(performance data as of November 30, 2025)
The Quick-Hits
- Cautious optimism heading into 2026
- Will momentum persist, or will 2026 be the year of fundamentals and risk management?
- Fixed Income in 2026: The year of coupon clipping vs. capital gains
- Growth stocks decline in November, though our proprietary AI analytics model* predicts strong earnings growth for U.S. Tech in 2026
- Canadian equities surge further ahead, driven by strong commodity demand
- Bank of Canada likely done cutting rates, markets expect no change through year-end 2026
- Markets expecting 3-4 rate cuts in the U.S. through year-end 2026, though much uncertainty remains
- Quote of the month:
“My estimation of value in securities is not now, and has not been for some time, in sync with the markets.”
– Michael Burry, Founder of Scion Asset Management
Macro Musings
As we approach year-end, it’s safe to say that 2025 has been quite an eventful year. Perhaps, surprisingly to some (me included), it was also quite a fruitful year, despite a backdrop that seemed to all but conspire against positivity – military conflict, a growing wave of protectionism (not just in the U.S. but globally), frothy Tech valuations that have largely defied talk of a bubble…the list goes on. But as the year has progressed and I’ve consistently flagged concerns and risks to both economic growth and market returns, I’m reminded how powerful momentum can be and how foolish it might be to fight against entrenched momentum in the short term. After all, history shows the investment return of optimists tends to exceed that of pessimists over the long term (as evidenced by historical equity market performance) and, to paraphrase John Maynard Keynes, markets can remain irrational far longer than an individual can remain solvent.
Speaking of which, those paying attention to the headlines in November would have seen that Michael Burry, founder and hedge fund manager at Scion Asset Management – the same Michael Burry played by Christian Bale in The Big Short – decided to close up shop. Recall that Michael famously predicted, and profited handsomely, from the 2007-08 subprime mortgage crisis – a feat he was narrowly able to accomplish. He had been calling for a collapse in a subprime mortgage market early and took on short positions that put his hedge fund on the brink of disaster as margin calls piled up and the market kept climbing higher. Ultimately, he was able to remain solvent just long enough for his short trade to pay off – big time.
Fast forward to this year. Michael made headlines first for declaring that he had built significant short positions against both NVIDIA and Palantir – two of the highest-flying stocks in recent memory. Shortly thereafter, he announced that he would be closing up shop and returning funds to investors. He believes that the market is heading for a prolonged downturn, stating, “I think the stock market could be in for many bad years”, citing that the dominance of passive investing could exacerbate negative returns. Further, he admitted, “My estimation of value in securities is not now, and has not been for some time, in sync with the markets”. Rather than revisit his 2007-08 experience of being potentially right, but too early and fighting against momentum, he stated, “Sometimes, the only winning move is not to play”.
His view – concern around lofty valuations potentially out of sync with reality and fundamentals – is certainly not a niche idea in an obscure part of the market. This has been a theme we’ve discussed multiple times this year and is, arguably, the trillion-dollar question on most people’s minds.
A Financial Times article published in October entitled, “The real value trade is abroad”, cites Goldman Sachs strategists predicting that U.S. equities will likely underperform global peers for the next decade based on concerns about high valuations coupled with concentration risk in the U.S.
Aswath Damodaran, Professor of Finance at the NYU Stern School of Business and voted one of the top U.S. business school professors by BusinessWeek, also shares concerns. The “Dean of Valuation,” as he’s often referred to, was recently interviewed¹ and said there’s no place to hide in stocks, emphasizing that market valuations are stretched across the board, making it hard to find undervalued sectors. Furthermore, he believes that small caps and value stocks are no longer reliable as their historical premiums have been eroded by structural changes such as passive investing dominance and concentration within mega-cap tech. This has led, in turn, to increased correlation not only within equities but also across asset classes. While he does sound rather bearish, his advice to those with longer time horizons is to remain invested but be realistic about future return expectations, diversify globally and don’t get overly wrapped up in Artificial Intelligence (AI) hype without understanding the fundamentals. And finally, he stresses the importance of maintaining valuation discipline, which matters more than ever in a market dominated by momentum.
