Chin up, Canada.
Two portfolio managers told a Morningstar Canada audience in Toronto on Wednesday that they are cautiously optimistic about the domestic economy and capital markets.
“The outlook for Canada is getting better and better,” John Shaw, senior vice-president and portfolio manager, fixed income, at CI Global Asset Management (GAM), said.
“Canada is somewhat unique, as a net commodity exporter,” David Tulk, global asset allocation portfolio manager at Fidelity Investments, said. We’re also “a relatively safe option,” compared to other producers, which he said will be increasingly important following the U.S.-Israel war on Iran.
We could use a break after 10 years of lacklustre gains. Excluding the Covid pandemic years of 2020–2022, Canada has achieved GDP growth of 2.5% or more just once in the past decade.
“We’re coming from a weak starting point,” Shaw said.
Tulk’s comments signal a shift at Fidelity Investments that began last year. His firm had been underweighting Canadian stocks and bonds “for an extremely long period of time,” he said — more than a decade.
“We have closed a great deal of that underweight,” Tulk told the audience.
Canadians are still holding too much debt. The household debt-to-income ratio reached 177.2% at the end of 2025. That’s high relative to other OECD countries. But we’re well off the 2022 pandemic peak of 188%.
“Not great, but marginally getting better,” Tulk said.
Fidelity is more optimistic about policy-making in Ottawa after the election of Prime Minister Mark Carney. Tulk, who worked with Carney when he was governor of the Bank of Canada, believes he will make progress on the country’s long-standing productivity gap.
“He understands what the issue is,” Tulk said. “He has a lot of bureaucracy to overcome, but he’s someone who gets it.”
On the trade front, Tulk and Shaw expect Ottawa and Washington to hammer out a new agreement that will at least provide Canadian business leaders clearer direction.
“It’s uncertainty that’s causing the problem,” Shaw said. “Not having a decision is actually the worst thing. … If we can get a solution, we think the Canadian economy can do better.”
That’s contributed to CI GAM’s positive outlook on the loonie.
“We’re generally bullish on the Canadian dollar in most of our fixed-income mandates,” Shaw said.
Watch out for a rate hike
Investors should be prepared for a Bank of Canada rate hike in the second half of the year, given inflation concerns driven by rising oil prices. However, neither Shaw nor Tulk believes it is certain.
The U.S. Federal Reserve is less likely to raise rates.
Treasury Secretary Scott Bessent keeps talking up a “strong dollar” policy. But investors are skeptical. Bessent told CNBC that “short-term fluctuations are OK” and that “it’s natural for currencies to go up and down.” At the same time, Washington is emphasizing export competitiveness in its trade policy and continuing to run large fiscal deficits.
“They’re basically trying to inflate their way out of their debt burden,” said Shaw.
Politics could also play a role. U.S. President Donald Trump pressured Fed Chair Jerome to lower interest rates. Should his nominee Kevin Warsh be confirmed, it’s not clear that he’ll stand firm.