Market Watch: December 2025

Closing Out a Remarkable Market Year

December 2025 marked the end of an extraordinary year for North American markets. US equities posted their third consecutive year of double-digit returns, while Canadian markets stunned with total returns of over 30%, their best performance in over 15 years. What stood out was not only the strength of returns, but also the differences in the underlying drivers. In the US, gains remained closely tied to the ongoing expansion of artificial intelligence. Canada’s story unfolded along a different path, supported by a powerful rally in precious metals and steady contributions from financials and energy.

By year-end, the overall picture was less clear-cut. Corporate earnings remained supportive and central banks had shifted toward easier policy, yet trade uncertainty and signs of slowing economic momentum tempered enthusiasm. The contrast was especially visible in commodity markets: gold climbed roughly 64% to new record highs, while oil prices fell more than 20% as supply concerns resurfaced.

Global Market Overview

US equity markets ended the year solidly higher, with the S&P 500 Total Return Index up around 18%. Momentum softened toward year-end, however, as markets recorded four consecutive down sessions in late December, driven by profit-taking in large-cap technology stocks. Economic data remained mixed. Q3 GDP growth accelerated to 4.3%, the strongest in two years, while the labor market showed signs of cooling, with November job gains slowing to 64,000 and unemployment rising to 4.6%. Inflation continued to ease, with headline CPI at 2.7%, though core inflation remained elevated near 2.6%.

In December, the Federal Reserve cut rates by 25 basis points, bringing the policy range to 3.50–3.75%, while signaling a cautious approach to further easing. Globally, commodities were a defining theme in 2025: gold surged 64%, silver jumped 144%, and oil declined 23% amid concerns of oversupply.

Canadian Market Overview

The S&P/TSX Total Return Composite surged 31%, the best return since 2009, setting multiple record highs along the way and significantly outperforming US benchmarks. Strength in precious metals was the primary driver, but gains were supported by stability in financials and resilience in energy.

Real GDP grew by 0.6% in the third quarter, rebounding from a 0.5% contraction in the second quarter. The labor market also improved, with 53,600 jobs added in November, marking the third consecutive month of gains, while the unemployment rate declined to 6.5% from 6.9%, its lowest level in over a year. Against this backdrop, the Bank of Canada chose to keep its policy rate unchanged at 2.25% in December, following a cut in October and 225 basis points of cumulative easing over the cycle. Currency markets also reflected Canada’s relative strength. The Canadian dollar appreciated roughly 4.7% against the US dollar over the year, ending near 1.37.

Canadian Sector Performance

• Materials were the clear standout, nearly doubling over the year as gold and silver prices surged. Gold miners benefited directly from the sharp rise in bullion prices, while silver producers captured outsized gains from an extraordinary rally in the metal.
• Financials also played a critical role, advancing more than 30% in 2025. The Big Six banks saw margins stabilize, and credit quality remained solid.
• Energy stocks proved more resilient than underlying oil prices might suggest. Despite crude oil declining sharply, integrated producers focused on efficiency and shareholder returns, while pipeline companies continued to offer stable cash flows.

Important Dates

• January 9: Canada Unemployment data
• January 13: U.S. CPI Inflation
• January 19: Canada CPI Inflation & BOC Interest rate decision
• January 23: Canadian Retail Sales
• January 26: Fed Interest rate decision

Portfolio Strategy Tip

With 2026 now underway, the emphasis may be shifting from maximizing upside to managing exposure. The gap between US mega-cap technology leadership and Canada’s resource-driven performance underscores how quickly market leadership can change. Periods like this often favor investors who reassess their positions, trim crowded trades, and ensure portfolios are not overly dependent on a single theme, particularly when valuations have moved faster than fundamentals.

Final Thoughts

The past year delivered impressive returns, supported by solid earnings and a more accommodative policy environment. At the same time, underlying signals are becoming less uniform. Labor markets are cooling, inflation progress remains uneven, and global trade dynamics continue to introduce uncertainty. As markets move into 2026, a more selective approach may be required. Investors who remain diversified, flexible, and focused on fundamentals are likely to be better positioned as the next phase of the cycle unfolds.

Wishing you a prosperous 2026!