Another prominent investor picked up on this theme about not relying on the AI trade. Ruchir Sharma, Chair of Rockefeller International, a U.S. financial research and advisory firm, drafted an article for the Financial Times on December 1 (“The best time to buy quality stocks is now”) outlining the case for quality companies with stable earnings growth, low debt levels and high return on equity. In his view, there is now a “once-in-a-generation” opportunity in global markets that could deliver strong returns regardless of how AI mania plays out. Sharma notes that “quality” has just suffered one of its worst relative declines ever in developed markets, lagging behind the broader (global equity) market by almost 10 percentage points over the past year, before going on to say that quality stocks have typically delivered their best returns after similar (but rare) periods of such underperformance, which is why this moment feels so ripe.
But, as is often the case, the view of where we go from here is cloudy, and not everyone believes we’re destined for drawdowns. In fact, if we ask ourselves, “What could go right?”, there are some positive tailwinds that could propel the momentum well into 2026.
In our latest “Buy the Way” podcast episode (episode #6, airing early next week), I sat down with James Francis, Client Portfolio Manager supporting Guardian Capital LP’s i³ Investments™ Team*, to discuss how AI is revolutionizing stock analysis. An interesting takeaway from the discussion was that the team maintains high conviction in the U.S. Information Technology sector, as their proprietary AI model* is predicting very strong earnings growth in 2026. This, of course, is one of the main concerns that has been floating in the media in the midst of the staggering levels of AI capital expenditures – whether these mega cap stocks will be able to drive higher earnings growth to justify these capital outlays. While it may be premature to draw a direct line between AI capital expenditures and increased earnings growth, it’s a positive signal nonetheless for sustained momentum in the sector and, by extension, the broader global equity market.
Sara Devereux, Vanguard’s Fixed Income Chief, says she expects AI infrastructure spending will continue at a blistering pace next year, causing U.S. GDP growth to increase from 2025’s 1.9% rate to an estimated 2.25% in 2026, contributing (in her view) to fewer interest rate cuts by the U.S. Federal Reserve (Fed) than the market is currently expecting² (more on that below in our fixed income section).
The U.S. political environment also seems primed to influence markets next year. The President’s approval rating, at just 36%, is now at the same level as Joe Biden’s after his horrendous debate performance raised concerns about his age-related cognitive decline and ultimately pushed him out of the running in 2024. If “Trump is horrendously unpopular and even MAGA is catching on”,³ and the economy is far and away the single largest concern for American voters, it stands to reason that the current administration will amplify its efforts even further, pulling any levers it can to improve affordability and stimulate the economy. Failing to do so will likely exacerbate the issue facing Republicans today, where they were handily beaten in several recent elections. As it increasingly feels like the U.S. is having a referendum on Trump, he’s at risk of a Democratic wave sweeping the 2026 mid-term elections and becoming a lame duck to ride out his second term. I, for one, don’t expect him to sit on his hands.
Will the AI-powered economy continue to defy expectations alongside increased stimulative efforts from the White House? Perhaps with frothy equity valuations and fixed income credit spreads at near-decade tights, 2026 may favour the risk-conscious investor focusing more on fundamentals and quality and placing less reliance on corporate bonds. Both scenarios are entirely plausible, so investors will need to choose their own adventure.
Equities
Global equities eked out a positive return this month, with the U.S. market barely able to keep its head above water as Big Tech suffered drawdowns. Some of the hardest hit Tech names were Super Micro Computer Inc (-35%), Oracle Corp (-23%) and Dell Technologies Inc (-18%). But it was NVIDIA, the largest weight in the S&P 500 Index⁴ at 8%, that most hurt the index, as shares fell almost 13% in November despite a staggeringly positive Q3 earnings report. NVIDIA’s revenues were up 62% year-over-year (YoY), forward guidance beat expectations with $65 billion in revenue projected just for Q4 of 2025 and CEO Jensen Huang described sales as “off the charts.” The surprising development that likely contributed significantly to NVIDIA’s share price pullback was that Alphabet (Google) emerged as a very real competitor, actually even signalling to some that it has an AI lead with its own AI-specialized chips, known as tensor processing units (TPUs). Unlike NVIDIA’s general-purpose GPUs, these TPUs were developed by Google specifically to accelerate machine learning workloads, particularly deep learning models, and they have trained their leading-edge Gemini AI models solely on TPUs. Charlie McElligott, a strategist at Nomura, likened Gemini 3’s impact to the DeepSeek shock from the Chinese in early 2025. He was cited in a recent Financial Times article⁵ as saying that Alphabet’s latest model has “reset the AI hierarchy chessboard” and pulled the market into a new DeepSeek moment.
