The Open for Friday, Nov. 28, 2025

Key Concepts

GDP Rebound: Canada's economy experienced a significant rebound in the third quarter, exceeding expectations.
Government Spending & Residential Investment: These were the primary drivers of the GDP growth.
Weak Trade: Imports saw a substantial decline, impacting overall trade performance.
Alberta's Growth Forecast: Alberta revised its 2025 growth forecast upwards.
Ministerial Resignation: Steven Guilbeault resigned from cabinet over an energy deal with Alberta.
Interest Rate Expectations: Divergent expectations for US and Canadian interest rate cuts.
Bond Market Strategy: Preference for corporate bonds over government bonds at current yields.
Black Friday Shopping: Increased Canadian participation and evolving consumer behavior.
Alberta Energy Deal: Memorandum of Understanding for a new pipeline, with conditions and opposition.
Market Outages: Technical glitch at CME impacting trading.
Silver Rally: Spot silver reaching record highs, boosting related stocks.
AI Impact on Tech: Concerns about AI's disruption of traditional software businesses.
Retail Trends: Bifurcation in consumer spending, with strength at the high and low ends.
Productivity Outlook: Cautious optimism for Canadian productivity growth.

Economic Performance and Forecasts

Third Quarter GDP Rebound: Statistics Canada reported that the Canadian economy experienced a sharp rebound in the third quarter, with Gross Domestic Product (GDP) rising by 2.6% at an annual rate. This figure significantly exceeded market expectations, which were generally around 0.5%. This growth represents the fastest pace since the end of the previous year and offsets the 1.6% decline observed in the second quarter.

Drivers of Growth: The primary drivers of this rebound were government spending and residential investment.

Weak Trade Performance: Despite the overall GDP growth, trade remained a weak point. Imports dropped by almost 9%, marking the largest decline since 2022. This was largely attributed to a decline in shipments of metals. Exports, however, edged higher according to a flash estimate.

October Economic Contraction: In contrast to the third quarter's rebound, Statistics Canada indicated that the economy shrank by 0.3% in October, signaling a potentially weaker start to the fourth quarter.

Alberta's Economic Outlook: Alberta has revised its 2025 growth forecast upwards, now expecting its GDP to rise by 2.1% this year. Growth in 2026 is projected to moderate to 1.8%. The province's budget update also signaled lower borrowing needs, with a projected deficit of $6.4 billion for the 2025-26 fiscal year.

Underlying Economic Weakness: Despite the positive headline GDP figure, analysts like Michael Davenport from Oxford Economics highlight underlying weaknesses. He notes that the strong GDP print was "flattered and boosted by a large decline in imports" (2.2% quarter-on-quarter, the largest contraction since Q4 2022). Final domestic demand, which includes spending by households, businesses, and governments, was flat quarter-on-quarter. Consumer spending, in particular, saw cutbacks.

Business Investment Decline: Business investment continued to decline across all major categories: non-residential structures, machinery and equipment, and intellectual property products. This is attributed to factors like US tariffs and uncertainty surrounding trade policy, which are causing firms to postpone major capital expenditure plans.

Productivity Outlook: There is cautious optimism for Canadian productivity growth over the next 5 to 10 years, following a period of significant weakness. This optimism is based on expected technological advancements, including the impact of artificial intelligence, and a potential shift towards a more growth-oriented government agenda, with support for major natural resource projects and increased business investment.

Political and Energy Sector Developments

Ministerial Resignation: Culture Minister Steven Guilbeault resigned from cabinet over Prime Minister Mark Carney's energy deal with Alberta, specifically the pipeline Memorandum of Understanding (MOU). Guilbeault cited concerns that Carney failed to consult Indigenous communities and that the pipeline would pose significant environmental risks. He previously served as Heritage and Environment Minister under Prime Minister Justin Trudeau and will remain an MP.

Alberta Energy Deal and Pipeline Conditions: The Prime Minister and Alberta's Premier have agreed on an outline for a new pipeline to the West Coast. This agreement includes a clear path for the construction of an over 1 million barrel per day Indigenous co-owned bitumen pipeline to Asian markets.

Key Conditions for Pipeline Construction:

Private Sector Proponent: The pipeline will not proceed without a private sector proponent.
Indigenous Co-ownership and Collaboration: This is a crucial element of the deal.
New Carbon Pricing Agreement: A revised carbon pricing framework is required.
Pathways Carbon Capture Project: This project must move forward in tandem with the pipeline.

Timeline and Opposition: If all conditions are met smoothly, construction could potentially start in 2029. However, BC Premier David Eby views talk of a new pipeline as a "needless distraction," and Coastal First Nations are adamantly opposed, citing significant environmental risks and the potential destruction of their way of life. They emphasize that there is no technology to clean up an oil spill and they will never consent to oil tankers in their coastal waters.

Federal Conservatives' Criticism: Federal Conservatives criticized the process, suggesting the Prime Minister could expedite the pipeline approval using existing legislation.

