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1. Grow your guarantee using resets from Equitable Life
   Did you know that many of Equitable Life®’s segregated funds contracts, including Pivotal Select™ Estate Class and Protection Class, allow for an annual reset of the death benefit guarantee? Now could be a great time to remind clients to lock-in any gains with a death benefit reset; and increase their Death Benefit guarantee to 100% of the current market value. The ability to lock-in market growth using resets is one of the differences between segregated funds and mutual funds.
    
   To complete a reset, submit the applicable investment direction form. If you have Limited Trading Authorization on file, you can sign the request on your client’s behalf*. The Investment Direction Forms are posted on EquiNet®, or can be found here (by product):
    
   • Pivotal Select (form # 693SEL)
   • Personal Investment Portfolio, Pivotal Solutions II or Pivotal Solutions DSC (form # 693ANN)
    
   Be sure to check out the “Growing your Guarantee with Resets” marketing piece which can be shared with your clients. For questions about resets, contact your Regional Investment Sales Manager today.
   
   
    
   *Advisors are required to keep notes of their conversation with their client for audit purposes when completing transactions using Limited Trading Authorization. World Financial Group (WFG) advisors are not permitted to use Limited Trading Authorization as per their agreement with WFG.
   ® and ^TM denote trademarks of The Equitable Life Insurance Company of Canada
    
2. Sharpen your skills with Equitable’s Path to Invest summer learning modules

   Want to stay ahead, bring more value to clients, and earn Continuing Education (CE) credits?

   Equitable^® now offers new online summer modules to help you grow your financial knowledge. These self-paced Path to Invest modules are available on our ON24 platform. You can learn on your own schedule and earn CE credits with ease.

   Whether you want to boost your investment skills or have better client conversations, these courses are here to support your growth.

   The first module, Index Investing, explores the basics of index investing, how it compares to active management, and how using indexes can help diversify client portfolios.

   The second module, Saving for a Home with Equitable, equips you with strategies and tools to guide clients through the homebuying journey, including insights on savings vehicles, intergenerational wealth transfers, and mortgage planning.

   Each course is approved by the Alberta Insurance Council and the Insurance Council of Manitoba. You will earn 1 CE credit for each course after passing the quiz.

   Start learning today! Visit our Learning Centre to begin. 
   
   If you have any questions, reach out to your Director, Investment Sales. When we work together, success is mutual.

   
   Continuing Education Credits
   To be eligible for CE credits, you must register individually, watch the webcast in full and complete a short quiz. These webcasts are available in English only. It is the advisor's responsibility to ensure Continuing Education credits being offered are accepted by the licensing body. Alberta Insurance Council (AIC) credits are valid in Yukon, British Columbia, Alberta, Saskatchewan, Ontario, New Brunswick, Prince Edward Island and Nova Scotia. Insurance Council of Manitoba (ICM) credits are valid in Manitoba only.
   
   Date posted: July 17, 2025

3. Making it easier to do business with us At Equitable^® we are always looking for ways to improve your experience with us. We’ve made the following enhancements to make it easier for you to put your business with us.  
   
   New and Improved UL Fund Performance page
   
   Access more fund performance information faster and easier on our new and improved Fund Overview & Performance website for funds held within Equitable universal life policies. 
    
   We partnered with Fundata to build a central location for fund performance, fund information (available in web and PDF) and Management Expense Ratios (MERs). This fund reporting will be available for all our universal life business (both legacy products and products currently being sold).
   
   Highlights include: 
   ● Save your favourite funds for easy access. 
   ● Fund search and tools to filter by product, asset class and sustainability. 
   ● Share feature allows you to easily share fund information with clients. 
   ● Ability to compare fund performance. 
   
   Check out the new Fund Overview & Performance website today. See how Equitable is making fund information faster and easier to access. 
   
   New “Update Payment” feature for banking changes has launched!
   
   Great news! We have launched a new self-serve "Update Payment" feature in Client Access and on EquiNet^®. This new online capability enables clients and advisors to easily submit key banking change requests for eligible insurance policies*, with no need to complete a physical form.  
   *The Update Payment transactions are only available for eligible policies: those that have not lapsed, are not on Automatic Premium Loan, and are not owned by a corporation or other entity.
   
   What’s new? Clients and advisors can now submit banking changes via EquiNet under Policy Inquiry. It allows them to easily submit requests for the following: stop and resume pre-authorized payments or change banks. Learn more. 
   
