With political uncertainty, tariff battles and market turbulence shaping the past year, Mackenzie sees 2026 as another test of investor resilience. Investors will need a thoughtful, disciplined approach in the coming months, but there is promise for those with strategic foresight and resilient, purposefully allocated portfolios.
Next year’s economic narrative will be shaped by diverging government policies and decisions in Washington and Ottawa.
In the U.S., sustained growth is anticipated, supported by fiscal stimulus from the One Big Beautiful Bill Act. Lower taxes will support consumer spending and offset tariff impacts. Capital spending incentives will also fuel business investment.
Corporate profit margins are projected to benefit as transformative potential from AI translates into productivity gains. However, the U.S. Federal Reserve may deliver fewer rate cuts than the market expects as core inflation is likely to remain near 3%, necessitating a cautious monetary stance.
Closer to home, Canada’s economic trajectory appears more measured. Canada will continue to be subjected to the overhang from trade negotiations with its largest trading partner, and the associated sectoral tariffs.
Another notable headwind for Canadian households will be impending mortgage refinancings, which could pressure consumer spending and prompt further, limited policy easing. With this backdrop, the Bank of Canada is likely to continue a modest easing path, influenced by weaker domestic growth and ongoing Canada-U.S. trade complexities.
While Canadian yields should hold steady, a modest steepening of the curve is probable. Investors must also remain vigilant regarding inflation risks, particularly from tariffs, which could translate into higher consumer prices.
Equity market drivers
Despite these nuanced conditions, the view on equities remains constructively optimistic. While there are frothy pockets, the broader equity market is underpinned by four robust fundamental drivers for advisors to keep in mind when guiding client portfolios:
- Persistent fiscal stimulus. Deficit-financed fiscal impulses across major economies will boost corporate earnings growth.
- Dovish central bank policies. Global central banks are forecast to maintain policies supportive of economic activity, even if they do so cautiously.
- Global capital spending cycle. A significant capital spending cycle, particularly in defence and large-scale capital projects, will create demand and employment opportunities.
- AI-driven productivity gains. Widespread AI adoption will unlock considerable productivity enhancements, improving corporate margins and earnings.
These factors suggest that most equities will be well-supported by earnings growth, improving margins and reasonable valuation, making them a compelling asset class for long-term investors.
While volatility is unavoidable, the fundamental drivers provide a solid foundation for market activity. Maintain discipline, diversify strategically and look beyond familiar names.
Portfolio considerations
Outside of the typical allocation to bonds and equities, commodities are expected to play a vital diversification role. Gold’s underlying drivers should persist and industrial commodities like steel and copper will benefit from a boost in capital investment.
Surging electricity demand from data centres also advances prospects for uranium, rare earth elements and natural gas. In fixed income, a neutral equity-bond asset mix, with a strategic overweight in quality corporate bonds, may support portfolios in times of elevated volatility.
As markets evolve over the next year, investors will face bold shifts. But there will be strategic opportunities. While global growth may be uneven with inflationary pressures, the fundamental drivers supporting equity markets support an optimistic view.
For Canadian advisors, the path to client success lies in broad diversification beyond familiar heavyweight index names, sharp insight into global and domestic trends and long-term discipline. Variance across regions and asset classes, as well as forward-looking investment strategy, will help advisors put their clients on a sturdy path for 2026.
Lesley Marks is chief investment officer of equities with Mackenzie Investments.