Rhythmic Reasoning_Highlights_SWM_EN - Flipbook - Page 14
EQUITIES
Long-term themes and tariffs clarity supports continued gains,
but valuations limit upside potential
Equities have enjoyed a strong 2025 after tariff uncertainty failed to meaningfully
impact the growth trajectory of corporate earnings. Markets around the globe are
sitting at new highs, driven by technology stocks and higher beta cyclicals.
As we look ahead to 2026, we continue to maintain an underweight position in
Canadian equities. While we are encouraged by the potential upside from the Federal
government’s fast tracking of nation-building projects, and secular themes such as
energy transition and resource scarcity, beneficiaries may remain too cyclical in nature
or have limited pricing power.
Despite downward revisions in certain markets, earnings
estimates remain healthy across the globe
U.S.
Canada
12.6%
12.4%
11.8%
12.1%
10.3% 10.5%
8.5%
8.0%
We remain positive on U.S. equities into 2026, underpinned by a resilient mediumterm economic outlook, secular growth themes (AI or healthcare), and a return to
healthy earnings growth. Clarity on the tariff and trade policy front has improved,
revealing which (and how much) industries will be impacted. Recent U.S. employment
weakness warrants close attention, however.
European equities should benefit from more accommodative fiscal policy, rising
infrastructure and defense spending, and a potential recovery in global demand. But
with exports representing ~60% of Euro Stoxx revenues, profitability may be
constrained by ongoing USD weakness, while French political risks are a risk for the
region’s indices.
Lower interest rates and favourable macro trends are positives for Latam indices,
though political uncertainty linked to upcoming elections tempers the outlook.
Regional valuations have moved higher, yet they remain at a discount relative to
history and global peers. Latam equities typically outperform during Fed easing cycles
– which may play out again if expectations materialize – and the region is wellpositioned to benefit from long-term themes such as the global energy transition,
given its significant exposure to commodities and materials.
2025
2026
2025
2026
Start of year
Sept 30
Start of year
Sept 30
International
10.9%
LatAm
11.3%
10.0%
47.9%
7.6%
In Asia, Chinese equities are backed by public policy prioritizing profitability and
innovation while curbing excessive competition, with the added tailwind of the statebacked “Tech 8”, though elevated market expectations require caution. Japanese
markets continue to reach new highs in line with global peers and avoiding steep U.S.
tariffs, but political instability remains a concern.
15.6%
9.8%
7.0%
2025
2026
2025
2026
Start of year
Sept 30
Start of year
Sept 30
