Canadian Election Special Market Insights: Carney’s Canada

April 30, 2025

THE ILLUSION OF A REVIVAL OR A PRELUDE TO RECKONING?

“I, however, place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared.” – Thomas Jefferson

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Now that the Canadian election is over and Mark Carney has won, the hard part begins. The campaign trail is behind him; the spotlight now shifts to the daunting reality of governing a nation under siege from global headwinds and domestic skepticism. Mark Carney, the 24th Prime Minister of Canada, inherits not just the legacy of a decade of Liberal rule but a country whose economic standing and reputation are under intense scrutiny from global capital markets and geopolitical rivals alike. The euphoria of victory will be fleeting if it is not followed by decisive, credible action.

The mirage of reform

Carney’s platform, which helped sweep him into office, is a paradox. It promises market-friendly incentives—$22 billion in income tax cuts, reversal of capital gains hikes, GST exemptions for new home builds—and vows to expedite energy project approvals, diversify trade, and break regulatory logjams. Yet, beneath the surface, the old ghosts of persistent deficits, ballooning debt, and regulatory inertia remain. Carney’s refusal to dismantle Bill C-69—the “no pipelines bill”—and his retention of divisive social programs signal a reluctance to break with the Trudeau-era legacy that has weighed heavily on Canada’s resource sector and investor confidence.

The numbers are sobering. Deficits are projected to hit $63 billion in 2025-26, with debt-to-gross domestic product (GDP) stuck above 42 per cent and a federal balance sheet that has doubled over the past decade. Carney’s pledge to “catalyze private dollars” through public borrowing is, to many, a rebranding of Modern Monetary Theory (MMT)—a doctrine rapidly falling out of favour as global debt markets tighten and the refinancing wall looms. The world is now fixated on debt sustainability, not creative accounting or campaign slogans.

Alberta’s revolt and the energy dilemma

No region illustrates the challenge more starkly than Alberta. The province’s energy sector, battered by tariffs, weak prices, and regulatory gridlock, is openly skeptical of Ottawa’s intentions. Bill C-69 continues to choke off investment and delay projects, despite Carney’s promises of a “one project, one approval” regime. CEOs warn of divestment, and business leaders question whether the new government is prepared to deliver meaningful reform. Alberta’s frustration is not an isolated phenomenon; it is a signal to global markets that Canada’s internal divisions and regulatory gridlock remain unresolved.

Net zero ambitions in retreat

Meanwhile, Carney’s net zero ambitions, once a symbol of Canadian leadership, are unravelling. The exodus from the Glasgow Financial Alliance for Net Zero (GFANZ) is accelerating, as Wall Street and Bay Street giants abandon climate-first pledges in favour of returns. Canada’s insistence on carbon taxes and regulatory overlays is increasingly out of step with a world recalibrating toward energy security and hard assets. The risk is that Canada’s climate policy, once a source of pride, becomes a competitive disadvantage in the global race for capital.

Global context: Growth slows, liquidity swells

The challenge facing Carney’s government is not just domestic. The latest International Monetary Fund (IMF) and S&P outlooks are clear: global growth is slowing, downside risks are mounting, and the era of easy gains is over. Major economies are recalibrating after years of extraordinary stimulus and swelling debt. The U.S. dollar remains strong, but the prospect of a new “Mar-a-Lago Accord”—a modern echo of the Plaza Accord—hangs over markets, hinting at a possible global effort to address imbalances, currency volatility, and trade distortions.

Liquidity is abundant, but conviction is scarce. Investors are no longer content to chase yield at any price. They demand credible fiscal anchors, regulatory clarity, and a return to sustainable growth models. In this environment, Canada’s deteriorating stance is impossible to obscure. The country’s growth forecast has been slashed, with real GDP now expected to limp along at 1.3–1.7 per cent in 2025, masking a pronounced loss of momentum as the year progresses. Trade uncertainty and the spectre of a full-blown tariff war with the U.S. could tip Canada into recession, especially as investment decisions are delayed or redirected elsewhere.

The world is watching—and waiting

Canada’s reputation as a stable, reliable destination for capital has eroded. The world’s largest asset allocators are not fooled by rhetorical pivots. They see a country that doubled its debt in less than a decade, layered on regulatory burdens, and clung to progressive fiscal experiments long after the world lost patience for them. The IMF, S&P, and every major allocator are now focused on debt sustainability, productivity, and credible policy. Canada’s experiment with progressive economics has run its course.

