Canadian resilience
Although Canadian equities have lagged their south of the border peers over the last decade, it’s important to note that the U.S. market’s performance has been significantly narrowing and increasingly led by mega cap companies (the “Magnificent 7”). As a consequence, the top 10 companies now represent more than 35% of the S&P 500 Index’s market capitalization, compared to less than 20% 10 years ago1. Furthermore, the Canadian economy has demonstrated remarkable resilience, with GDP growth outpacing every market except the U.S. since 2010.
G7 countries real GDP growth comparison
Sources: Jarislowsky Fraser and Bloomberg.
Immigration windfall
One of the driving forces behind the Canadian market’s success has been the inflow of talent, particularly in high-innovation jobs. Canada’s strong social safety net—which includes universal health care, Old Age Security, the Canada Pension Plan, and employment insurance—proves an advantage for attracting talent. These factors help Canada consistently rank among the top four countries in the world based on attributes such as quality of life, human rights, gender equality, education, economic influence, health care, and public safety2. Moreover, the government’s openness to immigration has allowed many foreign firms to locate high income jobs in the country. As a result, Canada has the highest proportion of foreign-born residents with a post-secondary education. This influx of skilled professionals has significantly contributed to the success of various sectors, including technology and industrials, and has helped foster the growth of Canadian global champions.
Canada’s foreign-born population is highly educated
Percentage of foreign-born Canadians aged 25 to 64 with a
post-secondary education (2023)
Source: NBC Economics and Strategy (data via OECD).
Financial strength
Canada has maintained a solid balance sheet, boasting the lowest net debt in the G73. This financial stability allows the government to fund a robust social safety net, invest in innovation, and support the economy counter-cyclically. These factors make Canada an attractive place to start a business.
The Canadian industrial sector features strong businesses across a variety of end markets, including rails, engineering services, waste management, and transportation. Engineering companies like WSP Global, Stantec, and AtkinsRéalis have reported record growth, margins, and backlogs while continuing to consolidate the industry globally. This growth has been fuelled by several structural megatrends, including climate change, climate resiliency, electrification, and aging infrastructure, which drive increased global spending in the sector. Over the past 13 years, WSP Global has grown from 5,000 to 72,500 employees, making it the largest engineering services firm in the world today by market capitalization.
Tech champions
Canada’s Information Technology sector plays a vital role in the market and features a diversified group of companies such as Shopify, Constellation Software, CGI, OpenText, Descartes, and Kinaxis. Shopify, for instance, was founded by German immigrant Tobi Lutke and has become a leading global software company powering e-commerce. Over the past 20 years, Canada’s IT sector has transformed from primarily cyclical hardware-oriented businesses to an almost exclusively recurring software and services model. The IT sector continues to attract strong inflows of talent, with Toronto drawing the highest number of tech professionals of any city in North America from 2018 to 20234. This has helped drive outperformance of the TSX’s Software and Services index versus the S&P/TSX and S&P500 indices over the past 20 years.
Canada’s IT sector evolution over two decades
Cumulative total return comparison
Sources: Bloomberg and S&P Global. Software & Service based
on GICS level 2 Index.
Returns in CAD for all indices as of
March 25, 2025.
Impact of U.S. tariffs
In the most recent “Liberation Day” U.S. tariff announcement by the Trump administration, Canada fared relatively well compared to other major trading nations, with lower incremental tariff rates than China and Europe. As a result, the economic impact might not be as pronounced as once expected for Canadian products. These headwinds could also be partially mitigated by a weakening Canadian dollar, government stimulus through rate cuts and fiscal spending, a reduction of provincial barriers, and an increased focus on alternative trading partners.
Key takeaway
Overall, the strength of the Canadian economy can be attributed to a combination of several key factors, including a healthy inflow of talent, a highly educated population, a robust government balance sheet, a sound banking system, and the emergence of Canadian global champions. These elements have positioned the Canadian market as a strong contender on the global stage, with a positive outlook for the future.
NBI
Canadian Equity Fund
NBI
Jarislowsky Fraser Select Income Fund
NBI
Jarislowsky Fraser Select Balanced Fund