Will he or won’t he? Since former president and president-elect Donald J. Trump threatened tariffs—25% on goods from Canada and Mexico and 10% on imports from China—investors have been asking whether this is a negotiating tactic or a policy he will actually pursue. It could be both; it’s certainly intended to influence negotiations. Even if tariffs are implemented, the outcomes are uncertain, which is why I’m not losing sleep over the headlines and remain optimistic about the market outlook for 2025.
That said, I’m not ignoring the risks. I continue to follow my disciplined approach: conducting careful research, concentrating on finding value, and adapting portfolios when necessary. It’s not flashy, but a steady, fundamentals-based strategy is a reliable way to build a resilient portfolio that can withstand market noise and geopolitical surprises.
Below is a concise look back at 2024 and how it positions Canadian investors as we move into 2025.
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In many respects, 2024 echoed 2023. Technology stocks, driven by the excitement around artificial intelligence (AI), continued to lead. Large-cap tech firms—often referred to as the market’s core leaders—delivered strong performance and dominated headlines.
That dynamic shifted in September, when the U.S. Federal Reserve cut interest rates by half a percentage point—its first reduction in four years. Lower rates broadened the market’s rally beyond tech, giving more sectors room to recover and participate. Combined with steady economic indicators, this created favorable conditions for investors.
A well-managed U.S. presidential transition—rapid results that were accepted and uncontested—also helped calm markets and supported further gains. As 2024 closed, the U.S. economy remained strong, and the market finished the year on a high note.
What’s ahead for the markets in 2025
Historically, the period from November through January tends to be one of the strongest seasonal stretches for investors. The old investing adage, “As goes January, so goes the year,” often reflects the market’s early-year momentum.
For 2025, I expect more moderate, but healthy, returns. After back-to-back years with lofty gains, I’m forecasting returns closer to a traditional range—around 8% to 12%—rather than another year of 20%-plus growth. High market valuations are a cautionary signal: many stocks appear costly relative to earnings, and that suggests a more tempered pace of upside.
Managing expectations is critical. Positioning portfolios for normalized returns helps avoid disappointment. If you expect double-digit returns and the market delivers more modest gains, you’ll feel the sting. If your expectations are realistic, steady performance will feel satisfactory.
Where to look for value in 2025
Certain sectors that pulled back in 2024 look more attractive now. Big pharmaceutical and biotechnology companies experienced price declines after political developments raised regulatory uncertainty. Names that were hit include several major drugmakers, and for long-term investors these dips present opportunities to acquire shares in otherwise solid businesses at lower prices.
In technology, some names also sold off on regulatory and legal news. These pullbacks can be entry points for established companies with durable competitive advantages. Selectivity is important: focus on businesses with sustainable revenue models and credible paths to growth.
Canadian bank stocks, which for a long time offered reliable dividends but limited capital appreciation, saw renewed interest in 2024. Major banks reached record levels, and valuations for some are now elevated. When price-to-earnings ratios climb above long-term norms, consider waiting for better entry points or shifting to smaller financial firms that trade at more attractive multiples. Several regional and specialty lenders remain reasonably valued and may offer both income and upside potential.
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What Canadian investors can do in 2025
Avoid making investment decisions based only on the latest headlines or short-term market moves. Instead, focus on high-quality companies that lead their industries and trade at reasonable valuations. Dividend-paying businesses with durable cash flow can provide both income and downside protection. A patient, research-driven approach—diversifying across sectors and maintaining a long-term view—remains one of the most reliable pathways to investment success, regardless of market cycles.
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