Carney’s personal credentials—his stewardship of the Bank of Canada during the 2008 financial crisis and the Bank of England through Brexit—are impressive. But markets are forward-looking. The halo of past heroics does not immunize a government from the consequences of policy drift and fiscal excess. The message from global capital is clear: the age of infinite borrowing is over; the refinancing wall is real, and the cost of capital is rising everywhere.

The Trump factor and the spectre of a new accord

The U.S. remains Canada’s indispensable trading partner, absorbing the lion’s share of exports. Trump’s tariffs are a blunt reminder of Canada’s vulnerability. Carney’s retaliatory measures and talk of diversification cannot mask the reality: Canada’s leverage is limited, and its regulatory stance on energy is a glaring weakness in any negotiation. There is growing speculation that a new “Mar-a-Lago Accord” could emerge—an international effort to address currency misalignments and trade frictions. If such an accord materializes, it will be driven by the interests of the world’s largest economies. Canada, diminished by years of drift, will be a bystander—not a shaper— of the new order.

The spectre of a new global bargain, possibly brokered at Mar-a-Lago or elsewhere, looms large. Such an accord would address the imbalances and volatility that have plagued currency and trade markets since the pandemic. For Canada, the risk is clear: unless it can demonstrate credible reform and alignment with global priorities, it will be relegated to the sidelines, its influence faded and its access to capital constrained.

The end of illusions

Let there be no illusion: Canada’s standing in the world has deteriorated, and the world has noticed. Global capital will not tolerate another four years of progressive policy and MMT-style fiscal management. The world is not waiting for slogans—it is waiting for action.

Canada’s resource wealth, once a magnet for global investment, is now mired in regulatory confusion and political indecision. Productivity growth lags the U.S. by two per cent annually, and foreign direct investment has fallen sharply. The Fraser Institute reports a 40 per cent drop in foreign direct investment since 2015; the C.D. Howe Institute warns of a five per cent GDP per capita decline by 2035 without meaningful deregulation. These are not abstract risks—they are the symptoms of a country that has lost its way.

Adam Smith’s blueprint: Moral sentiments and market dynamism

A pivotal question now faces Carney’s government: will he draw inspiration from Scottish economist and philosopher Adam Smith’s dual legacy to redefine Canadian capitalism for this era, or simply perpetuate the progressive excesses of the Trudeau years? Smith’s Theory of Moral Sentiments provides a philosophical foundation for a capitalism that is not merely transactional but rooted in empathy, justice, and the public good. Smith argued that self-interest, when tempered by moral sympathy and the desire for mutual approbation, could knit together a virtuous society, allowing each nation to shape its own brand of capitalism. In this sense, Canada has the latitude to define its economic model in a way that balances prosperity with social cohesion.

Yet Smith’s later work, The Wealth of Nations, is unequivocal: sustainable prosperity requires unleashing the private sector and embracing structural change. Smith warned of the dangers of monopoly, regulatory capture, and excessive government intervention—pitfalls that now threaten Canada’s competitiveness. Carney, who has often referenced both Smithian texts in his roles as central banker and Brookfield executive, must now move from rhetoric to action. The world is watching to see if he can pivot from Trudeau’s progressive orthodoxy to a pragmatic capitalism that prizes both moral sentiment and market dynamism.
If he fails, Canada’s decline will be indisputable.

What must change

If Carney wants to restore confidence, he must do what his predecessor would not: deliver tangible, visible reform. Repeal the regulatory barriers that stifle investment. Rein in deficits, not with creative accounting, but with real discipline. Signal to the world that Canada is serious about competitiveness, resource development, and fiscal sustainability.

Global capital is pragmatic. If Carney can prove by action—not words—that he is not Justin Trudeau, that he understands the gravity of the moment, then and only then will capital begin to return. But the window is closing. In a world of slowing growth, swelling liquidity, and looming global bargains, Canada cannot afford another lost decade.

Investor outlook: Caution, skepticism, opportunity

For investors, the message is clear: Canada is no longer a default safe haven. The dispersion of possible outcomes is wide, and the risks are real. Slowing global growth, abundant liquidity, and the possibility of a new global accord to address imbalances all add to the uncertainty. Watch for signals—not slogans—of genuine reform. Monitor global negotiations, shifts in U.S. policy, and the trajectory of Canadian fiscal and regulatory action.

