatility and persistent inflation persist, while AI drives growth, and key themes emerge across fixed Income, equities, and the rise of "Global Champions".
2025 saw considerable volatility amid ongoing geopolitical conflicts and rising protectionism. However, there were also some bright spots with AI driving growth across the globe, and a broadening of high performing sectors beyond the Magnificent 7.
As we head into the new year, there are a number of themes we will be watching.
Starting with Fixed Income, short term bond yields have been declining in both Canada and the US.. However, longer dated bonds have been increasing in both countries as investors demand higher compensation to hold them.1
We expect inflation to remain above the 2% target set by most central banks in the developed economy, continuing to weigh on households in the new year.
Taking a look at equities—starting here in Canada. We will be following discussions around the Canada-U.S.-Mexico Agreement, which is slated for review in July. A favourable outcome is vital to Canada’s economic health as 2.3 million Canadian jobs are tied to exports.2 The federal government has also been accelerating trade talks and nation building projects in an attempt to enhance Canada’s economic resilience. We will continue to monitor the progress that has been made on these initiatives in the new year.
In the U.S., the full impact of the tariffs has been relatively muted. However, we will continue to watch for changes in the CPI, where we are starting to see some upward pressure from the tariffs.3 We remain optimistic about the U.S.’ rapid adoption of nuclear energy, having signed a historic partnership with 3 private firms to deploy a new fleet of nuclear reactors nationwide.4
AI also remains a focus heading into the new year, as we expect another substantial increase in capital spending by hyperscalers in 2026. Hyperscalers are companies that provide large scale computing services through massive data centres.
Finally, we continue to see opportunities in what we call “Global Champions”- blue chip companies with a defendable competitive advantage, excellent management teams, healthy cash flows and strong balance sheets.
Although the Chinese economy continues to be impacted by declining residential property prices, we are seeing pockets of strength- namely in luxury goods sales and technological innovation. Europe still suffers from muted growth and ongoing geopolitical issues- these are reflected in valuations, and we expect this will carry into the new year.
These are some of the key themes we believe will shape markets in the new year. For more, please read our 2026 market outlook. Thank you for watching.
1 Bloomberg, October 31, 2025.
2 “The Cost of Canada-U.S. Trade Disruption on Full Display with New Trade Tracker”, Canadian Chamber of Commerce, January 14, 2025
3 Bureau of Economic Analysis, Consumer Price Index, September 2025
4 “U.S. strikes $80 billion deal for new nuclear power plants”, https://www.reuters.com/business/energy/westinghouse-electric-cameco-corp-brookfield-asset-management-80-bln-nuclear-2025-10-28/
December 2025