Easing Interest Rates and Steady Portfolio Discipline

Executive Summary

Central banks in Canada and the United States took action to ease interest rates while global economic growth remained positive but uneven. Equity markets delivered positive returns for the year, although performance varied across regions. Our investment approach remains unchanged: focus on high-quality businesses over the long term.

Bank of Canada: Easing Carefully

The Bank of Canada lowered its key policy rate to 2.25% in December, citing slowing growth and inflation near target. The central bank’s message remains measured: future moves will depend on incoming data. For households and businesses, borrowing costs are edging downward but future reductions are unlikely to follow a smooth or predictable path.

The Canadian Dollar: Drifts Lower into Quarter-End

The loonie ended Q4 2025 near CAD/USD 0.7219 vs CAD/USD 0.7190 at the end of Q3 2025. This reflects persistent U.S. dollar strength and oil prices hovering in the mid-USD 60s (generally unchanged from Q3). Currency markets remain sensitive to global risk sentiment.

Policy Backdrop in Ottawa

Federal priorities continue to emphasize green investment and trade diversification. Fiscal measures announced in late Q4 aim to support productivity and infrastructure, reinforcing resilience amid global uncertainty.

What Changed Globally

In the United States, the Federal Reserve cut their key interest rate again to 3.50-3.75% in December as inflation cooled and growth moderated. Markets anticipate further easing in 2026. European rates held steady, while the U.K. trimmed its bank rate to 3.75%. China reported 5.2% GDP growth for 2025, with manufacturing stabilizing but housing remaining soft. Global equity markets delivered positive returns overall, though performance varied by region and sector. Overall, the investment landscape remains shaped by ongoing adjustments in interest rates and microeconomic factors.

Commodities and Safe Havens

Brent crude oil prices stayed range-bound around 63 USD per barrel. Gold extended its rally, closing the year above 3,900/oz USD as investors sought safety amid geopolitical and economic uncertainty. As Anish Chopra, Managing Director at Portfolio Management Corp, observed in an interview with the Canadian Press on Oct. 21, 2025, “Gold has a larger weight in the TSX than in major U.S. indices, so moves in gold tend to have more pronounced impact on Canada’s benchmark.”

What This Means for You

Central banks are easing as growth slows, but uncertainty persists. Quality remains paramount: strong balance sheets, durable cash flows and adaptable management teams.

• Stay focused on high-quality companies with healthy balance sheets.
• Keep portfolios diversified across sectors and geographies.
• Trim or add when valuations move materially away from fundamentals.
• Hold liquidity to take advantage of buying opportunities that market volatility can create.

PMC will continue to monitor risks and opportunities and make measured adjustments with your long-term goals front and centre.

Client Question Corner

What are the benefits of making my RRSP contribution early?

The benefits of contributing to your RRSP early include more time for tax-deferred growth, potential for a larger tax refund, avoiding last-minute delays and flexibility for investment decisions.

What are the key dates and limits for 2025 and 2026?

RRSP Contribution Information	Details
2025 Contribution Deadline	Monday, March 2, 2026
2025 Maximum Contribution	18% of income, up to $32,490
2026 Maximum Contribution (if contributing early)	18% of income, up to $33,810

PMC in the News

1. Anish Chopra interview with The Canadian Press: S&P/TSX composite finishes slightly higher, U.S. markets closed for Thanksgiving
2. Anish Chopra interview with The Canadian Press:  S&P/TSX composite slides on lower gold prices as U.S. markets fare better on earnings
3. Anish Chopra interview with The Globe and Mail: Nine Canadian fund managers reveal their best stock picks - and portfolio advice - for 2026 - The Globe and Mail

Articles of Interest

1. Swimming Naked, Investing in Bricks and Other Warren Buffett Words of Wisdom
2. How to Dodge the Sequence of Returns Trap in Retirement
3. Building Your Edge: Why Your Brain Is Wired to Lose Money (And How to Fix It)

Commentary has been prepared by Portfolio Management Corporation (PMC) for informational purposes only and is not intended to provide any financial, tax, or investment advice, and does not take into account your particular investment objectives or financial situation. Before acting on any information, you should consider the appropriateness of the information and speak with one of our portfolio managers. This information has been drawn from sources believed to be reliable. All securities transactions involve risks, including the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk. This commentary may contain forward-looking statements that are predictive in nature which reflect current views on expectations and market conditions. Readers are cautioned not to place undue reliance on these forward-looking statements. Portfolio Management Corporation does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof to reflect eh occurrence of unanticipated events. While due care has been used in the preparation of forecast information, actual results may vary in the materially positive or negative manner. Past performance is not a reliable indication of future performance.