Investor action points

Stay nimble. Global growth is decelerating, and volatility is rising.
Watch liquidity trends. Abundant capital is chasing fewer credible opportunities—Canada must compete for every dollar.
Track global negotiations. A new Mar-a-Lago Accord could reshape currency and trade dynamics overnight.
Demand proof, not promises. Only real fiscal and regulatory reform will restore confidence.
Be ready to pivot. If Canada signals credible change, opportunities will emerge. If not, capital will continue to flow elsewhere.

The road ahead: No more illusions

To be clear, a minority government is not a strong mandate. If Carney ignores the warnings from capital markets, investors should not rule out a swift return to the polls. However, given Carney’s extensive experience at the helm of Brookfield, one might expect him to be highly attuned to the sensitivities of global investors. It’s worth remembering that the markets rejected his previous net-zero program, signalling that he will need to carefully navigate investor concerns moving forward.

Now that the election is over and Carney has secured victory, the real challenge begins. The world is watching closely. The era of progressive experiments fuelled by limitless debt has come to an end. Only genuine reform—fiscal discipline, regulatory clarity, and a sustainable economic vision—will restore Canada’s international standing and attract the capital it so desperately needs. The illusions of easy solutions and reckless spending are no longer tenable.

If Carney commits to governing as a prudent reformer, there is still hope that Canada can reclaim its position as a desirable destination for global capital. But failure to do so risks accelerating the country’s slide into irrelevance. Investors are increasingly impatient; they will not wait indefinitely for Ottawa to catch up. The window for meaningful change is narrowing, and the stakes have never been higher.

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May Market Insights: Mastery and the Terror Premium

Mastery of energy, again

Winston Churchill, as first lord of the Admiralty, tied Britain’s fate to Persian oil. United States President Donald Trump’s war in Iran, centred on Operation Epic Fury, could do the same for the West by removing Iran’s nuclear shadow, resetting oil toward US$60, and finally unlocking a modern peace dividend.

“Mastery itself was the prize of the venture.” Winston Churchill’s 1912–13 case for converting the Royal Navy from coal to oil—enshrined in historian Daniel Yergin’s The Prize: The Epic Quest for Oil, Money, and Power captured the brutal clarity of a great power energy strategy: accept dependence to command the seas. That wager framed the last century. In 2026, as Epic Fury grinds through the Gulf and Brent trades above US$100, the question is no longer whether oil confers mastery, but who holds it: a revolutionary theocracy astride the Strait of Hormuz, or a West intent on stripping the terror and nuclear risk now priced into every barrel out of the energy system—finally collecting a long‑deferred peace dividend.

Churchill’s shift bound Britain’s prosperity to distant wells and narrow waterways, welding energy supply to national survival. He understood that control of energy was not an adjunct to power, it was the metric. In April 2026, with Hormuz contested and Iranian missiles demonstrating reach beyond the Middle East, the same dilemma confronts policymakers and markets. Does the West still want that prize, and what is it prepared to stake to reclaim it from a regime that has spent half a century turning oil, terror, and nuclear brinkmanship into interchangeable tools of coercion? Assume Trump’s campaign does what it is now on course to do: not merely reopen a chokepoint, but neutralize a nascent tactical nuclear threat which, left intact, would hardwire a doomsday premium into global energy prices for a generation.

Iran’s war with the West has done what decades of shocks, embargoes, and “maximum pressure” could not: it has made the hidden tax on energy legible even on a Bloomberg screen. Strip out the terror and nuclear‑risk premiums in a post‑Trump‑Iran settlement, and Brent does not belong north of US$100; it sits much closer to the US$60 level implied by underlying supply and demand and pre‑war bank research. The gap between where oil trades in a world held hostage by a nuclear‑ambitious theocracy at Hormuz and where it would trade if flows were secure and de‑weaponized is more than a volatility surface. It is the unclaimed peace dividend of globalization, the energy market analogue of the windfall that followed the end of the Cold War, when the removal of an existential nuclear standoff released capital, confidence, and capacity back into the real economy.

