November 2025 - Monthly Update

Hi,

 

Hope this note finds you and your family well as we head into the home stretch of 2025.

 

Your portfolio was steady and ended flat in October. It remains with positive performance over the last twelve months.

 

 

Let's revisit the trends around lower short-term interest rates in Canada and the United States (U.S.) and how they feed into the outlook for economic growth.

 

 

In assessing the medium-term prospects for an economy, it is important to have a view on the financial health and liquidity of the banking system. After all, banks are the conduit for economic activity by supplying the fuel for businesses to fund their operations and power growth. Earnings are a useful datapoint to this end.

 

The biggest single driver of earnings for banks is the difference between short and long-term interest rates. The interest banks pay for money on deposit is influenced by short-term rates while the rate they earn to lend money is related to long-term rates. Short-term interest rates have declined by 0.50% in the last two months. Long-term rates have remained stable and at levels above short-term rates.

 

This positive trend for bank profitability ties back to their financial health and ability to absorb losses on loans as well as fund new borrowing. This is a positive trend for the banks in North America. Their ability to act as a conduit for economic activity is strong and will continue to strengthen as this cycle of overnight rate cuts continues into 2026.

 

Moreover, the different between short and long term rates is widening. Over time, it incentivizes moving cash out of bank balances and into long-term investments and productive assets. The more time that goes by, the greater the incentive to shift. It also reflects a medium-term trend of real organic growth within an economy. By the end of this decade, the path of least resistance is for the North American economy to be materially bigger than it is today.

 

Lastly, the positive effect on economic activity tends to lag interest rate cuts by six to nine months. We are heading into an easier economic environment in the new year that will continue to moderate right through 2026.

 

Our investment strategy is unchanged, and we continue to focus on businesses with exposure to the domestic North American economy. You and your wealth are in a strong position.

 

The view from Brent Joyce, BMO Wealth’s Chief Investment Strategist:

“Capital markets continued to forge ahead despite a fog around most official U.S. economic data courtesy of the government shutdown. October saw a minor scare in U.S. private credit markets, gold’s sharp reversal of fortune, and perceived hawkish-leaning policy meetings of central banks in Canada, the U.S. and Europe. Outweighing these negatives was progress on trade relations between the U.S. and China (can kicked, again) and, most significantly, very solid corporate earnings reports…. We are encouraged that earnings remain the single most positive factor supporting our conviction that equities remain attractive. Of course, the earnings landscape of AI and AI-adjacent companies (energy, data, storage, and computing) continues to garner a lot of attention. Two things stand out to us as very constructive in the current reporting season. First, earnings growth is broadening beyond Technology. Second, investors are becoming more discerning in the AI space. They are asking questions about the bottom line, then rewarding companies that have good answers and punishing those that don’t. The blended S&P 500 earnings growth rate for Q3 stands at 11%, beating expectations for 7.9% growth at the end of Q2. The percentage of companies beating expectations on consensus earnings hovers around 80%, a very healthy number, and well above averages for one and five years (ditto for top-line sales growth)… For 2026, S&P 500 earnings growth expectations sit at 13%. Notably, this number is remaining firm. In the past, equity market downturns were often preceded by softening earnings growth-rate expectations. Prices continued to rise (especially in bubble episodes) despite deteriorating fundamentals. We do not see this today.” Portfolio Strategy – November 2025. BMO Capital Markets.

 

• Stocks in your portfolio that made a new 52 week high this past month: Fortis*, Johnson & Johnson, Qualcomm*, Royal Bank*, S&P500, TD Bank*

 

• Stocks in your portfolio that made a new 52 week low this past month: Kraft Heinz, Thomson Reuters*, Waste Management*

 

• The Loonie fell half a cent versus the U.S. dollar to $0.715

 

Thank you,

Ian, Gab, Kaitlyn, Naina, and Meeral