The Canadian economy contracted in Q2, shrinking by -1.6%, following a strong 2% gain in Q1. But weakness in the Canadian economy has largely remained a story around trade — most of the drop in Q2 GDP (Gross Domestic Product) came from a steep drop in exports, tied to a fall in U.S. imports after the surge in pre-tariff stockpiling in the first few months of the year. Due to the weakness in the economy (and thanks to relatively tame inflation numbers, around 1.9% in August) the Bank of Canada lowered its benchmark interest rate by 0.25% in September, providing some much-needed stimulus to the economy.

In this context, the ELCIC Pension Plan returned 6.2% for the third quarter of 2025.

Canadian Equities

The Canadian stock market experienced a strong third quarter in 2025, with the S&P/TSX Composite Index gaining 12.5% to reach a new record high. The Materials sector was the clear leader, surging nearly 38%, primarily driven by a rally in precious metal prices, particularly gold, which attracted safe-haven demand amid heightened economic uncertainty. The Information Technology sector also performed well, up about 13%, largely fueled by the global boom in Artificial Intelligence (AI) and strong performances from major tech heavyweights like Shopify. The Industrials sector was the worst performer, declining slightly, while consumer staples and consumer discretionary sectors also lagged. These sectors, particularly those exposed to trade tensions and domestic economic sensitivity, lagged behind the market’s commodity and tech-driven momentum. In the first 9 months of the year, the TSX is up 24%.

Canadian equities in the Growth portfolio gained over 9.1% in the quarter, which was an underperformance against their benchmark as the fund was positioned slightly more conservatively than the index this quarter.

Global Equities

In Q3 2025, global equities rallied strongly, driven by a surge in several tech-related names, while economic growth was also resilient. The launch of the Fed’s interest rate cutting cycle also helped feed enthusiasm in global markets. U.S. stocks gained 8.1% in Q3 – outperforming most other developed markets – but on a year-to-date basis, U.S. equities are generally behind their counterparts in Europe due to the significant weakness in the large American IT sector early in the year.

All of the funds in the Growth portfolio produced strong returns, although performance against their benchmarks was mixed. The Emerging Markets fund was the best performer, having gained 11.6% but underperformed its benchmark. The portfolio’s largest equity holding, the Global Equity Fund, gained 9.7%, beating its benchmark in Q3.

Fixed Income

The Canadian bond market had a generally positive Q3 2025, driven by the Bank of Canada (BoC) cutting its benchmark interest rate to 2.50% in September. This rate cut, which was a response to a weakening economy and soft job market, caused bond yields to decline, benefiting bond prices. The yield curve also normalized somewhat, with shorter-term yields falling more than longer-term yields.

Universe bonds, the largest holding in the Fixed Income portfolio, gained 1.7% while global opportunistic bonds gained 4.8%. Returns in corporate bonds and commercial mortgages were also strong. All the funds outperformed their benchmarks this quarter.