Here in Canada, the S&P/TSX Composite Index⁶ was the best-performing broad index we track at Guardian Capital, up nearly 4%. As has been the case throughout 2025, the Materials sector, yet again, propelled the index higher. The Materials sector was up almost 15% as broad commodity strength continued. Notably, Gold resumed its upward march after retreating late in October, finishing November north of 5%. In terms of the best-performing stocks last month, the top three consisted of Aris Mining Corp (+42%), Orla Mining Ltd (+35%) and Iamgold Corp (+35%). At the other end of the spectrum, the worst performers were Northland Power Inc (-32%), Energy Fuels Inc (-30%) and Denison Mines Corp (-19%).
From a stylistic perspective, with Growth and Momentum in the red for November, Dividends, Value and Quality posted positive returns and closed the year-to-date (YTD) performance gap. As it stands, each of the respective five global factor indexes mentioned above⁷ has returned between 13%-19% this year, with Dividends at the lower end and Growth at the top.
Regarding currency, the Canadian dollar has been in a slow decline vs. the U.S. dollar over the past six months. However, late in November, the Canadian dollar rebounded and finished the month having appreciated by 0.6%, closing at US$0.7158.
Fixed Income
With regards to fixed income, U.S. bonds generally outperformed Canadian bonds. As was the case on both sides of the border, government bonds outperformed corporate bonds, though not by much, as the dispersion between aggregate/universe, high yield, corporates and short-term bonds was quite narrow. From a YTD standpoint, corporates have outperformed, and we remain constructive on this area of fixed income for 2026.
As things stand today, it seems unlikely that bondholders should expect much in the way of capital gains in 2026. Rather, we believe it’s going to be more of a coupon-clipping year. Why? First, because the Bank of Canada (BoC) appears done with interest rate cuts and, second, corporate bond spreads are near historic tights, so they’re an asymmetrical skew to the risk of widening spreads from here. In an environment where broad benchmarks will be subject to these previous assessments, there’s perhaps no better time to allocate money to actively managed fixed income strategies. On the government bond side, levers exist to add alpha primarily by tactically deploying between Provincial and Federal bonds, as well as determining where along the yield curve to obtain duration exposure. Similarly, on the corporate side, while spreads in aggregate may be tight, there is a wide dispersion of quality and opportunities to sift through.
Barring any major changes or shocks to the economy, our Fixed Income Team’s base case assessment for 2026 is one of economic expansion that should favour corporate bonds over government bonds. Within Guardian Capital’s fund lineup, the highest conviction approach to position for this theme is likely the Guardian Strategic Income Fund, followed by the Guardian Investment Grade Corporate Bond Fund, both of which could be suitable for investors willing to assume relatively more risk than our core fixed income strategy, the Guardian Canadian Bond Fund.
Neither the BoC nor the Fed met in November, meaning the overnight rate here in Canada remains at 2.25% and the target for the overnight rate in the U.S. remains at 3.75-4.00%. What has changed considerably, however, is the expectation for an upcoming U.S. rate cut by the Fed. The market-implied probability started in November at around a 40% chance of a cut in December; however, as of writing, it appears a December cut is a foregone conclusion. In Canada, as mentioned previously, no rate cuts are expected. The market implied probability of a cut in Canada is essentially flat through the end of 2026.
As alluded to previously, Sara Devereux of Vanguard expects the Fed will cut rates once or twice more over the coming year, not three or four times as the market expects today. Along with her view that the market is over-relying on rate cuts, she also warned that U.S. corporate bond prices were likely to take a hit in the coming months as the market digests a flood of issuance by companies including Amazon, Meta, Alphabet and Oracle. She was quoted in the Financial Times as also saying, “We are going to see some defaults in private credit. This is a year of discipline. This is a year of precision. Not all boats will rise.”⁸
Don’t miss…
In our latest episode of the Buy the Way podcast (Episode #6), I sit down with James Francis to discuss the practical implementation of AI into stock analysis within Guardian Capital’s i³ Investments™ Team. We touch on how their proprietary AI analytics model seeks to deliver valuable predictions of earnings and dividends, why they maintain high conviction in the Tech sector, and how they believe AI plus human judgment creates deeper insights for long-term growth and more.
