Quarterly Market Commentary.

SEI’s Domestic View 

Professional sports don’t often serve up suitable parallels to the complex dynamics of national economies and financial markets. However, 2025 was an exception, at least for Canadian businesses, investors, and policymakers. Multiple Canada-based teams competed in their respective league championships against U.S.-based rivals at a time of heightened trade and political frictions between Canada and its largest and wealthiest trade partner. Unfortunately, all of these matches ended in heartbreak for Canadian sports fans. While there are obvious risks to Canada’s economic performance in 2026, heartbreak isn’t guaranteed, and there are even some reasons to be hopeful. 

Canada experienced a challenging year in 2025. Trade and other political frictions with the Trump administration weren’t the entire story. In October, the Toronto Blue Jays treated baseball fans to an impressive playoff run culminating in an American League pennant and World Series berth. A win over a U.S.-based rival would have been welcome news to anyone in an “elbows-up” frame of mind. Unfortunately, after taking the Los Angeles Dodgers, with Major League Baseball’s largest payroll, to a deciding game seven, the Jays fell short at home in extra innings by just one run. 

In December, Major League Soccer’s (MLS) Vancouver Whitecaps embarked on their own magical playoff run, punching their ticket to the MLS Cup final after a memorable home win in blizzard conditions. But for the second time in two months, a Canadian team went head-to-head with its league’s highest-payroll team (in this case, Lionel Messi’s Inter Miami) before coming up short. 

And of course, most hockey fans are aware of the more-than-30-year Stanley Cup drought for Canada-based National Hockey League (NHL) teams. The Edmonton Oilers had a shot at ending that streak in June of last year. But after pulling even with the Florida Panthers—once again, an opponent with its league’s highest-paid roster—through the first four matches, a U.S.-based opponent prolonged the pain for Canadian NHL teams. 

Of course, when thinking about parallels between sports and political economy, it’s important to remember that the underdog Toronto Raptors won an NBA championship in 2019 against that league’s highest-paid roster. As difficult as 2025 was for Canadian sports fans, reaching three league finals is still an impressive feat, and victories are still possible. 

How might the coming year play out for Canada’s economy, governments, businesses, workers, and consumers? It remains to be seen. As already noted, macroeconomic dynamics are quite unlike the straightforward win-lose frameworks of professional sports, so it’s probably not reasonable to expect a clear winner and a clear loser in the current frictions between Canada and the U.S. 

Although economic growth has been nothing to get too excited about, Canada largely outperformed expectations in 2025. The Bank of Canada continued to ease monetary policy by cutting its interest-rate target. Corporate profits and employee compensation continued to grow; unemployment improved notably starting in the fall; and preliminary figures indicate that, despite ongoing pressure on household balance sheets, consumer spending continued to rise as the year drew to a close. Quarterly Market Commentary Fourth Quarter 2025 Monetary policy and robust earnings cheer investors.

As we’ve noted previously, the performance of the global economy will remain an important factor for Canada’s outlook. While prevailing consensus is for further slowing of global growth—due to factors such as “prolonged uncertainty, more protectionism, and labor supply shocks,” according to the International Monetary Fund (IMF)¹ — global activity should still prove supportive. We expect positive fiscal impulses in a number of countries. While major central banks (with the notable exception of the Bank of Japan) nearing the end of their rate-cutting cycles might seem negative on its face, it should mean less uncertainty around interest-rate outlooks, and the effects of past interest-rate cuts should continue to work their way through national, regional, and global economies, including Canada’s. Finally, although the loonie strengthened against the U.S. dollar in December, it remained relatively weak versus a broad range of trading partners, which may provide additional support to export activity as Canada seeks to develop stronger trading ties beyond its neighbour to the south. 

If there’s a single area that could prove critical to the outlook in 2026 and beyond, it’s trade. The planned renegotiation of the Canada-United States-Mexico Agreement (CUSMA) among the three trading partners is the clearest risk and one we will be watching closely. But the federal government’s attempts to expand trade with non-U.S. countries and business activity within Canada are also critically important. Will they bear fruit in terms of trade, corporate profits, and household incomes? Only time will tell, and most of these things are well beyond investors’ control. 