   Speak to your individual life wholesaler to learn more about these great enhancements!
   
   ^® or ^TM denotes a trademark of The Equitable Life Insurance Company of Canada
4. [pdf] Make your money work for you
5. NEW MARKETING MATERIAL! Equimax Participating Whole Life, Strong and Stable Dividends Participating whole life policyholders can get some of the participating account earnings back as dividends.^₁
   
   Dividend scales change over time. This new marketing piece shows how the actual values of policies look like against those that were estimated. It looks at two sample policies and compares them to the original sales illustrations. One example shows an Equimax Estate Builder^® policy. The other example shows an Equimax® Wealth Accumulator^® policy.
   
   We are proud of our strong and stable dividend results. We have paid dividends to our participating policyholders every year since 1936. And we’re still going strong!
   
   We want to make sure that we can continue to provide long-term income and growth to support the dividend scale and meet the product guarantees. We do this with constant focus on how we invest and manage risk to support the participating account.
   
   As a mutual life insurance company, we are owned by our policyholders who count on us and our services. Their trust in our knowledge, experience, and financial strength helps us keep our commitments to them—now and in the future.
   
   Dividend scales may change.² But with a balanced approach, Equitable Life’s Equimax® Participating Whole Life continues to deliver excellent value. It gives guaranteed life insurance protection with the potential for earnings.
   
   Want to learn more? Check out our new marketing piece: Equimax Participating Whole Life, Strong and Stable Dividends (2075).
   
   For more information, reach out to your local wholesaler.
    
    
   
   ^® and ^TM denote trademarks of The Equitable Life Insurance Company of Canada.
   ¹ Dividends are not guaranteed and are paid at the sole discretion of the Board of Directors. Dividends may be subject to taxation. Dividends will vary based on the actual investment returns in the participating account as well as mortality, expenses, lapse, claims experience, taxes, and other experience of the participating block of policies.
   ² If low interest rates continue, investment returns will be lower, and this may mean decreases in the dividend scale in the future. Dividend payments are not guaranteed, but they will never be negative.
6. Client Access login is changing Equitable wants to keep client’s information safe. Starting in January 2026, all clients will be asked to use an email address to log in to Client Access^®, our secure client website for insurance and investments transactions.
   
   What’s changing?
   In January, all clients must use their email address to log in to Client Access. They will no longer be able to use a username. If clients can’t remember which email they used to register for Client Access, they can simply click “Forgot email” on the login page to get help. If clients use a password, they may need to enter a one-time code sent to their email.
   
   Clients looking for extra security?
   Clients can also create a Passkey. This makes logging in easier and safer.
    
7. All about the changes to the capital gains inclusion rate Disclaimer: The following content is provided by and is the opinion of Invesco Canada Ltd. Equitable does not guarantee the adequacy, accuracy, timeliness, or completeness of the information. Equitable shall not be liable for any errors or omissions in the information provided by Invesco.
   
   
   What has changed?
   One noteworthy measure to come from Budget 2024 is the proposed change to the capital gains inclusion rate, which was previously held steady at 50% since 2001.
   
   For individuals, capital gains more than $250,000 annually will be subject to an increased 66.67% inclusion rate as of June 25, 2024, while the capital gains up to $250,000 will continue to be subject to the existing 50% inclusion rate. As a transitional measure for 2024, only the capital gains realized by individuals on or after the effective date of June 25 that are above the $250,000 threshold will be subject to the increased inclusion rate.
   
   For trusts and corporations, the inclusion rate on all capital gains will increase from 50% to 66.67% starting on June 25, 2024.
   
   
   
   
    
   Who is affected?
   
