Fall 2025 Market Update
From June through September, markets were buoyed by growing optimism that interest rates are finally set to move lower. In the United States, stocks continued their strong run, with the S&P 500 up around 8% for the quarter. Technology companies once again led the way, but strength was broad-based as investors anticipated a more supportive policy environment. Corporate earnings growth remained healthy, and while the U.S. economy showed signs of slowing, it continued to expand at a steady pace. Inflation eased further, and bond yields declined as markets priced in further rate cuts from the Federal Reserve later this year.
In Canada, the picture was more subdued. Economic growth stalled in the middle of 2025 as exports softened and consumers remained cautious in the face of higher borrowing costs. The Bank of Canada held rates steady at 2.75% through the summer, but with inflation cooling and signs of economic strain emerging, markets expect a modest rate cut in the months ahead. Despite these headwinds, resource and industrial sectors remained relatively resilient, and easing trade tensions could provide some lift into year-end. Looking ahead, both economies appear to be entering a more balanced phase — one where interest rates, inflation, and growth begin to normalize. For investors, this environment highlights the value of diversification and staying focused on long-term goals, even as short-term conditions evolve. With rate cuts on the horizon and inflation trending lower, the foundation is being laid for a more stable investment landscape heading into 2026.
Strong or Stretched? The Concentration of Market Returns in a Handful of Stocks.
Over the past year, much of the stock market’s strength has been driven by a relatively small group of large technology and growth-oriented companies. While the S&P 500 has delivered solid returns overall, the majority of that performance has come from just a handful of stocks — the so-called “Magnificent Seven” and a few others. This growing concentration means that index performance can be heavily influenced by how these few companies fare, which can make the market appear stronger or more resilient than it might be beneath the surface.
Historically, periods of high concentration have come and gone. Leadership in the stock market tends to evolve over time, often shifting as new industries emerge or economic conditions change. For investors, this concentration isn’t necessarily a sign of weakness, but it is a reminder of the importance of diversification. Relying too heavily on a narrow segment of the market can increase risk, especially if those leading stocks stumble or valuations become stretched.
As your advisors, we continuously monitor these dynamics and ensure that your portfolios remain well-diversified — both across sectors and geographies. While market headlines often focus on the biggest names, a balanced approach that includes a mix of asset classes and investment styles helps position portfolios for stability and opportunity, no matter which companies are leading the market at any given time.
More Proof to Stay Invested…
One of the most common beliefs for market participants is that the expectation of a stock market correction justifies staying on the sidelines. While we don’t recommend investing large lump sums of money at market highs (we would consider multiple buy-ins over a set period), we also don’t believe that trying to time the market by staying on the sidelines, is in your best interest.
If you’re anticipating a stock market correction, you’re probably right. Stock market corrections of approximately 5% happen nearly every calendar year! However, what many market participants don’t realize, is in these years, the average year-end return is approximately +10%.
Investors whose investment horizon allows for patience are typically better off accepting these corrections rather than fearing them.
Data provided by Refinitiv/London Stock Exchange
Year-End Tax Planning Reminders
As we head into the final quarter of 2025, now is the ideal time to review your finances and take advantage of key tax-planning opportunities before December 31. A few proactive steps today can help reduce your 2025 tax bill and keep your long-term plan on track. For investors, this might include reviewing your non-registered portfolio for tax-loss harvesting opportunities – selling investments that are down in value to offset capital gains realized earlier in the year.
It’s also a good time to ensure you’re making the most of your registered accounts. If you have available TFSA room, consider topping it up to keep your savings growing tax-free. For those still in the accumulation phase, early planning for your RRSP contribution can help spread out the cash flow impact rather than waiting until the March deadline. Families might also explore income-splitting strategies, such as making a spousal RRSP contribution or lending funds to a lower-income spouse under a prescribed-rate loan.
Finally, charitable giving can be both personally rewarding and tax efficient. Alberta has the most favourable charitable giving tax rules in Canada. Donating appreciated securities directly to a registered charity eliminates capital gains tax while providing a donation receipt for the full fair market value. Whether you’re optimizing your portfolio, supporting causes you care about, or simply checking off year-end to-dos, these steps can make a meaningful difference. As always, our team is here to help you identify the most effective strategies for your situation.
Rest assured, our team reviews and prepares many of these items on your behalf as part of our ongoing planning process. From identifying tax-loss opportunities to coordinating charitable donations and optimizing registered account contributions, we work to ensure nothing is missed before year-end. Still, it’s a great time to touch base if your circumstances have changed this year, or if you’d like to discuss additional strategies before December 31. We’re here to help make your year-end planning simple, efficient, and aligned with your long-term goals.
Sources:
- JPMorgan “Guide to the Markets”