Canadian investors toast 2025

If you are someone who makes your own investment decisions and remained disciplined chances are good you had a pretty good year. If you owned gold, technology, or Canadian bank stocks, it has been an exceptional one.

This was despite the many market and geopolitical traumas since Donald Trump’s election. In fact, our stock market performance surprisingly, beat his.

The TSX Composite Index ended the year with a 27% year-to-date, the Nasdaq 24% and S&P 500 up 16%. It doesn’t get much better than that.

It is possible you rewarded yourself for the good behavior. You couldn’t but help feel better glancing at the top line of the monthly portfolio statement. Perhaps you were a little more generous with holiday gifts. Maybe there was an upgrade to your home, a new car, or a trip – this one within Canada.  

 The Wall Street Journal recently explored the wealth effect, looking at why investors are feeling good and how 2025 stock market gains powered consumer spending. One suspects the trend applies here too. The Journal article observed that even if the gains are only on paper, it fueled spending at restaurants, business-class airline tickets and home improvement.   

It was a different story for those without investments. They feel anxious and are worried about inflation, particularly food inflation. They don’t feel secure in their jobs and don’t see things getting better. A monthly University of Michigan consumer sentiment index finds the sentiment of people who don’t own stocks is at the lowest level since the university began tracking it in 1998.

Some anecdotal confirmation comes from quick-serve companies like McDonald’s and Restaurant Brands International, which owns Tim Hortons and Burger King. Less affluent customers are coming less often and spending less. Chains like Dollarama in Canada and Dollar General in the US are booming with their value proposition. Loblaws and Metro are seeing big shifts to their discount chains.

As a result, the number of voices raised in caution is increasing. While the tariff shocks for US consumers are less than expected, inflation is rising as they put pressure on prices. Investors wonder how long the AI boom can carry on and whether it will end like the 1999 Internet bust.   

The conclusion is that it is a two-speed economy with a wide gulf between them. Since only one half is carrying things and stock market gains are behind that, it follows that if share prices fall the wider impact could have a big ripple.

 As an investor there are two things you should do. The first is enjoy your 2025 gains. The second is to prudently prepare for what will come next. “Will’ because it is a question of when, not if. The market will correct itself. We don’t know when, how long or how deep, but we do know it is coming.

That doesn’t mean selling everything. In a recent blog post Tom Bradley, co-founder of Steadyhand Investments noted that if sell your stocks when faced with uncertainty, you face an even bigger decision: When to get back in? If you sell at the wrong time and miss a year or two of returns, the buy-back decision becomes even more difficult to make.

Mr. Bradley says investors have no excuse  for not getting ready for another bear market and offers a checklist. Here are some of the items:

• Remove the word ‘if’ from your vocabulary because it limits your ability to mentally prepare. It should be: “When my stocks are dropping, when the headlines are ugly, and when it feels like my plan isn’t working.”
• Your strategic asset mix is the mix of asset types, industries and geographies that help you reach your goals. After a long market run, some will be overweight and others under.  Now is the time to rebalance.
• Ask yourself if a bet on a particular theme or sector doesn’t work out, how badly will it hurt? If your portfolio drops 20% will you be able to stick to your guns? If you can’t confidently say yes, then you have the wrong mix.
• Set aside money for such things as travel or a home renovation. Put the cash in a money-market fund or GIC. If you’re retired, make sure to set aside a cash cushion.

By using the same critical thinking that led to your recent gains, you can position yourself for success, no matter what lies ahead in 2026.

This article appeared in a recent issue of the Internet Wealth Builder.  For information on how to reprint this article please view this page.