While that may sound unsettling, it’s important to remember these are some of the kinds of risk investors expect to be compensated for assuming over the long term. Holding a diversified portfolio that is well-suited to one’s objectives and circumstances is well within investors’ control. And while it may be challenging, staying off emotional rollercoasters that can accompany things like cheering for professional sports teams is also a good idea in life—especially when investing.

SEI’s Global View

Global equities, as measured by the MSCI ACWI Index, garnered positive returns in the fourth quarter of 2025. Investors were encouraged by central bank monetary policy easing, relatively strong corporate earnings, and softening trade tensions between the U.S. and China. Emerging markets outperformed developed markets for the quarter. 

The Nordic countries were the strongest performers among the developed markets for the fourth quarter led by Finland and Sweden. Europe benefited from sharp upturns in Austria, Ireland, Spain, and Switzerland. The Pacific ex Japan and Pacific regions underperformed due to market downturns in Australia and New Zealand. Europe and Eastern Europe were the top emerging-market performers over the quarter, bolstered by strength in Hungary and Poland. Conversely, Chinese stocks listed on the Hong Kong Stock Exchange recorded negative returns. The Gulf Cooperation Council (GCC) countries also lagged due to weakness in Saudi Arabia, Qatar, and Kuwait. 

Global fixed-income assets, as represented by the Bloomberg Global Aggregate Bond Index, edged up 0.2% (in U.S. dollars) in the fourth quarter. Mortgage-backed securities (MBS) led the U.S. fixed-income market, followed by highyield bonds, investment-grade corporate bonds, and U.S. Treasury securities. Treasury yields modestly declined in the short and intermediate parts of the yield curve, and moved slightly higher in the 7-, 10-, 20-, and 30-year segments. (Bond prices move inversely to yields.) Yields on 2-, 3-, and 5-year Treasury notes dipped by corresponding margins of 0.13%, 0.06%, and 0.01%, ending the quarter at 3.47%, 3.55%, and 3.73%, respectively, while the 10-year yield ticked up 0.02% to 4.18% The 10-year to 3-month yield curve widened by 35 basis points (0.35%) to +0.51% as of the December 31.² 

Global commodity prices, as measured by the Bloomberg Commodity Index, rose 5.8% in the fourth quarter. The spot prices for West Texas Intermediate (WTI) and Brent crude oil fell 7.9% and 7.8%, respectively, during the quarter due to increased output from both Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers and softer demand. Additionally, investors were concerned that a proposed peace plan for the Russia-Ukraine conflict, released in November, could increase exports from Russia. The 12.1% rise in the gold price for the quarter was in response to Federal Reserve (Fed) interest-rate cuts in November and December, as well as escalating geopolitical tensions, particularly the U.S. government’s blockade of Venezuelan oil tankers in the Caribbean Sea. On January 3, U.S. military forces invaded Venezuela and arrested President Nicolás Maduro and his wife, Cilia Flores, on numerous charges, including cocaine importation conspiracy and possession of machine guns. After climbing steadily for much of the quarter, the New York Mercantile Exchange (NYMEX) natural gas price ended the period down 5.2% following a steep decline in late December. The downturn was attributable mainly to investors’ profit-taking, a decrease in demand due to forecasts of milder winter weather in parts of the U.S., as well as record-high output and rising inventories. 

On November 12, President Donald Trump signed a spending package to reopen the federal government after a 43-day shutdown—the longest in U.S. history—after the House of Representatives and Senate passed the legislation by votes of 222-209 and 60-40, respectively. The political dispute centered on the demand of the Democrats, who are the minority party in both houses of Congress, for an extension of the enhanced Affordable Care Act (ACA) health insurance subsidies enacted during the COVID-19 pandemic in 2021, and to restore the cuts to the Medicaid program mandated in the One Big Beautiful Bill Act, which Trump signed into law in July.

