Canadian equities have outperformed this year, largely thanks to the strength of gold — but, in the year ahead, the BlackRock Investment Institute (BII) calls for overweighting U.S. stocks, and keeping Canada at a market weight.
In a new report, the firm detailed its investment outlook for 2026, saying that it remains “pro risk” and enthusiastic about the tech sector, which underpins the call to continue overweighting U.S. equities.
“We see the AI theme supported by strong earnings, resilient profit margins and healthy balance sheets at large listed tech companies,” it said — adding that continued easing in U.S. monetary policy, and an overall reduction in policy uncertainty also supports its call on U.S. stocks.
For Canada, while equity returns have outpaced both the U.S. and developed markets generally so far this year, these gains have been concentrated in the materials sector, “where gold companies make up about three-quarters of the industry,” it noted.
Looking ahead however, this gold-driven outperformance isn’t expected to continue in the long run.
“We like gold as a tactical diversifier with unique drivers of return, but we don’t see the precious metal as a long-term portfolio hedge,” the report said.
As a result, it’s “neutral” on Canadian equities, it said, “given Canada’s smaller tech footprint and deep ties to U.S. trade.”
While trade-related uncertainty “has fallen from its peak,” BII said that it sees that challenge continuing to loom over Canada’s economy and markets, “as the country adapts to a changing global trading environment.”
Additionally, macro factors, such as labour market weakness, “stubborn inflation” and higher tariffs, “cloud the outlook,” it said.
“U.S. tariffs could still be a serious drag on its economy,” it noted. “Much will depend on how Canada-U.S. trade negotiations — already extensive this year — evolve in 2026, particularly with a review of USMCA due by July.”
And, while the Bank of Canada supplied monetary stimulus this year, in 2026, BII sees the central bank holding rates steady, “as it weighs the tariff impact.”
On the fiscal side, the latest federal budget, “with a focus on trade, infrastructure, defence and productivity … could boost growth and lower deficits, but will depend on execution and attracting enough private capital to invest $1 trillion over the next five years,” it noted.
Despite that uncertainty, on the fixed-income side, BII said that it favours Canadian government bonds over U.S. Treasuries, “especially in longer-dated maturities” — particularly given the growing concern about the sustainability of the U.S. government’s finances.
“We turn tactically underweight long-term U.S. Treasuries as we see high debt servicing costs and price-sensitive domestic buyers pushing investors to demand more compensation for the risk of holding long-term bonds,” it said.
In Canada, these kinds of structural pressures “are weaker,” it noted — adding that the country’s “stronger fiscal position and softer growth outlook should keep long-term yields relatively anchored.”