The following market commentary is courtesy of the Plan’s Canadian Equity investment manager, Connor, Clark & Lunn Investment Management.
Markets entered the fourth quarter of 2025 with improving risk sentiment and reduced volatility, supported by resilient growth data earlier in the quarter and continued disinflation across major economies. That optimism was tested intermittently by pockets of volatility, ranging from renewed concerns around regional banks in the US to shifting expectations for monetary policy, while the US federal government shutdown disrupted data flow and added uncertainty and noisy signals. Still, overall sentiment remained constructive as the quarter progressed. By year-end, the dominant narrative was one of gradual cooling rather than contraction, with economic data reinforcing a “soft-landing” theme.
Click to enlarge image
Against this backdrop, equity markets remained well supported, with outperformance from Canada driven by the materials sector, which benefited from continued strength in commodity prices. Although precious metal prices softened in the final weeks of December, the sector finished the quarter in solidly positive territory. During the fourth quarter, the S&P/TSX Composite delivered a return of 6.3%, outperforming the S&P 500 and theMSCI All CountryWorld Index, which posted returns of 2.7% and 3.7%, respectively, in local-currency terms. Emerging market equities also benefited from exposure to metals, rising 5.7% in local-currency terms.
The US Federal Reserve lowered its target interest rates by 50 basis points (bps) over two meetings to 3.5-3.75%, while the Bank of Canada reduced its overnight rate by 25 bps to 2.25%. For the quarter, two-year yields rose 12 bps in Canada and fell 13 bps in the US, while 10-year yields rose 22 bps in Canada and 2 bps in the US. Credit spreads narrowed, and the FTSE Canada Universe Bond Index declined by 0.32% over the fourth quarter.
Disclaimer
Unless stated otherwise, all data is as at December 31, 2025 and stated in Canadian dollars. Source: Connor, Clark & Lunn Financial Group Ltd., Merrill Lynch, Pierce, Fenner & Smith Incorporated, S&P Global Ratings, and MSCI.
Market Commentary – Fourth Quarter 2025
January 19, 2026
The following market commentary is courtesy of the Plan’s Canadian Equity investment manager, Connor, Clark & Lunn Investment Management.
Markets entered the fourth quarter of 2025 with improving risk sentiment and reduced volatility, supported by resilient growth data earlier in the quarter and continued disinflation across major economies. That optimism was tested intermittently by pockets of volatility, ranging from renewed concerns around regional banks in the US to shifting expectations for monetary policy, while the US federal government shutdown disrupted data flow and added uncertainty and noisy signals. Still, overall sentiment remained constructive as the quarter progressed. By year-end, the dominant narrative was one of gradual cooling rather than contraction, with economic data reinforcing a “soft-landing” theme.
Click to enlarge image
Against this backdrop, equity markets remained well supported, with outperformance from Canada driven by the materials sector, which benefited from continued strength in commodity prices. Although precious metal prices softened in the final weeks of December, the sector finished the quarter in solidly positive territory. During the fourth quarter, the S&P/TSX Composite delivered a return of 6.3%, outperforming the S&P 500 and theMSCI All CountryWorld Index, which posted returns of 2.7% and 3.7%, respectively, in local-currency terms. Emerging market equities also benefited from exposure to metals, rising 5.7% in local-currency terms.
The US Federal Reserve lowered its target interest rates by 50 basis points (bps) over two meetings to 3.5-3.75%, while the Bank of Canada reduced its overnight rate by 25 bps to 2.25%. For the quarter, two-year yields rose 12 bps in Canada and fell 13 bps in the US, while 10-year yields rose 22 bps in Canada and 2 bps in the US. Credit spreads narrowed, and the FTSE Canada Universe Bond Index declined by 0.32% over the fourth quarter.
Disclaimer
Unless stated otherwise, all data is as at December 31, 2025 and stated in Canadian dollars. Source: Connor, Clark & Lunn Financial Group Ltd., Merrill Lynch, Pierce, Fenner & Smith Incorporated, S&P Global Ratings, and MSCI.