Alberta's Application Deadline: Alberta has until July 1st to submit a pipeline project application to the New Major Projects Office.

Oil Tanker Ban Adjustment: If all conditions are met, the federal government will make an adjustment to the oil tanker ban on the coast of BC.

Energy Industry Perspective: Grace Wilton, Senior Energy Advisor at Enpro.org, suggests there is a market for more bitumen in Asian markets. She notes that regulatory burdens have historically made exports less attractive. The MOU is seen as a roadmap to fast-track the pipeline, with a presentation to the Major Projects Office required by July 1, 2026. The agreement also includes the Pathways carbon capture project, and regulatory "lifting" such as the suspension of clean electricity regulations in Alberta to facilitate grid expansion. She believes a proponent will emerge if the case is strong, especially with the tanker ban adjustment and regulatory support.

Market Performance and Investment Strategies

TSX Performance: The TSX has been hitting record highs, edging up consistently. It was up once again yesterday and continued to push further into record territory, boosted by precious metals stocks.

US Market Activity: US equity futures were pointing higher. The US market was expected to be relatively quiet due to the Thanksgiving holiday.

Oil Prices: A question remains about the long-term recovery of oil prices, with concerns about whether demand will be sufficient to push prices up given strong global supply. Oil is reportedly set for a fourth monthly decline on outlooks predicting a glut in the global market.

Gold and Bullion: There is a widespread expectation that the US Federal Reserve will cut interest rates next month. Lower rates are generally seen as positive for bullion.

Canadian Dollar (Loonie): There is an expectation that Canada may hold off on an interest rate reduction in December, which would tend to boost the Canadian currency.

Bitcoin: Bitcoin was trading up about 1% on the day, though significantly down from its record highs.

Interest Rate Expectations (US vs. Canada): A key thesis is that the US Federal Reserve will cut interest rates in December, while Canada will hold its rates steady. Earl Davis of BMO Global Asset Management expects the US to pause after the December cut.

Market Reaction to Fed Meeting: The market reaction following the Fed meeting will be interesting, with potential volatility depending on how "hawkish" the cut is. Overall, risk assets like corporate bonds and equities are expected to perform well until the Fed meeting. 2026 is anticipated to be a constructive year for growth in both countries.

Canadian Bond Yields:

Canadian Ten-Year Bond Yield: Currently around 3.1%.
Investment Strategy: On a one-year horizon, yields are expected to remain within a range of 2.75% to 3.60%. For a five-year horizon, the preference is not necessarily to buy Canadian ten-year bonds at current levels. However, they are buyers at these levels for the one-year outlook. If yields rise to the 3.65% level again in 2026, they would become "very large buyers" and go overweight bonds.
Preference for Corporate Bonds: At current levels, corporate bonds are preferred over government bonds due to higher yields (e.g., 3.20% on a ten-year government bond plus an additional 125 to 150 basis points for corporate bonds).

Inflation and Bond Vigilantes:

Inflation Risk: At present, inflation is not considered a concern in Canada due to less demand stemming from US negotiation uncertainty, leading to excess supply. Inflation is only a concern when there is excess demand.
Bond Vigilantes: The risk of bond vigilantes targeting Canada is deemed "definitely not" a concern. Other markets (UK, France, Japan, and the US) are considered more at risk of inflation problems before Canada. This makes buying bonds in Canada, particularly corporate bonds, feel "very comfortable."

Specific Corporate Bond Recommendation:

Inter Pipeline: A Brookfield family company. Bonds maturing in 2032 offer a yield of about 4.3%.
Rationale: Positive cash flow, supportive sector (oil, despite low prices), potential for price appreciation from spread upgrades. It's a Triple B (investment grade) bond. Valuations on oil companies are still low compared to other sectors, offering additional yield.
Credit Rating: Triple B low (DBRS), one level above junk. Brookfield's support is expected to prevent a slip into junk territory. Even Double B oil sector bonds are considered attractive.

Canadian Equity Ideas:

Dohmen Building Materials (DBM): A leader in pressure-treated lumber, with a stable business model focused on volume and price spread, rather than lumber price risk. They have consolidated in Canada and the US, achieving scale. Free cash flow yield is about 14%, with a 6% dividend.
Linamar: A global player in agricultural equipment and autos. The stock is near its all-time high. While the auto sector is improving, the agriculture and industrial business is currently depressed but expected to recover by late 2026/2027. Earnings per share growth is projected at 10-20% annually during cyclical upswings.
Northwest Healthcare Properties: Owns medical office buildings and hospitals. Trading at a discount to its net asset value ($8 per share vs. $5.40). A new management team is optimizing the business, controlling debt, and selling assets. It's seen as a stable business, less sensitive to economic activity than apartment REITs, with a growing dividend.

Top Investor Picks (Brendan Wood International): Brendan Wood International identifies stocks with deep conviction among top global investors.

