1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 126
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
The Materials sector’s 92% price return accounts for 40% of the Canadian market’s
performance in 2025
27.4%
16.5%
Jan
Feb
Mar
Apr
May
Jun
Jul
TSX Composite ex-materials
Jul
Aug
Sep
Oct
Nov
Dec
TSX Composite
Source: Bloomberg Finance LP, Scotia Wealth Management, annual price returns for 2025.
Looking ahead to the first quarter, near-term domestic headwinds are evident. Reduced
immigration targets and anticipated slowing population growth – now at historically low levels and
turning negative – combined with hiring that has nearly stalled, is exerting pressure on housing
demand and domestically oriented consumption. These factors present challenges for sectors tied
closely to domestic fundamentals – Real Estate, Consumer Discretionary, Consumer Staples, and
even Financials.
Economic drivers – GDP versus TSX Composite indexed to 2019
225
Index = 100 (2019)
200
175
150
125
100
75
2019
2020
2021
2022
S&P/TSX Composite
2023
2024
2025
Canada nominal GDP
Sources: Scotiabank Economics, Scotia Wealth Management, FactSet
Irrespective of these headwinds, our outlook for 2026 for Canada remains constructive, albeit
selective, supported by past monetary easing, fiscal expansion via investments in infrastructure,
defense, productivity, and housing alongside resilient corporate fundamentals. Despite
macroeconomic headwinds and a challenging global backdrop, we believe mid-to high-singledigit EPS growth is achievable for many TSX-listed companies. This earnings strength underpins
our view that there is potential for positive returns, particularly in select sectors with pricing power
and strong balance sheets.
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