Trading Day for Tuesday, Dec. 23, 2025

Key Concepts

• Budget Deficit (Canada): Increase in government spending exceeding revenue.
• Retail Spending (Canada): Growth in consumer spending, differentiating between in-store and online sales.
• Copper Price: Record high price driven by mine outages and trade disruptions.
• AI Foundation Models: Large-scale AI models capable of general tasks, requiring significant engineering resources.
• AI Sovereignty: Canada’s ability to independently develop and control its AI capabilities.
• Commodity Prices: Fluctuations in oil, gold, and other raw material prices, influenced by geopolitical factors and supply/demand dynamics.
• TSX & US Market Performance: Current state and recent trends of the Toronto Stock Exchange and US stock markets.
• Foreign Ownership in Housing: Debate around allowing increased foreign investment in the Canadian housing market.

Canada’s Financial Landscape & Economic Updates (April-October 2025)

The Canadian government recorded a budget deficit exceeding $18 billion between April and October 2025, representing a 26.6% increase year-over-year. This increase is attributed to rising program expenses, specifically major transfers to individuals and provinces. However, revenue also increased due to customs import duties (resulting from countermeasures to U.S. tariffs) and growth in corporate and personal income tax revenue.

Canadian Retail Performance & the Impact of AI

Canadian holiday retail spending rose by 4.4% annually, according to Visa’s Retail Spend Monitor. In-store shopping accounted for 88% of total sales, while online sales comprised 12%. Clothing and accessories led retail segment growth, increasing by 10%. Visa highlights the growing influence of Artificial Intelligence (AI) in shaping consumer product discovery and price comparison. The data analyzed covers retail sales activity from November 1st to December 21st.

Global Commodity Market Volatility

Copper prices reached an all-time high, surpassing $12,000 USD per ton. This surge is linked to severe mine outages and trade disruptions caused by U.S. administration tariffs. Despite deteriorating usage in China (which consumes approximately half of the world’s copper), prices have rallied due to the extreme impact on global trade flows. Oil prices have been soft, with West Texas Intermediate (WTI) around levels seen 11 years ago, due to increased supply from Russia, Guyana, and Canada, despite OPEC’s attempts to manage production. Gold prices have also surged, reaching record peaks, potentially indicating a loss of confidence in G7 nations and concerns about future inflation. Central banks have also been increasing their gold reserves.

Market Performance – “Santa Claus Rally”

The Toronto Stock Exchange (TSX) is hovering around record highs, slightly above the 32,000 mark. U.S. markets are also near record territory, with the S&P 500 up by approximately 0.3%, the Dow Jones up by 0.3%, and the NASDAQ up by 0.34%. This positive market trend is being described as a continuation of the “Santa Claus Rally.”

Canada & the Future of Artificial Intelligence

Canada is recognized as a global leader in AI, being the birthplace of key scientists involved in the deep learning revolution. However, a key challenge is the lack of a “truly public option” – a foundation model built by and for Canadians.

Foundation Models Explained: These are large-scale, general-purpose AI models (like ChatGPT or Google’s Gemini) requiring substantial engineering resources. Building such a model is a massive undertaking, comparable to the Apollo project, and necessitates collaborative efforts.

AI Sovereignty & Strategic Partnerships: The focus should be on developing the skills and capacity to build these models, rather than directly competing with giants like OpenAI or Google. Canada is exploring partnerships with like-minded nations (Switzerland, Germany, Singapore) to co-create infrastructure for sovereign AI systems, as discussed at the G7 Digital Ministers Meeting. The goal is to enable Canadian startups to develop AI solutions with a skilled workforce.

Mark Daly Quote: “Canada is already a world leader. We punch above our weight in AI. We are the home of some of the scientists who created the deep learning revolution through which we're now living, and there's an opportunity for us to lean further into that and develop capacity right here in the engineering space.”

Daly on the Need for Skills: “This isn't about competing directly with OpenAI, that that's not something for the public sector to do. What we're interested in is creating the capacity for a new generation of Canadian start-ups to have young, smart people who have those sort of intangible skills that you only get by building these things.”

Corporate Developments & Market Movers

• Strathcona Resources: Completed its acquisition of MEG Energy, with Cenovus competing for the oil sands producer.
• GDI Integrated: Is being taken private by Birch Hill Equity and Jean-Claude Bigras for $36.6 per share, a 25% premium.
• Firefly Aerospace: Experienced a significant stock drop after a three-day rally fueled by a U.S. executive order favouring the space sector.
• Coty: Received a downgrade to a “hold” rating from Evercore following the announcement of CEO Sue Nagy’s departure. Shares are down over 50% this year.

Potential Shift in Canadian Housing Policy

Canada’s Housing Minister is considering expanding foreign ownership in the housing market, citing the success of the Australian model. This is a reversal of previous policies aimed at curbing foreign investment. The debate centers on balancing affordability for Canadians with the need for investment in the housing sector, particularly new builds.

Synthesis/Conclusion

Canada’s economic landscape is currently navigating a complex interplay of factors: a growing budget deficit, fluctuating commodity prices, the transformative potential of AI, and evolving housing policies. While challenges exist, particularly regarding global trade uncertainties and affordability, Canada is actively pursuing strategies to diversify its economy, strengthen its AI capabilities, and potentially attract foreign investment. The coming year will be crucial in determining the success of these initiatives and shaping the future of the Canadian economy.