Market and economic commentary
December 2025
December capped off a strong 2025 with the Federal Reserve delivering a final rate cut and commodities hitting all-time highs. Looking ahead, we analyze how consumer resilience and US policy changes position markets for the new year.
December wrapped up a positive year for markets. As we reflect on the past twelve months, it’s important to remember that markets rarely move in a straight line. Minor dips are common occurrences during bull markets, reinforcing the value of diversification as an essential tool to manage risk. The Federal Reserve (Fed) delivered the anticipated interest rate cut to close the year at 3.75%.
While the Compass Portfolios declined over December, results within the ATBIS Pools were mixed; Canadian Equity and International Equity finished positive, while other Pools were negative (using F series returns). Up-to-date performance data for the Funds can be found here.
Index performance
Below are index one-month total returns in Canadian dollar (CAD) terms for December:
| Index | December 2025 |
|---|---|
| S&P/TSX Composite Index | 1.3% |
| S&P 500 Index | -1.6% |
| MSCI EAFE Index | 1.3% |
| MSCI Emerging Market Index | 1.3% |
| FTSE Canada Universe Bond Index | -1.3% |
Source: Bloomberg, FTSE Russell
Market overview
Markets closed out the year in very positive territory. With most major equity indices hitting all-time highs in recent months, investors were reassured that fundamentals and global economic conditions supported the price action. The US led on the data front with corporate profits posting double-digit growth, labour markets holding firm, and financial markets remaining supportive with contained credit spreads. The positive sentiment cascaded globally, providing a lift to other markets beyond the US.
While we saw some softness on the surveyed US consumer sentiment data, actual consumer spending remained resilient. This may simply reflect a discrepancy between what consumers say and what they do. Seasonal shopping surged—evident in the latest Black Friday results—though households were more selective, focusing on essentials over extravagance.
Emerging markets & commodities
Looking at Emerging Markets, both economic data and consumer sentiment is on the up and up. Policy efforts in China to stimulate near-term consumption, combined with rising incomes in key markets like India and Southeast Asia, have translated into the rapid growth of local and regional brands. The consumer has become the backbone of growth in these economies as they pivot away from export dependencies. This has translated to a very strong year for the emerging market complex, further aided by late-year US dollar weakness.
Commodity markets also saw significant gains in 2025. Metal markets surged higher on the back of stronger demand and supply constraints. Gold, silver, copper all shone brightly, climbing to all-time highs by year-end. Canadian equities benefited significantly from this, given the heavy weighting of mining and materials companies on the TSX.
Looking ahead: Earnings & 2026 outlook
As investors prepare for the Q4 earnings season, all eyes will be on the mega-caps and the artificial intelligence (“AI”) space. While the consensus view has shifted toward a narrative of broadening fundamentals or catch-up trade, expectations that growth rates of the “S&P 493” (the remaining stocks in the index) will overtake the Magnificent Seven still appear premature. We are likely still a few quarters away from that happening. Regardless of which group leads, the majority of US equities continue to strengthen.
While the US administration will certainly throw its share of curveballs in 2026, the known market drivers tend to be tilted positively. Key items include: 1) significant consumer stimulus in the form of tax refunds from OBBBA (estimated to be $150 billion); 2) a new Fed Chair; and 3) the US mid-term elections.
Fixed income
Fixed income markets saw the Fed deliver a 25bps rate cut to close the year at 3.75%, totalling three cuts in 2025. While the Fed noted this was a normalization cut rather than an emergency measure, investors had hoped for a more dovish stance. The market interpreted the Fed’s latest comments as signalling a potential pause, causing long-term yields to rise and weighing on bond prices. Paired with year-end illiquidity in the bond markets, this ultimately led to the Canadian Bond Universe finishing the month in the red (-1.3%).
Compass Portfolios Series F1 - Returns net of fees
|
|
December 2025 |
1 year |
3 year |
5 year |
10 year |
|
Compass Conservative Portfolio |
-0.58% | 6.00% | 8.16% | 4.26% | 5.58% |
|
Compass Conservative Balanced Portfolio |
-0.54% | 8.54% | 9.84% | 5.45% | 6.37% |
|
Compass Balanced Portfolio |
-0.57% | 9.67% | 10.98% | 6.67% | 7.36% |
|
Compass Balanced Growth Portfolio |
-0.60% | 11.39% | 12.27% | 7.74% | 8.18% |
|
Compass Growth Portfolio |
-0.72% | 12.81% | 13.54% | 8.81% | 8.90% |
|
Compass Maximum Growth Portfolio |
-0.74% | 15.54% | 15.53% | 10.10% | 9.67% |
Source: ATB Investment Management Inc.
ATBIS Pools Series F1 - Returns net of fees
|
December 2025 |
1 year |
3 year |
5 year |
Since inception |
|
|
ATBIS Fixed Income Pool |
-0.66% |
3.56% |
5.82% |
2.07% |
3.56% |
|
ATBIS Canadian Equity Pool |
1.15% |
18.11% |
16.21% |
13.08% |
8.07% |
|
ATBIS US Equity Pool |
-2.70% |
5.82% |
14.89% |
10.79% |
11.58% |
|
ATBIS International Equity Pool |
0.47% |
19.26% |
14.64% |
6.82% |
7.50% |
*Inception date: September 22, 2016
Source: ATB Investment Management Inc.
2026 global market outlook
Bridge the gap between global headlines and your investment strategy with our 2026 market outlook.
This report has been prepared by ATB Investment Management Inc. (ATBIM). ATBIM is registered as a portfolio manager across various Canadian securities commissions, with the Alberta Securities Commission (ASC) being its principal regulator. ATBIM is also registered as an investment fund manager and manages the ATB Funds, Compass Portfolios and the ATBIS Pools. ATBIM is a wholly owned subsidiary of ATB Financial and is a licensed user of the registered trademark ATB Wealth.
The performance data provided assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that may reduce returns. Unit values of mutual funds will fluctuate and past performance may not be repeated. Mutual Funds are not insured by the Canada Deposit Insurance Corporation, nor guaranteed by ATBIM, ATB Securities Inc. (ATBSI), ATB Financial, the province of Alberta, any other government or any government agency. Commissions, trailing commissions, management fees, and expenses may all be associated with mutual fund investments. Read the fund offering documents provided before investing. The Compass Portfolios includes investments in other mutual funds. Information on these mutual funds, including the prospectus, is available on the internet at www.sedarplus.ca.
Past performance is not indicative of future results. Opinions, estimates, and projections contained herein are subject to change without notice and ATBIM does not undertake to provide updated information should a change occur. This information has been compiled or arrived at from sources believed reliable but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. ATB Financial, ATBIM and ATBSI do not accept any liability whatsoever for any losses arising from the use of this report or its contents.
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