Market Recap* – Year in Review (2025)

1. What happened in the markets?

Despite tariff related volatility, the equity markets posted strong gains over the past year, with investors witnessing one of the most rapid recoveries on record after the quick downturn in early April. The comeback was powered by mega-cap strength and unrelenting AI-related optimism. Among commodities, precious metals had a stellar year, aided by safe-haven demand and central-bank purchases.

Canadian equities delivered an exceptionally strong year, rising 31.7%, supported by easing inflation and accommodative monetary policy. Financial conditions gradually improved boosting investor confidence and market participation. Among sectors, the Materials were leading, up 100.6%, while at tail of the pack, Health Care climbed 0.4%.

US equities gained 17.9% over the year as inflation trended lower the Federal Reserve policy became more accommodative. Consumer spending remained resilient, supporting record corporate earnings.

Canadian fixed income returned 2.6% over the year as bond prices gradually recovered while inflation pressures eased. Early in the period, expectations for higher interest rates kept prices under pressure, but sentiment improved with Bank of Canada’s rate cuts.

Money market investments returned 2.8% for the year, supported by elevated short-term interest rates for much of the year.

The Canadian dollar strengthened over the year, with USD/CAD moving from 1.44 to 1.37. Improved risk sentiment and stable commodity prices supported the Canadian dollar, while interest rate differentials narrowed between Canada and the US. The stronger Canadian dollar slightly reduced returns on unhedged US assets for Canadian investors.

2. What does it mean for Embark Funds?

Asset class	Change	Impact on cohorts
Canadian Equities	↑	Strong performance was particularly positive for younger cohorts with higher equity exposure. Gains were supported by easing monetary policy and inflation, though economic growth remained moderate.
U.S. Equities	↑	Positive for growth-oriented and younger cohorts, as resilient economic activity, accommodative monetary policy, and slowing inflation supported the equity markets.
Bonds	↑	Bond price gains benefited older and more conservative cohorts by providing stability, diversification, and income.
Money Market	↑	Gains supported older cohorts and conservative investors seeking income and capital preservation.
Canadian Dollar	↑	A stronger Canadian dollar slightly reduced returns on unhedged U.S. assets.