November 2025 market update
Canada Life - Dec 04, 2025
Markets may look calm, but the details tell a different story. Canada’s ambitious budget, Japan’s tariff struggles, and the U.S. emerging from its longest shutdown ever are shaping the global outlook.
Introduction
Global equity markets finished largely unchanged over the month of November. Enthusiasm for artificial intelligence (AI) stocks pulled back, pushing stock markets lower. However, the release of economic data in the U.S. raised bets the U.S. Federal Reserve Board (Fed) would lower interest rates again in 2025.
Global economic activity was relatively underwhelming over the third quarter of 2025. Tariffs persisted, continuing to weigh on consumer and business confidence, which hindered demand and investment. Inflationary pressures also persisted, albeit at lower levels than in 2022. Global manufacturing activity was soft over the month, weighed down by modest global demand and trade tensions.
The S&P/TSX Composite Index advanced, reaching a new record high. The best-performing sectors were materials and consumer staples. The yield on the 10-year Government of Canada bond edged higher over the month. U.S. equities eked out a small gain. In commodity markets, the price of gold increased, while the price of silver hit a new record high. The price of oil fell over November.
Canada’s budget 2025
Canadian Prime Minister Mark Carney’s first federal budget pledged to support the Canadian economy and reduce the country’s reliance on its trade relationship with the U.S. The U.S. imposed significant tariffs on Canada’s economy, leaving economic activity to soften. The budget includes new spending measures to help transform Canada’s economy and make it more competitive globally. However, that pledge does not come without significant financial outlays. The federal deficit is expected to be $78.3 billion during the 2025/26 fiscal year. Later in the month, the PM announced the second set of nation-building projects that will be referred to the Major Projects Office. This includes a liquefied natural gas project, a transmission line in northern British Columbia and several critical mineral projects. The PM was not done there. He also announced a tariff on steel-related products imported into Canada to help the steel industry and additional funding for the loan program to support the softwood lumber industry. Amid the sweeping changes, Canada’s economy has shown its resilience in the face of trade disruptions with the U.S. Canada’s gross domestic product expanded at an annualized pace of 2.6% over the third quarter of 2025, topping economists’ expectations and helping Canada’s economy avoid a technical recession after contracting in the second quarter. A stronger housing market and government investment were key contributors to the increase. Exports also increased, adding to growth. On the other hand, consumer spending weakened amid a softer labour market. While there are some points of concern for Canada’s economy, it has demonstrated its resilience and appears poised for growth over all of 2025.
U.S. government gets back to work
The U.S. government shutdown has come to an end. Republicans and Democrats negotiated a deal to get the government back to work and end the longest government shutdown in history. The shutdown negatively impacted millions of Americans and delayed the release of plenty of economic announcements, leaving investors uncertain about the health of the U.S. economy and how that data would impact the Fed. Upon the government’s reopening, data began to be released. Much of the data goes back to September. The government did say some data sets, including labour and inflation, would skip October and be combined into November’s report. The labour market report for September showed the economy added 119,00 jobs in September, rebounding from the revised 4,000 jobs losses in August. Still, the unemployment rate edged higher to 4.4% with more people unemployed. More recent data has shown that initial jobless claims are relatively elevated, but hiring has been subdued. Late in the month, it was announced that retail sales rose by 0.2% in September, falling just short of expectations. While it was the fourth straight increase, it was the slowest among the set, suggesting that U.S. consumers may be scaling back spending amid still-tight financial conditions. The Fed will make its last interest rate announcement of 2025 in early December. At the end of November, markets are expecting the Fed to cut interest rates again. In speeches, several Fed officials have noted they are in favour of another interest rate cut this year.
U.K. economic growth stalled before the new budget
The U.K. economy stumbled in the third quarter of 2025 as tight financial conditions weighed on consumer and business activity. The economy was also impacted by a cybersecurity attack at automobile manufacturer Jaguar Land Rover. A preliminary estimate showed the U.K. economy grew by 0.1% in the third quarter of 2025. This marked a slowdown from the 0.3% expansion in the second quarter, and it was the slowest pace of growth since shrinking in the fourth quarter of 2023. A drop in production weighed heavily on growth during the quarter. Automobile maker Jaguar Land Rover was the victim of a cybersecurity attack, which halted operations at the company and impacted businesses across its supply chain. The economy did see a tiny improvement in consumer spending. Consumers are grappling with elevated inflation and relatively high interest rates. The Bank of England held its policy interest rate steady at 4.00% at its November meeting. As the beginning of the fourth quarter, retail sales declined by 1.1% in October, demonstrating that tight financial conditions are weighing on households. The U.K. government released its budget in late November, which will raise taxes to help support higher spending. The government had to navigate through a difficult environment of slowing economic growth and rising deficits.
Tariffs drag down Japan’s economic growth
The weight of trade tensions with the U.S. and slower global demand weighed on Japan’s economy during the third quarter of 2025. According to a first estimate, Japan’s economy shrank by 1.8%, annualized, in the third quarter. Japan’s economy grew for five straight quarters before this contraction, succumbing to the negative impact of trade disruption with the U.S., despite a trade deal, which still left Japan facing a baseline tariff rate of 15% on most exports to the U.S. Net trade declined over the quarter, detracting from overall economic growth. This was driven by a 1.2% decline in exports. Imports also fell, but at a slower pace. Meanwhile, household consumption slowed considerably with households facing a rising cost of living. Japan’s economy is heavily reliant on strong goods production and trade activity. Industrial output declined in July and August before recovering in September. Manufacturing activity continued to contract over the third quarter. The government is preparing a stimulus package to help domestic demand and support exporters hurt by U.S. tariffs. The Bank of Japan is scheduled to hold one more meeting in 2025, with the possibility of another interest rate hike.
Market performance - as of November 30, 2025