   Impact to individuals
   Budget 2024 proposed to add transitional rules which would specifically identify capital gains and losses realized before the effective date (Period 1) and those realized on or after the effective date (Period 2). The effective date is June 25, 2024. Capital gains realized on or after that date will have an inclusion rate of 50% on the amount up to $250,000, and an inclusion rate of 66.67% on the amount above $250,000. All capital gains realized prior to the effective date will have an inclusion rate of 50%.
   Take Ontario as an example, the proposed higher inclusion rate on capital gains would effectively increase the average federal-provincial marginal tax rate for Ontario residents on capital gains above $250,000 at the top marginal tax rate from 26.76% to 35.69%. A more detailed analysis on the impact of these changes to an individual’s tax rate is discussed below.
   For net capital gains realized in Period 2, the annual $250,000 threshold would be fully available in 2024 (i.e., it would not be prorated) and it would apply only in respect of net capital gains realized in Period 2.
   The $250,000 threshold would effectively apply to capital gains realized by an individual, either directly or indirectly via a partnership or trust, net of any: current-year capital losses, capital losses of other years applied to reduce current-year capital gains, and capital gains in respect of which the Lifetime Capital Gains Exemption, the proposed employee Ownership Trust Exemption or the proposed Canadian Entrepreneurs’ Incentive claimed.
   Two common scenarios of reaching the $250,000 capital gain threshold are the deemed disposition of capital property at death, and the emigration from Canada (i.e., becoming a non-resident for income tax purposes). We have provided additional details on these topics below.
    
    
   Deemed disposition upon death
   When an individual passes away, they are deemed to have sold their capital property (e.g., units or shares of mutual funds, shares of corporations, and real property) at its fair market value (FMV) immediately before their death. If a capital gain arises because of this deemed disposition, that capital gain is reportable on the deceased’s final (terminal) tax return and the taxes owing as a result, if any, would be payable by the estate of the deceased. However, there are provisions that allow taxes to be deferred when the property is transferred to a spouse. For example, if a capital property is transferred to a surviving spouse or common-law partner, subsection 70(6) of the Income Tax Act (Canada) automatically deems the deceased to have disposed of that property and the spouse or common-law partner immediately acquires the same property at the deceased transferor’s adjusted cost base (ACB). This is commonly referred to as the “spousal rollover”. Another potential strategy to manage potential large capital gains taxes at death is life insurance, since the death benefit is typically paid out tax-free.
   Without careful planning, the estate value could be substantially reduced by the changes to the capital gains inclusion rate. Furthermore, it would be prudent to ensure there are liquid assets or cash available in the estate to cover the associated tax liabilities.
   
   Non-resident of Canada – Departure tax
   Residency in Canada for income tax purposes is a question of fact, which primarily depends on the individual’s residential and social ties in Canada. When an individual becomes a non-resident of Canada, they are deemed to have disposed of and immediately reacquired certain types of property at FMV. The tax incurred because of this deemed disposition and reacquisition is also known as the departure tax. Some examples of properties subject to departure tax include securities inside a non-registered investment portfolio, shares of Canadian private corporations, and real estate situated outside of Canada. Note that there are some properties that are exempted from the departure tax, including: pensions and similar rights (including registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), and tax-free savings accounts (TFSAs)) and Canadian real property.
   The departure tax rules coupled with the increased capital gain inclusion rate above the $250,000 threshold may incur additional tax payable for emigrants. However, there is an option to defer the payment of departure tax on income associated with the deemed disposition upon emigration. By making an election, the individual would pay the tax later, without interest, when the property is disposed of. This election can be done by completing CRA Form T1244, “Election Under Subsection 220(4.5) of the Income Tax Act, to Defer the Payment of Tax on Income Relating to the Deemed Disposition of Property," on or before April 30 of the year following their departure from Canada.
   
   Impact to Entities
   Corporations and trusts will also be impacted by the increased inclusion rate as of June 25, 2024. Unlike individuals, corporations and trusts will not have access to the old inclusion rate on the first $250,000 of capital gains: they will be subject to the new 66.67% inclusion rate from the very first dollar.
   With the above in mind, there will be options available to shelter corporate and trust capital gains from the new inclusion rate.
   
   For corporations:
   The lifetime capital gains exemption (LCGE) can be used to eliminate capital gains taxes on the sale of qualified small business corporation shares (generally, these are shares of a Canadian-controlled private corporation that carries on an active business). The LCGE is also available on the sale of qualified farm or fishing property. The current lifetime limit for the LCGE is $1,016,836. Budget 2024 proposed to increase that limit to $1,250,000 starting on June 25, 2024, so certain business owners will be able to reduce or eliminate their exposure to the new inclusion rate if they are able to make use of the increased LCGE limit.
   
