Daily Commentary

MarketMinder’s View: After a downwardly revised -1.8% annualized Q2 contraction, many expected Canadian GDP to fall once again in Q3—meeting one definition of a recession (two consecutive quarterly falls). But surprise! Q3 GDP grew 2.6% annualized, easily topping expectations. However, as this notes, the details under the hood are perhaps less bullish than the headline read. “Government spending on weapons systems, up by 82 per cent in the third quarter, led the stronger-than-anticipated growth, alongside an uptick in crude oil exports. Ottawa pledged in June — alongside other NATO countries — to spend five per cent of GDP on defence by 2035. There was also more government spending on non-residential structures, such as hospitals. However, business investment was virtually unchanged in the third quarter, according to Statistics Canada, and household spending declined as fewer people purchased cars but spent more on rent and financial services.” In addition, a decline in imports also exaggerated headline growth, which is likely an aftereffect of earlier tariff frontrunning. That being said, all the anticipation of recession means Canada doesn’t need to deliver super economic results to positively surprise … especially considering the huge, huge majority of its exports aren’t subject to tariffs, as they fall under the US-Mexico-Canada trade pact. That likely explains why Canada’s S&P TSX is up 29.1% this year through Thursday’s close, outpacing the MSCI World’s 16.6%, per FactSet data including dividends.

MarketMinder’s View: This article is a useful reminder of some major tax changes enacted in this year’s One Big Beautiful Bill Act—especially as the calendar turns to December. The two items documented here, changes to the state and local tax deduction limit (which will rise from $10,000 to $40,000) and shifts to charitable gifts, are particularly worth noting. The large increase to the former means many people who filed using standard deduction rules last year may benefit from itemizing. “Itemizing deductions will be a no-brainer for many people with high SALT bills. Others who paid more than $10,000 but less than $40,000 will need to do some analysis—because the megabill expanded the standard deduction as well. For 2025, it is now $31,500 for married couples and $15,750 for singles, plus from $1,600 to $2,000 each for most seniors age 65 or older, depending whether you file jointly or single.” As ever, consult your tax professional on your personal situation, but this can be a starting point to interpret how the law may affect your bottom line.

MarketMinder’s View: Now, this article dives into British politics, which is still dotted with coverage of Wednesday’s Budget announcement by Chancellor of the Exchequer Rachel Reeves and, as the title hints at, there is a heavy partisan angle to this. Please note that we favor no politician nor any political party and assess developments like this for their market and/or economic effects only. With that in mind, the story here is that for months, Reeves floated tax hike trial balloon after trial balloon on the grounds that a decline in British labor productivity had widened expected budget deficits over the next five years, which is counter to fiscal rules seeking a balanced budget in that span. This article notes that the nonpartisan Office for Budget Responsibility (OBR) had revised away that projected deficit widening in the months before the Budget release—and that Reeves knew it. We won’t traffic in biased talk about whether this constitutes a politician lying. (We mean, it probably is, but that is far from unique. Hence, the old adage, “How do you know when a politician is lying? Their lips are moving.”) The OBR’s estimates are what drove all the debate over tax hikes and guide future policy, to boot. In the short term, the debate over her honesty does keep some political uncertainty alive in the UK, in the sense that it could cost Reeves her job or, we guess, Prime Minister Keir Starmer, which was whispered about before the Budget itself. But also, there is a logical point made in this article we want to highlight. Per an analyst from the National Institute of Economic and Social Research (NIESR) interviewed here, “‘However, it is equally possible that she simply wanted to prepare the public for the large tax increases in the Budget that were necessary for her to build a bigger “buffer” against her fiscal rules, something that NIESR argued for in our Autumn Economic Outlook. ‘If this were the case, then actually it would be important to let the markets know that she was serious about raising taxes, which the 4 November speech did. Although we feel that the £22bn buffer is not enough – we advocated £30bn – increasing the size of the buffer does make it less likely that the OBR’s March forecast will require a further response from her (like it did back in March of this year), allowing her to stick to her pledge of only one fiscal event next year.’” That could mean the tradeoff of more short-term uncertainty now for less in the new year—a matter worth monitoring.