The agreement funds the government through January 30, 2026; provides full funding through the end of the fiscal year on September 30 for the Department of Agriculture, the legislative branch, and military construction; and guarantees the rehiring of furloughed workers and back pay for all federal employees. Furthermore, though the bill did not extend the Affordable Care Act (ACA) subsidies, the Senate pledged to hold a vote on the issue by mid-December. However, the proposed legislation on the subsidies failed to garner the 60 votes needed to pass.

There was an unexpected development regarding U.S. trade policy in mid-November. The Trump administration reversed several tariffs that were previously imposed on food imports in an effort to cut costs for both consumers and businesses, and ease inflationary pressures in the food sector. The lower tariffs, which were applied retroactively to November 13, include beef, coffee, and more than 100 agricultural and food products. The lower levies apply to imports from all countries—not just those with trade deals. Several U.S.-based businesses have challenged the legality of the tariffs with the U.S. Supreme Court, which could issue a decision on the matter sometime in January. Additionally, just before the end of the year, Trump announced a one-year delay for tariffs on imported lumber-based goods, including upholstered furniture, kitchen cabinets, and vanities. The levies were scheduled to take effect on January 1. 

On the geopolitical front, in late November, the Trump administration announced a plan to end the Russia-Ukraine war, which began in February 2022. The plan would provide limited security guarantees for Ukraine, excluding direct military assistance. However, Ukraine would be required to cede the eastern Donbas region to Russia and accept Russia’s control over other contested regions. Additionally, the plan would limit Ukraine’s military forces to 600,000 members and bans Ukraine from joining the North Atlantic Treaty Organization (NATO), which provides security guarantees for its member nations. 

In late December, Trump discussed the peace plan in a phone call with Russian President Vladimir Putin and met with Ukrainian President Volodymyr Zelensky at his Mar-A-Lago home in Florida. Trump and Zelensky reviewed a revised draft peace plan, which includes a referendum on territorial concessions and presidential elections in Ukraine. The original U.S. proposal faced criticism for being too favorable to Russia. Putin agreed to create two working groups— security and economic—with discussions expected to start in early January. Following the meeting, Trump and Zelensky expressed optimism that they could reach an agreement. However, it appeared that significant disputes— particularly over territory—could dampen the chances of a resolution in the near future.

Economic Data (unless otherwise noted, data sourced to Bloomberg)