   For trusts:
   Budget 2024 suggests that capital gains allocated by a trust to its beneficiaries on or after June 25, 2024, will be included in the beneficiaries’ income at the old 50% rate up to the beneficiaries’ first $250,000 of capital gains for the year. While the specifics are not yet available, this opportunity will likely create further planning considerations surrounding the allocation of capital gains from a trust to its beneficiaries to reduce taxes. Capital gains can generally be allocated to a beneficiary for tax purposes when they are actually paid to the beneficiary, or when they are payable to a beneficiary (i.e., the beneficiary hasn’t received it, but has a right to demand payment of the capital gain). The option of making income paid (or payable) to its beneficiaries and allocating such income to be taxed in their hands will largely depend on the trust terms.
   
   Historical reference: capital gains inclusion rate
   Those of us around long enough, understand that this recent change was not the only time the capital gains inclusion rate has deviated from the 50% inclusion rate. Over the years, capital gains tax rate has ranged from nil to as high as 75% as indicated in the table below.  In fact, the first instance of capital gain tax was introduced in 1972!
   
   
    
   Excluding the 2024 tax year, we have given a rough estimate on the percentage of time spent at each of the various capital gains inclusion rates over the last 42 years. As we can see, for most of the time, the capital gains inclusion rate has remained at the 50 % inclusion rate. In fact, for the last 23 consecutive years, the inclusion rate has remained untouched with the last change being back in tax year 2000 with various changes introduced that year.
   
   
   
   Tax impact by province/jurisdiction
   With the increase in the capital gains inclusion rate, we want to demonstrate the potential tax impact of those changes across jurisdictions in Canada. The table below shows the 2024 marginal tax rate for the highest individual income earners in each jurisdiction at both the 50% and 66.67% capital gains inclusion rate, respectively. The average difference is an increase in taxes payable by 8.45%.
   
   
   
   Next, we look at the additional taxes payable because of the inclusion increase, assuming varying capital gains income levels. Of course, this assumes that the capital gains do not otherwise benefit from a reduced inclusion rate or an outright exemption such as eligible in-kind donations of securities to registered charities, or shares that qualify for the lifetime capital gains exemption, to name a few.
   
   
   
   Understanding the tax implications of investing is an essential part of financial planning and reinforces the importance of working with a knowledgeable financial advisor to understand the long-term impact of these changes as it applies to personal situations. No doubt, tax rates influence capital allocation decisions. Canadians who take more inherent risk with their capital have traditionally been afforded preferred taxation rates promoting innovation through capital investment, something the government can do with good tax policy to encourage business growth and spur economic expansion. This is evident in the breakdown of the tax rates depending on the characterization of the income as noted in the table below.
   
   
   
   Clearly the tax rates reflect the added capital risk investors and business owners take. We can clearly see the preferred taxation rates afforded on small business income and at the general corporate tax rates on income over the small business limit, compared to the tax rate on interest income or that of employment income. That tax-preference also extends to investors of “riskier” allocations of capital in marketable securities such as stocks, bonds, mutual funds, and exchange traded funds, to name a few. The tax rates of less-risky investments (such as money market instruments) do not benefit from the capital gains tax-preferred inclusion rates. With the latest move, there is not much difference in earning eligible dividend income from Canadian resident corporations and from dispositions resulting in capital gains.
   Some pundits have declared the move as a disincentive to capital and business investment and may encourage businesses to move into more tax-favoured jurisdictions outside Canada. The Federal government has promoted the change as impacting a very small overall percentage of investors, estimated at 0.13% of Canadian individuals and 12.6% of corporations. Further, the move has been argued by the Liberals as necessary to work towards “intergenerational fairness”.
   
   How to prepare for the changes?
   For now, advisors may want to start educating their clients about the basics of the changes, which starts with comparing the current inclusion rates with the new inclusion rates.
   Individual investors with large unrealized capital gains will also likely ask if they should crystallize their capital gains before June 25th to save money on taxes in the long run. The assumption that selling now will result in overall savings will not be correct in all cases, however. There is an opportunity cost to paying taxes upfront, rather than deferring those taxes to a later year.
   For example, let’s assume an Ontario client owns a $2.5 million non-registered equity portfolio with $2,000,000 in unrealized capital gains. They had no intention of selling those investments for another 5 yeas, but in light of the upcoming changes, they are considering selling immediately, paying the capital gains taxes now, then reinvesting the net amount after taxes back into those same investments for the 5-year investment period. They are currently in the top marginal tax bracket in Ontario (53.53%) and expect to continue to be in 5 years’ time. The assumed average rate of return on their investments is 6% annually over the next 5 years.
   