The choice now facing the West is whether to lock in that outcome. Ending the Cold War removed the Sword of Damocles that had hung over every investment decision for half a century; a successful conclusion to Iran’s nuclear extortion would do something similar for the 21st‑century economy, collapsing a structural risk premium that has quietly taxed households, corporates, and sovereigns alike. The question, as Churchill would have recognized, is whether the West is prepared not just to win on the battlefield but to consolidate that victory into a new era of energy mastery, and to treat the potential verified removal of Iran’s enriched stockpile and fuel‑cycle capabilities as a security gain on the scale of the 1987 Intermediate-Range Nuclear Forces Treaty or the dissolution of the Soviet arsenal.

For Europe, the stakes are not abstract. Iranian missiles and drones have already shown that European Union territory and NATO logistics hubs sit uncomfortably close to the new strike envelope, shattering the illusion that Gulf risk could be quarantined to energy prices alone. The deeper reckoning is with Europe’s own energy strategy. The choice by many Western governments to anchor industrial policy primarily on climate targets while neglecting cheap and secure supply—is now coming home to roost. Prosperity in an artificial intelligence (AI)‑driven economy rests on abundant, reliable energy rather than on cheap consumer imports, echoing Churchill’s insight that mastery of energy is mastery of power. That logic points north as well as east: Canada with its hydrocarbons, hydropower, and critical minerals—looks less like a peripheral supplier and more like a potential resource superpower if it can cut through regulatory thickets and build the infrastructure to deliver secure barrels, electrons, and metals to allied markets.

U.S. hard power, the security backstop European, Canadian, and the United Kingdom economies long treated as a law of nature, now looks more contingent, more politically conditional, and more thinly spread across theatres. One could easily imagine Washington reverting to a post‑First World War stance, turning inward to rebuild its real economy, and no longer willing or able to offer security as a global public good. A successful Trump‑led settlement that removes both the nuclear overhang and the Hormuz chokepoint as instruments of coercion would not only stabilize Atlantic world energy supply but also underwrite a more credible NATO deterrent at lower long‑run cost—replacing the ersatz “peace dividend” of underfunded defence with a genuine one built on reduced threat rather than wishful budgeting.

For investors, a decisive outcome in Iran would not just redraw maps in the Gulf; it would refashion term premia. As the nuclear and terror discounts bleed out of the curve, gilt yields and U.S. Treasuries alike would begin to reflect lower expected inflation and slimmer risk premia rather than recurring energy shocks. Credit spreads-particularly for energy‑intensive sectors and fragile sovereigns—would compress as balance of payments and default risks ease. Equity markets would reprice in turn: structurally lower input costs and a thinner geopolitical risk layer would lift margins in manufacturing, transport, and consumer names, even as oil majors and defence stocks surrender some of their crisis rent. For the Square Mile and Wall Street, the real prize is not another trade on US$120 Brent; it is the re‑rating that comes when a structural doomsday premium is finally taken out of the system and the peace dividend—deferred since the end of the Cold War and repeatedly eroded by Iran—at last starts to be paid in cash flows rather than communiqués.

Churchill’s ghost at Hormuz

On the first day of April 2026, as Brent traded just above US$100, the world was relearning what Churchill meant when he called mastery the prize. As first lord of the Admiralty, he forced the Royal Navy off domestic coal and onto Persian oil, then secured that lifeblood by buying control of Anglo‑Persian Oil. He knew the bargain: oil conferred speed and reach, but at the price of dependence on distant fields and fragile sea lanes. Hence his warning to Parliament in 1913 that “on no one quality, on no one process, on no one country, on no one route, and on no one field must we be dependent” and his insistence that safety and certainty in oil lay “in variety, and in variety alone.”

That decision created the modern energy system and placed Iran at its centre. Four decades later, as prime minister, Churchill confronted the second act of his own gamble when Iran’s prime minister Mohammad Mossadegh nationalized Anglo‑Iranian Oil Company’s assets. The 1953 coup that restored the Shah was less a morality play than a confirmation that control over Iranian oil would be contested by empires, nationalists, and, eventually, revolutionaries. Churchill’s instinct to secure supply at the source and to dominate the sea lanes that connected it to Britain established a strategic architecture with a simple premise: mastery of energy flows was indistinguishable from mastery of global power.

