We’ve anchored our 2026 outlook in four key macroeconomic pillars: monetary easing, fiscal expansion, the AI supercycle and the wealth effect. Central banks are shifting from restrictive policy to accommodation, with continued rate cuts expected from both the Bank of Canada and the U.S. Federal Reserve. This boost in liquidity is already supporting stock values, particularly in long-duration sectors like technology.
Governments are leaning into fiscal stimulus, with Canada prioritizing housing and productivity, and the U.S. locking in tax cuts to bolster consumer spending. Meanwhile, the AI investment boom continues to reshape capital expenditure trends, driving productivity and earnings growth. The wealth effect, fuelled by strong household balance sheets and rising equity markets, is reinforcing consumption, especially among higher-income households that account for a disproportionate share of spending.
Global trade is rebounding, U.S. manufacturing and housing are stabilizing, and recession indicators remain subdued. While skepticism lingers — particularly around market breadth (the actual number of stocks contributing to growth) and the sustainability of AI-driven gains — the data suggests a durable expansion supported by fundamentals.
The story of 2026 is not one of retreat, but of renewal. The economic cycle is evolving, not ending. Investors who remain focused on earnings, valuations and macro fundamentals are well-positioned to benefit from the opportunities ahead. This is a market that rewards discipline, diversification and a long-term view.
For investors, the message is clear: resist the temptation to react to every headline. Instead, lean into quality, stay balanced across asset classes and geographical regions, and embrace the cycle as it unfolds.
Read our full 2026 Market Outlook to discover how these foundational pillars can guide portfolio decisions and help investors stay focused on progress in the year ahead, rather than noise.