• According to Statistics Canada, consumer prices (as measured by the change in the Consumer Price Index (CPI)) rose 0.1% and rose 2.2%, respectively, for the month and the year ending in November. Annual inflation ticked up for groceries, while pricing pressures for services and gasoline moderated. Producer prices were up 0.9% and 0.3% in November for the Industrial Product Price Index (IPPI) and the Raw Materials Price Index (RMPI), respectively. Year-over-year price increases were robust, rising 6.1% and 6.4%, respectively, for the IPPI and RMPI. Prices for metals and beef were higher, while prices for crude energy slumped. The Labour Force Survey revealed a fairly weak employment landscape for December. The economy added just 8,200 jobs for the month, and the unemployment rate jumped 0.3% to 6.8% as more Canadians searched for work.
• Following a delay due to the ongoing U.S. federal government shutdown, the Department of Labor released its inflation report for November. The consumer-price index (CPI) advanced by 2.7% year-over-year in November, down from the 3.0% rise in September and below expectations. (The government did not release inflation numbers for October and month-over-month changes for most items for November as the Bureau of Labor Statistics was unable to collect the data due to the government shutdown.) Fuel oil and electricity costs posted corresponding increases of 11.3% and 6.9% over the previous 12-month period. Prices for new vehicles and gasoline rose just 0.6% and 0.9%, respectively, year-over-year. Core inflation, as measured by the CPI for all items less food and energy, was up by a lower-than-expected margin of 2.6% over the previous 12-month period ending in November―a decline from the 3.0% rate in September. According to the initial estimate from the Department of Commerce, U.S. gross domestic product (GDP) expanded at an annual rate of 4.3% in the third quarter of 2025—higher than the 3.8% gain in the second quarter and significantly exceeding expectations. The upturn in the economy for the third quarter was attributable primarily to increases in consumer spending, exports, and government spending. Conversely, there was a decline in residential fixed investment (purchases of private residential structures and residential equipment that property owners use for rentals).
• The Office for National Statistics (ONS) announced that inflation in the U.K., as measured by the CPI, dipped 0.2% in November, down from the 0.4% upturn in October. The CPI advanced at an annual rate of 3.2% for the month, below the 3.6% year-over-year increase in October. Costs for transportation and furniture and household goods posted the largest declines in November, more than offsetting minimal price gains in housing and household services, and recreation and culture. Prices for education, housing and household services, and communication rose 7.6%, 5.1%, and 4.8%, respectively, over the previous 12-month period, while clothing and footwear, and furniture and household goods were down by corresponding margins of 0.6% and 0.3%. Core inflation, as represented by the CPI excluding energy, food, alcohol, and tobacco, rose 3.2% year-over-year in October, edging down from the 3.4% annual increase in October.³ According to the revised estimate of the ONS, U.K. GDP increased 0.1% for the third quarter of 2025 (the most recent reporting period), marginally lower than the 0.2% rise for the second quarter. Output in both the services and construction sectors ticked up 0.2% over the third quarter, while the production sector saw a 0.3% decrease.⁴
• Eurostat pegged inflation for the eurozone at 2.1% for the 12-month period ending in November, matching the increase in October. Costs in the services sector rose at an annual rate of 3.5% in November, slightly higher than the 3.4% advance in October. Prices for food, alcohol and tobacco increased 2.4% year-over-year in November versus the 2.5% annual upturn for the previous month, while energy prices declined 0.5% over the previous 12- month period. Core inflation, which excludes volatile energy, food, and alcohol and tobacco prices, rose at an annual rate of 2.4% in November, unchanged from the year-over-year increase in October.⁵ According to Eurostat’s second estimate, eurozone GDP rose 0.3% in the third quarter—an uptick from the 0.2% growth rate for the second quarter of this year—and increased 1.4% over the previous 12-month period, down modestly from the 1.6% year-over-year increase in the second quarter. The economies of Denmark, Sweden, Luxembourg, and Cyprus were the strongest performers for the third quarter, expanding 2.3%, 1.1%, 1.1%, and 0.9%, respectively. In contrast, GDP for Switzerland, Finland, and Romania contracted by corresponding margins of 0.5%, 0.3%, and 0.2% during the quarter.⁶

Index Data (Q4 2025, in CAD) 

• The S&P/TSX Composite Index jumped 6.25%.
• The FTSE Canada Universe Bond Index declined 0.32%.
• The S&P 500 Index, which measures U.S. equities, returned 1.13%.
• The MSCI ACWI (Net) Index, used to gauge global equity performance, rose 1.76%.
• The ICE BofA U.S. High Yield Constrained Index, representing U.S. high-yield bond markets, returned 0.86% (currency hedged) and -0.15% (unhedged).
• The Chicago Board Options Exchange Volatility Index, also known as the “fear index,” a measure of implied volatility in the S&P 500 Index, was lower as it moved from 16.28 to 14.95 for the quarter.
• WTI Cushing crude-oil prices, a key indicator of movements in the oil market, moved lower from US$62.37 to $57.42 a barrel to end the quarter.
• The Canadian dollar strengthened to C$1.37 per U.S. dollar. The U.S. dollar was weaker to little changed versus the world’s other major currencies, ending December at US$1.17 versus the euro, US$1.35 against sterling, and at 156.75 yen.

Important information

SEI Investments Canada Company, a wholly owned subsidiary of SEI Investments Company, is the Manager of the SEI Funds in Canada. 

The information contained herein is for general and educational information purposes only and is not intended to constitute legal, tax, accounting, securities, research or investment advice regarding the Funds or any security in particular, nor an opinion regarding the appropriateness of any investment. This information should not be construed as a recommendation to purchase or sell a security, derivative or futures contract. You should not act or rely on the information contained herein without obtaining specific legal, tax, accounting and investment advice from an investment professional. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. There is no assurance as of the date of this material that the securities mentioned remain in or out of the SEI Funds.