3 things: Week of December 15

Big year for Canadian stocks

As recently reported by RBC Wealth Management,¹ 2025 has been a blockbuster year for Canadian stocks. The S&P/TSX Composite Index is up about 26% year-to-date as of December 10² (that’s 10 percentage points higher than the S&P 500³) and may be on track for a record close this year.⁴ If a Santa Claus rally were to happen,⁵ which is when the market climbs in the last five trading days of December and the first two days of the new year, our market could possibly go even higher. What’s behind the index’s double-digit gains? The Big Six banks and gold stocks⁶ were the biggest drivers of gains, followed by the energy sector.⁷ Who would have thought back in April, when President Donald Trump’s tariff threats had many Canadians fearing the worst, that our market would be one of the strongest performers of the year?⁸

What we’re watching: Of course, no one can predict with certainty how Canadian stocks will perform in 2026. Trade tensions with the U.S., the recent federal budget, the possibility of an AI bubble and other factors could turn markets on their head at any point. RBC Wealth Management, however, thinks that consumer spending, at least among high-income earners, will remain strong, while the S&P/TSX Composite Index’s price-to-earnings ratio is only experiencing a modest premium to historical levels (compared to much richer premiums on U.S. stocks)⁹, which could help cushion the blow of any possible downturn. In the absence of a crystal ball, though, investors can prepare for next year by checking their asset allocation and rebalancing their portfolio if they feel as though they have too much money in Canadian stocks.

It’s all in the mix

According to a recent survey, three-quarters of Canadians plan to host holiday gatherings for family and friends this season. One-third expect to spend more this year to make it happen, due to food inflation and longer guest lists.¹⁰ (But hey, the more the merrier!) The survey also revealed that the traditional roast turkey might not be the main attraction (or perhaps not on its own): 60% of hosts will serve the big bird, but others are opting for chicken (47%), ham (35%), beef (32%), lamb (11%) or plant-based proteins (6%). We’re here for it – variety is the spice of life, after all. And whatever the main course, we’re still hoping for mashed potatoes.

What we’re watching: The most satisfying meals are rich in contrasting flavours and textures. Whether the menu calls for savoury turkey and tart cranberry sauce, or crispy latkes and smooth applesauce, balance is key to a delicious feast. The same is true for an investment portfolio. Diversifying assets can help to balance risk with growth potential. The right mix will depend on your goals, time horizon and risk tolerance. And, like the savviest home cooks, you could think about tweaking the “menu” when needed, whether that could be selling depreciated stocks to help offset capital gains, or rebalancing your asset allocation at the start of the new year.

Bad news for coffee lovers

Cafés across the United States are expanding their selection of low- and no-caffeine beverages as health-conscious consumers cut back on the stimulant, the New York Times recently reported.¹¹ Whether that trend trickles into Canada remains to be seen, but some of us are already cutting back on coffee due to rising prices.¹² Canadians paid about 28% more for coffee at the grocery store in August than we did a year prior, according to Statistics Canada,¹³ and at least one well-known coffee chain has hiked prices recently.¹⁴ Why is Canada’s most-consumed beverage getting more expensive? Bad weather in growing regions¹⁵ and U.S. tariffs against Brazil have contributed to the spike. Add the rising costs of production and fuel, plus labour challenges and supply-chain issues,¹⁶ and coffee beans seem like a precious commodity.

What we’re watching: Coffee isn’t the only grocery item that’s costing Canadians more. Grocery inflation has been trending upward since April 2024. Beef, chicken, nuts, chocolate and fruit juices are some of the fastest-rising items, according to Statistics Canada data.¹⁷ Overall, a Canadian family of four will spend nearly $1,000 more on groceries in 2026, as predicted by Canada’s Food Price Report,¹⁸ an annual publication from several Canadian universities. A few ways to counter rising food costs: make simple, healthy meals with low-cost ingredients, make a meal plan every week, shop at discount supermarkets and use grocery loyalty programs.¹⁹