As 2025 draws to a successful close across most global markets and asset classes, especially equities, we wanted to share some of our current thoughts and insights and how they inform Optimize’s investment approach and positioning for 2026.
Equity market returns have been impressive over the last three years and Optimize clients have benefited greatly, largely due to our bullish tilt toward equities, primarily in dominant large cap US champions.
While history does not support global stock markets repeating this performance, our outlook and positioning nonetheless remain optimistic. We expect further gains in 2026, although perhaps more modest than recent years, due to the strong fundamentals and forward guidance delivered by our portfolio companies.
Earnings performance has been the story and that continues to deliver above expectations, especially in the strongest and largest US companies where Optimize portfolios have meaningful exposure. Global growth is expected to be more subdued but positive in 2026. The International Monetary Fund forecasts the US to have the best developed world GDP growth of 2.1% (versus Canada at 1.5%, Eurozone at 1.1% and Japan at just 0.6%) which further reinforces our positive view on US equities.
In a recent report, Factset forecasts that US earnings growth will remain strong next year at 14.3%, an acceleration from the 11.8% expected by the end of 2025. In Canada, earnings growth is expected to decelerate from roughly 15.2% in 2025 to a still robust 13% in 2026 (Bloomberg). And North American equity valuations, while still elevated, appear more reasonable when considering this healthy earnings growth and current level of long-term interest rates.
Based on these strong earnings fundamentals and an accommodative interest rate environment, our optimistic positioning remains largely unchanged. We remain bullishly positioned toward primarily US equities, and we prefer sectors currently demonstrating strong and sustainable earnings growth.
This supports our high conviction tilt toward Technology (including Technology names like Alphabet, Meta, and Amazon that are technically included in other sectors) and Financials (especially large, diversified North American banks).
On the fixed income side, we have a preference for government bonds, split roughly evenly between Canada and the US, and investment-grade credit given historically tight spreads (providing minimal excess return potential versus the risks). In addition, we’re opportunistically extending duration over time with the belief that long-term rates will remain in a downward trajectory.
We remain constructive on the prospect of solid returns in equities, fixed income and pension-style assets and are positioned accordingly. However, we also recognize that we can’t see around corners. Our current mindset is that prudent risk management suggests it makes sense to tactically ease our foot off the gas a little as this year turns into next and then patiently wait to take advantage of any volatility. This demonstrates the flexibility and effectiveness of our Dynamic Asset Allocation pillar.
For example, intelligent rotation at the margin away from equity winners and toward more undervalued firms that exhibit the attributed we value is reasonable and logical. We do this where it makes sense because being properly diversified is a key component of our risk management and portfolio construction process.
As always, as the facts change we remain willing to change our minds to ensure the Optimize portfolios are thoughtfully constructed to deliver the best possible outcomes over time. Onward to 2026!
Alex Lane, CFA
Vice-President, Portfolio Management
Data Sources:
IMF Source:
https://www.imf.org/en/publications/weo/issues/2025/10/14/world-economic-outlook-october-2025
Factset Source:
https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_112125.pdf
Bloomberg Estimate as of December 2nd, 2025:
EPS 2024 - $1609.97
EPS 2025 - $1855.33 (growth of 15.24%)
EPS 2026 - $2097.10 (growth of 13.03%)