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After three successive years of above-average market appreciation, delivering a fourth will be a tall order.
Published Dec 12, 2025 • Last updated 18 hours ago • 3 minute read
Mike CandeloroArticle content
After three successive years of above-average market appreciation, delivering a fourth will be a tall order but not entirely out of the question. Whether equity market returns are “merely” positive or above average, either outcome will depend on the major economies, especially the U.S., avoiding recession and on the current consensus forecasts for GDP, earnings growth, inflation, and interest rates being in the right “ballpark.”
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While consensus estimates for the U.S. 2026 GDP growth sit at only 1.9 percent, there are some factors at play that might push that growth rate into the potentially more rewarding zone above two percent, including a rebound from the government shutdown, the lagged effect of monetary easing, and a capital spending boost from tax policy changes.
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AI is also very important to GDP growth expectations in 2026 and beyond because of the dramatic growth in capital spending by the big developers and the expectation that more and more successful applications of AI will emerge, which promise to prompt heavy future investment by users.
Meanwhile, most developed economies are running stimulative monetary and fiscal policies in the same direction as the United States.
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These feature rate-cutting by central banks, a commitment to much higher defense spending, initiatives to boost power-generation capacity and strengthen grids, as well as to develop AI capability. They are also faced with many of the same challenges: anemic GDP growth, trade uncertainties, mounting fiscal debt burdens, and fraught politics.
There is a plausible path to another year of positive gains for most major stock markets – but likely at a more sober pace. Slower earnings growth is the more likely outcome outside of the United States.
GDP growth everywhere needs to shift into a higher gear than is currently embodied in consensus forecasts to lift the prospects for equity market performance beyond the “merely” positive toward “above average.”
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OPEC+ has opted to pause additional output increases for the first quarter of the year. This strategic adjustment has the potential to remove some of the downward pressure and provide some degree of support for prices in the new year.
The price of gold reached new all-time highs in 2025, driven by a combination of geopolitical risk, a declining interest rate environment, policy uncertainty, and global central banks diversifying reserves away from the U.S. dollar.
Looking ahead to 2026, most market participants expect continued central bank purchases and sustained macroeconomic uncertainty to maintain sufficient demand to keep bullion prices elevated.
Many economists expect the U.S./Canadian exchange rate to reach the low 1.30s in 2026, with the interest rate cap between the U.S. and Canada forecast to narrow materially by the end of 2026.
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Of course, the big risk is around the USMCA renegotiations, but as long as exemptions remain in place for Canada, the U.S. effective tariff rate on Canadian imports should remain low versus the rest of the world. Stay tuned for more regarding the upcoming year in financial markets in future articles.
Mike Candeloro, Senior Portfolio Manager and Wealth Advisor with RBC Dominion Securities and the head of The Mike Candeloro Wealth Management Group supplied this article. RBC Dominion Securities Inc. and Royal Bank of Canada are separate corporate entities, which are affiliated. Member CIPF. Mike can be reached at Michael.candeloro@rbc.com You can also visit his website at www.michaelcandeloro.com To read Mike’s archived articles please visit Mike Candeloro / Special to The Nugget | North Bay Nugget
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