   
   
   
   
   As can be seen in this example, at 6% annual compound growth rate, the option to realize much of the capital gains now resulted in a higher overall return in the amount of $61,992.66 over the 5-year period due to the lower inclusion rate. Alternatively stated, if the investor does not crystallize the gains today, the equivalent rate of return needed to have the exact net after tax amount at the end of the 5-year period (the “breakeven return”) would be a 6.60% compound annual return. While this certainly will not be true in all cases, this is the sort of analysis that will have to be conducted when assessing whether it makes sense to realize capital gains in 2024. The rate of return on investment and the investment horizon, among other things, are important determining factors.
    
   Although we used securities investment in our example, a similar analysis can be done for other kinds of property held, such as a vacation property that is unlikely to benefit from the principal residence exemption. In addition, taxes often take a back seat to other planning considerations. These conversations should be had with the primary goals of the client in mind, which may supersede tax planning considerations.
    
   For corporate investors, it will be important to emphasize the impact the capital gains inclusion increase will have on small business owners. As a refresher, a corporation is a separate legal entity from the shareholders who own it and is subject to tax on the income it generates. Income is first taxed within the corporation before it can be passed to the shareholders in the form of dividends out of its retained earnings. To avoid double tax on income that passes through a corporation to shareholders (and to prevent any unintended tax advantages), a dividend gross-up and tax credit model is applied at the individual level, along with a tax refund mechanism to the corporation on passive investment income. This is designed to integrate the tax system between the two entities: individual and corporation. Ideally, perfect integration is achieved when after-tax income is equal, whether it is earned individually or through a corporation. In reality, depending on the province and type of income earned, there could be a tax cost in earning passive investment income through a corporation, including earning passive investment capital gains income. Currently there is a tax cost of earning capital gains income through a corporation across all Canadian provinces/jurisdictions.
    
   The latest change further increases the cost of earning passive investment income inside a corporation, though we do not yet know what changes will be made to the corporate tax refund mechanisms. As noted in the table below, the increase averages approximately 8.43% and closely equates the rate on eligible dividends. This rate reflects the initial tax rate on passive investment income earned within an active business.
   
   
   
   For many small businesses, and perhaps to long-term individual investors, this increase in the tax rate will feel unfair as the accumulation of earning a pool of assets for retirement is often done within their small business corporation, and in many cases the sole source of retirement funds.
   If an immediate crystallization of accumulated capital gains is not desired, what should investors consider in the longer run? Although many details of the new proposed rules are yet to be clarified, here are some general considerations.
   For individuals, it may be helpful to plan the timing of future dispositions to stay below the annual $250,000 threshold. Also, it may seem obvious but maximizing investments within registered plans, including the new first home savings plan (FHSA) where eligible, can reduce exposure to future capital gains tax. Moreover, estate planning becomes even more important as the potential tax payable on the deemed disposition of capital property at death rises. On that front, strategies to reduce capital gains at death could be considered, such as inter-vivos gifting, charitable donation, spousal rollover, and acquiring life insurance to provide sufficient liquidity to the estate.
   For business owners, some strategies to limit future capital gain exposure may include contributing to an individual pension plan (IPP), conducting an estate freeze to pass on future capital gains to succession owners, and ensuring the small business shares qualify for the LCGE. The suitable strategies are highly dependent on the business needs and personal situation of the business owner.  
   
   Acting too soon or not fast enough?
   Finally, there is what many in the industry have been calling a “change of law” risk. That is, within the next year and a half, a federal election is scheduled, and this capital gains inclusion tax policy will surely be a primary election issue. As part of that election platform, parties may promise to repeal it outright or alter its scope and application. Consider also that any changes in the capital gains inclusion rate could be retroactive or simply not apply in all cases.
    
   The information provided is general in nature and may not be relied upon nor considered to be the rendering of tax, legal, accounting or professional advice. Invesco Canada is not providing advice. Readers should consult with their own accountants, lawyers and/or other professionals for advice on their specific circumstances before taking any action. The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed. Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments.  Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.  Please read the simplified prospectus before investing. Copies are available from your advisor or from Invesco Canada Ltd
   
   Date posted: May 23, 2024
8. Market Commentary January 2026
   
   Key Takeaways
   
   Full year 2025:
   • Government policy was very impactful for markets in 2025. U.S. trade policy unsettled markets in the first half of the year, as the U.S. implemented significant tariffs and engaged in tough negotiations with major trading partners. However, by mid-year, fiscal policy provided positive support for markets, particularly with the passing in the U.S. of the One Big Beautiful Bill Act in July.
   • Artificial Intelligence (“AI”) continued to attract investment, particularly in the United States. This investment provided strong support for equity market performance.
   • Global equity markets delivered strong performance, most notably Canadian equities, which returned an impressive 31.7%.
   • Positive risk appetite supported solid corporate bond performance, which outpaced government bonds.
   
