5 ▪ 4 ▪ 3 | 2026: Another year of great changes
For the third consecutive year, equity markets have posted significant gains thanks to a resilient economy and solid earnings. Will this momentum continue in 2026? In 5 minutes, our investment strategist Louis Lajoie explains why the current environment remains supportive of equities and long-term investors.
Hello everyone. Today, December 4, we're going to briefly look back on 2025 before turning over to what we can reasonably expect for 2026 based on what we know now.And what we know now is that 2025 turned out to be or is on track to be another very positive year for equity investors, albeit quite volatile early in the year. We all know why, A bit more volatile in recent weeks as expected. But overall, with a resilient economy and resilient earnings growth, the uptrend was sustained for equity markets much like it was sustained over the previous two years where we also saw above average returns for global equities, which leads everyone wondering how long we can sustain such an above fast pace for equity markets.
And the first decisive factor to answer that question next year will be how the labour market will be evolving. And for now, we are still seeing a gradual slowdown. The unemployment rate is now at its weakest since 2021. We're also seeing job openings slowing down as a proportion to unemployed workers. And to be clear here, this is not necessarily problematic. We're coming from a point of unprecedented labour market tight tightness. This is, to some extent, welcome and we don't expect any significant accident on the labour market front next year. But what makes things a little bit more complicated this time around is that we're also facing uncertainty from a more structural point of view, with a marked slowdown in population growth given immigration policies in the U.S. And potentially something that's affecting labour demand with advances in artificial intelligence in technology that we'll have to see how they will evolve and have an impact next year.
They may also have an impact on labour market productivity, which we'll have to keep a close eye on, which hasn't been especially high over the last decade. But if we look at the latest episode of massive investments in technology, we see that there's ground for optimism in terms of labour productivity, which to be clear, doesn't guarantee many, many years of very strong positive equity returns. For instance, we all know equity markets are discounting machines, so definitely already discounting the likely benefits from a productivity standpoint ahead of us. And we all remember that in the early 2000s, we had reached a point of excessive optimisms on this front. We're not immune to disappointments for technology and 2026 will be an important year. But for us, for now, this mostly means that we have to keep a close eye on these big tech companies, their financial health, because they're carry the bulk of these investments. For now, as a whole, their financial health remains very strong.
And not only that, but the overall market backdrop in our mind remains quite supportive for equity markets with things like central banks having cut policy rates, global growth being rather broad based, earnings growth also quite positive and sustained upward equity momentum. Now to be clear, these four conditions, they're not foolproof. Nothing guarantees that these four conditions will remain in place. But bear in mind that typically speaking, to out of four is sufficient to form a rather positive view on equities. And right now, again, we're four out of four.
To sum things up, the story in 2025 was essentially one with its very own chapters, but the very same conclusion as in the previous two years, which is that despite massive uncertainties, a resilient economy, resilient earnings growth allowed equities to move upward. In 2026, we are still facing a lot of uncertainties, labour market fragility, the massive AI bet being undertaken by tech companies and our first change in leadership at the U.S. Federal Reserve in eight years. I didn't really talk about that today, but this is definitely an event that carries significant importance for next year. And as a whole, for us, this means that even though the market backdrop remains supportive after three consecutive years of very strong equity returns, the reasonable expectation from here on out is for more modest returns and sustained volatility, which is essentially what we have experienced this very quarter in Q4 of 2025.
That's it for today. Thank you for listening. Happy holidays everyone and we will talk again next year.
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