The Canadian economy showed surprising resilience in the third quarter of 2025, with GDP increasing by 2.6% (on an annualized basis) thanks to a rebound in exports to the U.S., and despite a decrease in domestic demand. This impressive gain was on the heels of the 1.6% GDP decline in the second quarter. Before those figures were released, the Bank of Canada reduced its benchmark rate in October – the fourth such rate decrease in 2025, for a total of 100 basis points – and then paused for the remainder of the year, as expected by the market. In terms of inflation, Canadian CPI rose 2.4% year-over-year in December, though with much dispersion in the data – Energy prices, for example, were down nearly 9%, while grocery prices surged, up 5.0% driven by the price of meat.

In this context, the ELCIC pension plan returned 1.95% for the fourth quarter of 2025, beating its benchmark by 35 bps.

Canadian Equities

The Canadian stock market had another quarter of strong gains, with the S&P/TSX gaining 6.2%, to end the year up 31.7%. The Materials sector once again was the strongest performer in Q4, up 11.9% thanks to the price of gold gaining nearly 15%, putting its gains up nearly 68% for the year. Canadian gold stocks surged 11.0% in the quarter and an extraordinary 131.1% over the year. Financials also played a key role in the TSX’s gains, as banks benefited from strong corporate earnings supported by broad-based volume growth in lending and margin expansion. Consumer Discretionary (11%) and Financials (+10.5%) also did well. Conversely, Real Estate and Telecoms did the worst, losing 6.2% and 1.7%, respectively.

Canadian equities in the Growth portfolio gained over 7% in the quarter, beating the benchmark by about 80 bps. The fund gained from strong momentum in Canadian retail, driven by increased consumer spending during the holiday season while exposure to Consumer Staples, which has benefitted from the “Buy Canadian” movement amid trade disputes with the US, was also beneficial.

Global Equities

Q4 2025 was a risk‑on quarter for US equities: The AI narrative continued to concentrate returns in large tech and communication‑services names. Those mega‑caps led the market, though momentum cooled late in Q4 as some investors questioned valuation sustainability. A dovish pivot from the Fed and solid corporate earnings also contributed to the gains in the U.S., where the S&P 500 finished the quarter up 2.7%. European stocks gained 6.3% as the weaker U.S. dollar and firmer Euro helped returns for Europe in dollar terms and attracted international flows. Emerging markets stocks gained 4.8% with the Fed easing & weaker USD removed financing stress for EM borrowers and encouraged capital flows back to EM assets, while higher commodity prices supported commodity‑exporting EM countries, namely in Latin America.

All of the funds in the Growth portfolio produced positive returns. Emerging markets and global equities did well, gaining 4.1% and 3.1%, respectively, both of which represent benchmark-beating performances. Global small caps in the portfolio gained less, about 0.7%, underperforming their benchmark.

Fixed Income

The Canadian bond market suffered some minor losses in Q4 as rates rose, particularly in the latter half of the quarter as economic data published in the last few weeks pointed to a strengthening of the economy. 10-year government of Canada yields ended the quarter at 3.44%, about 25 basis points higher from where they started, leading to a loss of 0.32% for universe bonds in Canada. Universe bonds, the largest holding in the Fixed Income portfolio, lost about 0.26%, slightly outperforming their benchmark. The corporate bond portion of the portfolio was positive in absolute terms but underperformed its benchmark, while growth bonds lost 9 bps.