   Fourth Quarter:
   • U.S. equities advanced at a slower pace in the fourth quarter after a strong surge in the prior two quarters. Canadian equities outperformed U.S. equities, fueled by a powerful rally in the Materials, Consumer Discretionary, and Financials sectors.
   • Canadian bond markets posted slightly negative returns during the quarter as higher interest rates weighed on performance. Strong corporate bond performance partially offset weakness in government bonds.
   • Both the Bank of Canada and the U.S. Federal Reserve lowered policy interest rates during the quarter, with Canada dropping its benchmark rate by 25 basis points and the U.S. dropping its policy rate by 50 basis points. Both central banks signalled a cautious approach for further easing.
   
   Economic and Market Update

   Economic Summary: The U.S. economy continued to expand at a moderate pace, supported by strong consumer spending and AI investment. However, job growth slowed and the unemployment rate has edged higher. Inflation remains higher than the 2% target, despite easing trends. While some U.S. trading partners have made trade agreements, uncertainty remains regarding reciprocal tariffs, with a case before the U.S. Supreme Court as to their legality. The Federal Reserve lowered its policy interest rate twice during the quarter, first in October and again in December, to reach a target rate of 3.50% to 3.75%. Chair Powell cited downside risks to employment as a key factor behind the rate cut decisions and emphasized that officials are “well positioned” to wait and assess how the economy evolves.
   
   In Canada, U.S. tariffs on steel, aluminum, autos, and lumber have weighed heavily on these sectors. While most goods continue to enter the U.S. tariff-free due to the Canada-United States-Mexico Agreement (“CUSMA”), broader  uncertainty around U.S. trade policy is dampening business investment. Third quarter GDP growth exceeded market expectations, but growth tracked weaker in the fourth quarter amid the trade disputes. The labour market showed signs of improvement in the fourth quarter after earlier weakness. Headline inflation has hovered near the 2% target, while core inflation remained persistent. The Bank of Canada lowered its policy interest rate by 25 basis points to 2.25% in October and made no changes in December. Going into 2026, trade uncertainty remains with the CUSMA up for renegotiation. The Bank of Canada reiterated its readiness to respond if new shocks or accumulating evidence materially alter the outlook.
    

   Bond Markets: During the quarter, the FTSE Canada Universe Bond Index returned -0.3% as interest rates on Canadian bonds rose (bond prices fall as interest rates go up). The increase reflected reduced expectations for interest rate cuts by the Bank of Canada and a higher risk premium demanded by investors for long-term debt. Although interest rates increased, credit spreads (i.e. the extra yield on corporate bonds versus government bonds to compensate for their extra risk) continued to move lower. These lower credit spreads resulted in positive overall returns for corporate bonds in the quarter, despite the overall bond market recording a loss. Tightening credit spreads reflected the continued risk-on tone to the market. Despite some volatility, lower-rated BBB bonds generally performed better than higher-quality A-rated bonds. Credit spreads have now rallied back to the tightest spreads since the 2008 financial crisis, nearing the tightest spreads in history. Despite expensive levels, investors remain buyers of corporate bonds, evidenced not just by falling  credit spreads, but also by investors’ enthusiasm to support the primary issuance market. Corporate bond supply continues to set new records, with an impressive $37.5 billion in new issuance in the fourth quarter helping 2025 to exceed the prior year’s issuance. All told, 2025 saw an impressive $160 billion in new issuance via 358 new bonds, versus 2024’s prior record of $139 billion from 301 new bonds.
   
