Signs suggest we’re ‘on the cusp’ of Canadian growth

Despite the negative hit to growth in the last couple of quarters due to ongoing tariff uncertainty, Canada and the global economy will likely avoid a recession, says Michael Sager, managing director and CIO of the multi-asset and currency management team, CIBC Asset Management.

“Fiscal [spending] and more Bank of Canada rate cuts will probably almost offset that negative tariff impact, and will be an important tailwind to the recovery,” he said in a July 10 interview.

Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Asset Management.

Sager said that while Canadian GDP is “very soggy” at the moment and unemployment has risen, government policy support and real-wage growth should help the economy strengthen over the next four quarters.

“We’ll see more government spending to at least partially alleviate housing supply constraints, targeted spending to improve infrastructure and productivity, which has been very poor for a number of years, and targeted spending to help diversify away from Canadian reliance upon the U.S. economy at least at the margin,” he said.  

The picture may not be as rosy south of the border, with the trade war putting a strain on growth, Sager said. And while the U.S. dollar remains globally dominant, investors are growing concerned over U.S. policy making and government debt.

“At the margin, something is deteriorating in the status of the dollar,” he said. “But we don’t want to overemphasize how big that change is in a short period of time.”

Sager said while the U.S. dollar weakened by about 10% in the first half of 2025, it’ remains expensive. As the Fed becomes “less hawkish” and the global economy is expected to recover faster than the U.S. over the next year, he predicted a continued weakening trend for the U.S. dollar.

As a result, he said, the Canadian dollar should increase in value against the U.S., going from $0.73 as of July 10 to about $0.78. The euro is also likely to continue strengthening.

Investment opportunities

Modest growth in the global economy will be positive for equity markets and risk assets, Sager said.

“Canada and EAFE are relatively attractive,” he said. “Within the U.S., we like tech. Along with the global economic cycle, we think the global tech cycle has positive legs still, and really the most dominant place to get access to the up tech cycle that we expect remains the Mag Seven.”

Sager is “neutral” on the remainder of the S&P 500 and said fixed income is “less attractive,” with the exception of U.S. Treasuries. That’s because there’s an opportunity for yields to fall in the U.S. and prices to rally, he said.

Overall, investors should stay focused on opportunities in equities, Sager said. “[The anticipated] recovery will likely be very helpful to Canadian equities relative to U.S. equities.”

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.