Kyle Prevost, creator of 4 Steps to a Worry-Free Retirement, Canada’s DIY retirement planning course, shares financial headlines and offers context for Canadian investors.
Can we make sense of the 2025 markets?
Predicting stock markets is notoriously difficult. There are far too many variables—monetary policy, geopolitics, consumer behaviour, and unexpected shocks—to make precise forecasts. Rather than offer investment advice, the observations below are meant to highlight trends and possible outcomes that Canadian investors should watch in 2025.
President Trump may impose tariffs
One major uncertainty for 2025 is whether a new U.S. administration will follow through on plans to impose tariffs on imports, including goods from Canada. Tariffs are being discussed as a lever to address trade deficits and to generate revenues that could support other policy priorities. While a blanket 25% tariff on all Canadian goods seems unlikely, a meaningful tariff on many categories—perhaps in the low double digits—would be disruptive.
Energy exports are often treated differently in trade negotiations, so oil and gas might be exempted. However, a broad tariff regime could trigger retaliatory measures, harming bilateral trade and reducing cross-border investment. For Canadian exporters and manufacturers, even a modest tariff can reduce sales to the U.S. and squeeze profit margins.
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U.S. inflation could rise again
Tariffs, large tax cuts, and rising government deficits can be inflationary, especially if they coincide with stronger consumer spending driven by gains in wealth or employment. If inflation picks up significantly—say, creeping back above 3%—central banks may delay or reverse plans to cut interest rates. That would keep borrowing costs higher for longer, put upward pressure on mortgage rates and strengthen the U.S. dollar, which in turn would complicate any tariff-based strategy aimed at narrowing trade gaps.
The first half of 2025 may outperform the second
Political victories and optimistic rhetoric can produce an early-year market rally as investors re-price future growth and policy expectations. This election-driven “sugar high” could lift stock markets in both Canada and the U.S. during the first half of 2025. But valuations in some sectors—particularly in large U.S. technology companies—are already elevated. If promised productivity gains (for example from AI) don’t materialize quickly, or if tariffs and a stronger dollar begin to drag on corporate earnings, markets could lose momentum later in the year.
Dividend-paying Canadian stocks may regain favour
If long-term interest rates fall and investors grow more cautious about high-growth names, yield-oriented stocks often look more attractive. In Canada, utilities, pipelines and other companies known for steady dividends can appeal to investors seeking predictable cash flow. As guaranteed returns from fixed-income instruments like GICs mature, some investors may rotate back into dividend payers to preserve income. Sector performance will vary—banks, insurers and other financials respond differently to rate changes—so diversification remains important.
Housing prices in Canada could cool
There are competing forces in the housing market. The Canadian Real Estate Association’s forecast for significant price gains is one view, but other factors may limit appreciation: slower population growth or lower immigration targets, a still-firm yield curve where longer-term bond yields don’t fall as fast as the central bank policy rate, and a large supply of condos in some urban markets. These dynamics suggest buyers may retain leverage over sellers in several major regions, and headline price gains could be more modest than some forecasts imply.
Oil prices likely pressured below US$75 a barrel
Global oil markets are shaped by supply decisions from major producers and by demand prospects—particularly in large consuming countries. With inventories still substantial in many regions and growth in some demand centres subdued, it will be difficult for prices to sustain a long-term rise without coordinated supply reductions. Absent a clear pickup in global demand, prices are more likely to remain under pressure.
BYD may extend its lead over Tesla outside North America
One clear trend in electric vehicles is intensifying competition. BYD has emerged as a major global EV manufacturer with rapid production growth and strong distribution in several markets; backing from well-known investors has helped fuel that expansion. In North America, tariffs and policy choices may protect existing players, but across the rest of the world BYD and other non-U.S. manufacturers are expanding into markets where Tesla once had a clearer advantage. The competitive landscape is shifting quickly.
Bye for now
After several years of writing this column to help readers make sense of the markets, I’m stepping back from weekly contributions to focus on my retirement-planning course and other writing commitments. You’ll still see occasional pieces from me in the pages of MoneySense. My thanks to the editors and to readers who have followed these market observations over the years.
“An investment in knowledge pays the best interest!”
— Benjamin Franklin
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