   
   Stock Markets: The fourth quarter marked a pivotal shift in the global equity market rally of 2025. After three quarters of a highly concentrated, tech-led rally in the U.S., cyclical and valueoriented sectors outperformed in Q4. The S&P 500 advanced at a slower 2.7% in the fourth quarter, reflecting a market that is recalibrating after an extended period of concentrated gains. Canadian equities outperformed U.S. equities as the S&P/TSX Composite returned 6.3% in the quarter, finishing the year with an impressive 31.7% return. That was its strongest annual gain since 2009. The strong returns in Canadian equities were fueled by a powerful rally in the Materials sector, supported by soaring gold and base metal prices, and reinforced by the resilience of the Consumer Discretionary and Financials sectors. Internationally, developed markets in Europe and Asia gained 6.2% for the quarter, bringing their annual return to 21.2%. This move signals a healthy rebalancing as global investors rotated into attractivelyvalued international equities to hedge against elevated U.S. valuations. Capital is now flowing toward regions and sectors offering stronger earnings visibility and defensive characteristics rather than purely speculative growth.
   
   
   U.S. Equities: U.S. equities entered the fourth quarter at elevated valuations. Despite fundamentally strong earnings growth, stock prices struggled to move higher because investor expectations were for even stronger growth. Technology remained the primary driver of earnings, but the sector faced intense pressure to prove its value. Specifically, investors questioned the pace at which companies could convert AI investments into actual revenue. Investors also worried that growth remained concentrated among too few companies rather than more broadly across the economy. Sector-wise, Communication Services emerged as the top performer for the full year due to significant margin expansion. This was driven by a wave of media-related merger activity and the successful use of AI to make digital advertising more efficient. Industrials also advanced as new tax incentives for domestic manufacturing boosted factory orders. Nevertheless, the market remains concentrated with the top ten stocks representing nearly 40% of the S&P 500 Index. This level of concentration makes the market vulnerable to sudden price swings. As inflation moderated and the Federal Reserve cut rates in December, investors shifted toward more defensive sectors and international equities. This rotation signals a preference for companies with stable cash flows over speculative growth.
   
   
   Canadian Equities: The Canadian market was a global standout during the quarter, supported by lower borrowing costs, a stable Financials sector, and rally in the prices of metals (including gold, but also base metals like nickel and copper). The Materials sector led the way as a weaker U.S. dollar and geopolitical tensions pushed gold to a record of US$4,550 per ounce in late December. For major mining companies, these prices generated record cash flow allowing them to raise dividends and buy back shares. The Bank of Canada interest rate cut supported both the Consumer Discretionary and Financials sectors, reducing borrowing costs, and helping banks maintain stable net interest margins. The Big Six Canadian Banks delivered strong earnings results in Q4. These were driven by a surge in capital markets activity and better-than-expected provisions for credit losses, as the economy remained resilient. Trading at 17 times forward earnings, the Canadian market appears attractively valued, prompting investors to shift away from U.S. volatility toward more tangible assets and reliable dividends.
   
   
   Bottom line:  The final quarter of 2025 saw a notable shift in investor positioning. As recession fears receded, attention turned to navigating a period of moderate economic expansion. In Canada, capital flowed into profitable, cash flow-generating companies in the Financials and Material sectors. Momentum in U.S. equities slowed as investors reduced risk amid caution around AI developments. Although major indices remain highly valued, opportunities persist in sectors and regions with stable cash flows and pricing power.
   
   
   Downloadable Copy
    

   Mark Warywoda, CFA VP, Public Investments	Ian Whiteside, CFA, MBA AVP, Public Investments	Johanna Shaw, CFA Director, Public Investments	Jin Li Director, Equity Investments
   Wanyi Chen, CFA, FRM Sr. Quantitative Analyst	Andrew Vermeer, CFA Senior Analyst, Credit	Elizabeth Ayodele  Analyst, Credit	Edward Ng Cheng Hin Analyst, Credit	Kate (Huyen) Vinh Analyst, Equity	Francie Chen Analyst, Rates

   
   ADVISOR USE ONLY
   Any statements contained herein that are not based on historical fact are forward-looking statements. Any forward-looking statements represent the portfolio manager’s best judgment as of the present date as to what may occur in the future. However, forward-looking statements are subject to many risks, uncertainties, and assumptions, and are based on the portfolio manager’s present opinions and views. For this reason, the actual outcome of the events or results predicted may differ materially from what is expressed. Furthermore, the portfolio manager’s views, opinions or assumptions may subsequently change based on previously unknown information, or for other reasons. Equitable^® assumes no obligation to update any forward-looking information contained herein. The reader is cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements. Investments may increase or decrease in value and are invested at the risk of the investor. Investment values change frequently, and past performance does not guarantee future results. Professional advice should be sought before an investor embarks on any investment strategy.
9. [pdf] When it is time to convert your RSP to a RIF