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Global Asset Allocation Viewpoints

A view from Canada

May 2026

Outlook
  • Markets have remained largely resilient despite ongoing geopolitical tensions continuing to threaten higher inflation and weigh on growth, leading us to modestly trim several more cyclical exposures.
  • The global economy continues to show pockets of resilience, supported by a steady consumer, fiscal spending, and ongoing investment, particularly in AI, though growth is moderating and becoming more uneven across regions.
  • Monetary policy remains steady with central banks largely in a holding pattern as they assess the path of inflation, while near-term inflation pressures persist in some areas, longer-term expectations remain relatively contained.
  • Canadian macro outlook remains on positive trajectory backed by strengthening natural resources demand and insulation from energy shortages. However, concerns about a more hawkish BoC could weigh on sentiment.
  • Key risks include a further escalation in geopolitical tensions, renewed inflationary pressures, greater reliance on a narrow set of growth drivers, potential labor market deterioration, and emerging liquidity concerns in parts of private markets.

From a Canadian perspective, stronger commodity prices are supporting corporate earnings and improving the domestic macro backdrop. However, persistent energy-driven inflation could prompt a more hawkish Bank of Canada stance, putting upward pressure on interest rates and limiting further equity upside. Canadian equities also appear more attractively valued following weakness in gold-related names and software stocks. In fixed income, Canadian investment-grade bonds remain less attractive as inflation concerns and increased government issuance tied to fiscal stimulus are expected to keep yields elevated.

Overall, Canada appears relatively well positioned to benefit from higher commodity and energy exposure, even as the same geopolitical and inflationary pressures continue to create broader global market risks.


 

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Navy background with four boxes at the upper right-hand corner A view from Canada

Global Asset Allocation Viewpoints

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202605-5495539

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