Thank you for your continued support and feedback on this newsletter, our podcast, and, of course, for entrusting Guardian Capital LP to manage your investments. Wishing you all a wonderful December. Merry Christmas and Happy Holidays!
John Pagliacci
Vice President, Investment Programs and National Accounts | Guardian Capital LP
John Pagliacci is Vice President, Investment Programs and National Accounts for Guardian Capital LP. He contributes to strategic planning for the Canadian retail asset management business, including product strategy and development, overall sales enablement initiatives and serving as a brand ambassador.
David Onyett-Jeffries
Vice President, Economics & Multi Asset Solutions | Guardian Capital LP
David Onyett-Jeffries is Vice President, Economics & Multi Asset Solutions, at Guardian Capital LP (GCLP). He provides macroeconomic guidance to GCLP and its affiliates. Additionally, he is a portfolio manager of GCLP’s multi-asset portfolios and funds and works closely with GCLP’s Directed Outcomes team.
*i³ Investments™ Team is a portfolio management team with Guardian Capital LP, a registered portfolio manager.
The i³ Investments™ Team combines quantitative and fundamental analysis in managing investment portfolios. The quantitative component of the team’s investment process has evolved as new tools and datasets have become available and, over time, new quantitative models which incorporate aspects of artificial intelligence have been incorporated. The i³ Investments™ Team provides a modern approach to portfolio construction, combining the advantages of quantitative analysis, big data, and artificial intelligence with the experience, perspective, and decision-making of our investment team. The application of quantitative investment analysis that incorporates artificial intelligence and machine learning in a forecast model is forward-looking, and the simulated results are subject to inherent limitations. Investment strategies which rely on predictive artificial intelligence and quantitative models may perform differently than expected, as a result of, among other things, the factors used in the models, the weight placed on each factor, changes from the factors’ historical trends and the limitations of technology in the construction and implementation of the models. There is no guarantee that the use of the quantitative model and artificial intelligence will result in effective investment decisions. There are no guarantees that dividend-paying stocks will continue to pay dividends. All investments are subject to risk, including loss. There is no assurance that any investment strategy will be successful.
James Francis is employed by Alta Capital Management, LLC, a U.S.-based affiliate of Guardian Capital LP, and is engaged in the marketing and promotion of Guardian Capital LP’s investment products and services in Canada and the U.S.
¹ Prof G Markets Podcast, November 14, 2025: “Aswath Damodaran Says There’s No Place to Hide in Stocks”
² Financial Times article, published November 21, 2025: “Wall Street is banking on too many Federal Reserve rate cuts, Vanguard warns”
³ USA Today article, published December 2, 2025: “Trump is horrendously unpopular. Even MAGA is catching on.”
⁴ The S&P 500 is an index of 500 stocks designed to reflect the risk/return characteristics of the large-cap US equity universe.
⁵ Financial Times article published November 26, 2025: “Nvidia shares fall on signs Google gaining upper hand in AI”.
⁶ The S&P/TSX Composite Index is the benchmark Canadian index, representing roughly 70% of the total market capitalization on the Toronto Stock Exchange (TSX) with
about 250 companies included in it.
⁷ The MSCI World Growth Index captures large and mid-cap securities exhibiting overall growth style characteristics across 23 Developed Markets (DM) countries; the
MSCI World High Dividend Yield is designed to reflect the performance of equities in the MSCI World Index (excluding REITs) with higher dividend income and quality
characteristics than average dividend yields that are both sustainable and persistent; the MSCI World Momentum Index is designed to reflect the performance of an equity
momentum strategy by emphasizing stocks with high price momentum, while maintaining reasonably high trading liquidity, investment capacity and moderate index turnover; the MSCI World Quality Index aims to capture the performance of quality growth stocks by identifying stocks with high quality scores based on three main
fundamental variables: high return on equity (ROE), stable year-over-year earnings growth and low financial leverage; and the MSCI World Value Index captures large and mid cap securities exhibiting overall value style characteristics across Developed Markets countries.
⁸ Financial Times article, published November 21, 2025: “Wall Street is banking on too many Federal Reserve rate cuts, Vanguard warns”
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Published: December 9, 2025