Commitment to Tech: Investors remain committed to tech stocks like NVIDIA and Microsoft for at least the next year, despite recent wobbles.
Bank Stocks: JP Morgan and RBC are highlighted for their reliable management, strong balance sheets, and growth potential.
Welltower: Leans into the aging population trend, focusing on retirement facilities globally.
Thematic Investing: Investors are looking at themes like AI and aging populations for long-term growth.

High Conviction Stock Picks (Sartorial Wealth): Shiraz Ahmed, CEO at Sartorial Wealth, uses a momentum-based strategy focused on risk-adjusted returns.

Royal Bank: A large Canadian bank with positive momentum, performing well on the back of the HSBC acquisition.
Franco-Nevada (FNV): A precious metals idea, considered a more stable way to play gold with a dividend.
Alibaba: A large Chinese consumer company, seen as a way to play AI in China. Momentum is picking up.
GSK: A substantial holding in healthcare, with positive performance driven by favorable legal outcomes and share buybacks.

Consumer Behavior and Retail Trends

Black Friday Shopping:

Increased Canadian Participation: 84% of Canadians consider Black Friday their most important shopping day.
Evolving Consumer Behavior: The emphasis on "door crasher" deals and long queues has diminished due to promotions running for days or weeks.
In-Store Experience: Stores are still invested in the in-store shopping experience, though online shopping is prevalent.
Cyber Monday: The phenomenon of Cyber Monday also influences consumer planning.

Canadian Consumer Spending:

Affordability Concerns: Affordability is a major concern for Canadians, with budgets under strain.
Making Dollars Go Further: Consumers are actively looking for sales, comparing prices online and in-store, and waiting for deals.
Buy Canadian Push: A significant portion of Canadians are prioritizing buying Canadian products.

Retail Trends (David Schwartz, Morningstar):

Black Friday Data Limitations: Black Friday is just one day of the holiday period, and drawing conclusions from it alone is difficult due to limited reliable sales data.
Nike: Despite recent stock price declines, Nike has strengths in its connection to global sports and a new CEO focused on quality products and improving wholesale relationships. Fair value estimate is $104 per share.
Lululemon: Experienced a difficult year but still generates high margins and direct sales. Concerns exist about slowing North American growth and the China market. Fair value estimate is $295 per share, indicating undervaluation. The company is expected to release new products.
Gildan: Set to close its acquisition of Hanesbrands, transforming its consumer business. The stock is trading at a significant discount to its fair value estimate of $128 Canadian.
Consumer Spending Bifurcation: Retailers catering to lower-income consumers and higher-income consumers are doing well, while the middle class is struggling. Department stores and retailers targeting the middle class are facing weakness, while brands like Ralph Lauren and Urban Outfitters (US) and clearance stores like Ross and TJ Maxx are performing strongly.

Technical Glitches and Market Infrastructure

CME Outage: The Chicago Mercantile Exchange (CME) experienced an outage caused by a cooling system malfunction at a data centre in Chicago. This crippled key parts of financial markets, suspending trading in the futures market for hours. CME offers futures and options across commodities, interest rates, equity indexes, foreign exchange, and crypto. The outage highlights the physical vulnerabilities of data centres.

Market Movers and Analyst Calls:

Silver Stocks Surging: Driven by spot silver hitting a record high above $54 US per ounce, stocks like First Majestic Silver, Discovery Silver, Pan American Silver, and Wheaton Precious Metals are trading higher.
Constellation Software: Down 24% this year, affected by concerns about AI potentially disrupting traditional software businesses.
Gildan Activewear: Down slightly today, despite positive analyst sentiment.
Exchange Income Corporation: Losing altitude.
TSX Banks Index: Hitting record highs, fueled by names like National Bank of Canada and Royal Bank of Canada.
Saputo: Price target raised to $49 CAD from $44 at TD Securities, with a "Buy" rating. TD Securities argues it's a "best idea for 2026" and trades at a discount to peers.
EQB: TD Securities cut its price target to $96 from $105, maintaining a "Hold" rating due to a more conservative loan growth outlook and persistent credit provisions.
Canadian Telecommunications Companies: Morningstar suggests they are well-positioned to build out the AI ecosystem due to their technical expertise, resources, and reputation.

Conclusion and Key Takeaways

The Canadian economy showed a surprising rebound in the third quarter, primarily driven by government spending and residential investment. However, this masks underlying weaknesses, particularly in trade and domestic demand, with imports collapsing and business investment declining. Alberta's energy deal, while promising a path for a new pipeline, faces significant opposition and stringent conditions. In the markets, a divergence in interest rate expectations between the US and Canada is influencing currency and bond strategies, with a preference for corporate bonds. Black Friday shopping continues to evolve, with Canadians prioritizing value and increasingly looking to buy Canadian. The tech sector, despite recent wobbles, remains a focus for top investors, while retail trends show a bifurcation in consumer spending. The market also experienced a significant technical glitch at the CME, highlighting the reliance on robust infrastructure. Overall, the economic and market landscape presents a complex picture with both opportunities and challenges.