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Canada
We have moderately positive expectations for the Financials sector, which is dominated by Canada’s big banks, and other areas of the market, which should provide support for the S&P/TSX Composite Index in 2026.
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United States
Looking out to the rest of 2026, we are somewhat optimistic about U.S. earnings growth given the profit tailwind of enormous AI capital spending, expectations of AI productivity gains, lower interest rates, and stimulus from tax cuts for both consumers and businesses.
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Europe
Overall, European stocks offer reasonable value supported by improving company profit prospects – but this opportunity requires earnings to materialize over the next 12 months.
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Asia
The economic outlook for Asia over the next 12 months is characterized by a "North-South divide," where technology-driven economies in North Asia outperform while emerging markets in Southeast Asia face domestic challenges.
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Emerging markets
While risks remain significant, especially from geopolitical developments and U.S. macroeconomic conditions, the balance of factors suggests that emerging-market equities may be entering the early stages of a period of sustained gains rather than a temporary rebound.
The war in Iran has injected significant uncertainty into the outlook and widened the range of potential outcomes for the economy and financial markets. While risks have intensified, our base case scenario still sees the economy continuing to grow amid a variety of existing tailwinds, allowing stocks to outperform bonds, particularly in non-U.S. regions where valuations are relatively appealing.
Economy
Economic outlook remains reasonably constructive given tailwinds including support from last year’s interest-rate cuts, fiscal support, and AI-related capital expenditures and productivity gains.
Fixed income
We forecast low-single digit returns with yields little changed, as the energy-price shock and ballooning government deficits counterbalance our modelled assumptions for declining inflation and lower real (after-inflation) yields.
Equity markets
Robust earnings growth is expected almost everywhere over the next two years, but indexes outside the U.S. large-cap space may offer access to that earnings growth at a cheaper price.
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