The twist came in 1979, when that architecture was seized by those it had previously constrained. The Iranian Revolution toppled the Shah and installed Ayatollah Khomeini’s theocracy—a regime that viewed the U.S. as the “Great Satan,” embraced terrorism as statecraft, and sat astride the Strait of Hormuz. Oil workers struck, production collapsed, and prices more than doubled. The world discovered that the geographic fulcrum Churchill had chosen could just as easily be pulled by a revolutionary fist. From that moment, the markets began to price an Iran terror premium. It was distinct from OPEC’s cartel pricing power or conventional war risk. It recognized that a state sponsor of terrorism—with a web of proxies and control over the narrow channel through which roughly a fifth of seaborne oil must pass—would periodically weaponize that position. Each tanker attack in the 1980s “Tanker War,” each Hezbollah bombing, each missile launched at a Gulf facility added a sliver to that premium. Over time, slivers hardened into a slab.

Churchill’s maxim was inverted. Variety still existed geologically, with new barrels from the North Sea, Alaska, and deepwater, but strategically the system was again anchored on a single actor most willing to turn energy into a cudgel. Where Churchill had sought safety through variety, the world lived with uncertainty concentrated in one revolutionary capital. And where he had seen mastery as the prize of bold, deliberate ventures, mastery of energy risk quietly migrated to a regime that treated terror as an operating model.

How terror became a line item

The terror premium is no longer an academic calculation; it is a visible spread. In calmer phases of the cycle, geopolitical risk barely nudges price forecasts. In crisis, as in early 2026, the gap between pre‑war expectations for oil and the levels seen when Hormuz is threatened yawns wider, and futures curves kink as traders try to price the possibility of disruption. Even if part of that is fear and temporality, the underlying message is obvious. There is a structural surcharge on every barrel to account for the probability that Tehran or one of its proxies will, at some point, take terrorist action.

That surcharge has a history. The 1973–74 oil embargo revealed how quickly geopolitics could quadruple prices, but Iran was then still an ally. The true discontinuity came with the 1979 revolution and the Iran‑Iraq War. The Tanker War saw mines in the Gulf, neutral shipping attacked, and U.S. naval forces drawn in to reflag and escort tankers. Washington’s 1984 decision to designate Iran a state sponsor of terrorism, off the back of Hezbollah’s bombing of U.S. Marines in Beirut, made explicit what markets had intuited: one of the central suppliers to the system was also its most committed saboteur.

Highlights from the 2026 Spring Economic Update

On April 28, 2026, Finance and National Revenue Minister François-Philippe Champagne released the 2026
Spring Economic Update (the Update). This was the first spring economic update after the federal budget was
moved to the fall in 2025. In the absence of a federal budget earlier this year and with the recent shift to a
majority government, Canadians have been awaiting clear direction on the federal government’s policy
focus and anticipated initiatives. Overall, the Update introduces relatively little that had not been previously
announced, while showing an improved fiscal outlook, with the projected deficit declining despite $37.5 billion
in net new spending.

April Market Insights: Bretton Woods 2.0, the New Great Game, and Trump

U.S. President Donald Trump’s second term is not just another burst of tariff theatre; it is the opening move in a new great game over energy, artificial intelligence (AI), and money. By neutralizing Iran and Venezuela, squeezing Cuba, binding Canada, and courting Russia, Washington is trying to re-anchor oil in U.S. dollars and push BRICS’ [1] monetary ambitions to the margins. Layered on top are digital rails—dollar-backed stablecoins, tokenized Treasuries, gold, and even a strategic bitcoin reserve—designed to harden, not retire, King Dollar. If it works, Bretton Woods 2.0 will arrive not as a conference, but as the unannounced sequel to a crisis-ridden decade, with the U.S. once again writing the rules.

Investment Insights Spring 2026

The Shifting (Global) Order We are living through a period of shifting order. Global alliances

March Market Insights: There is no Bronze Medal

“There’s only two cultures that are going to win in the next year. It’s going to be us or China.” The subtext of Palantir CEO Alex Karp’s widely cited speech from late 2025 sounds like tech‑bro theatre until you reflect on it. In artificial intelligence, there is no bronze medal. There will be a hegemon and a runner‑up. Everyone else will be a client.

Markets are not pricing that reality. Investors still treat the AI build-out as marginal cloud spend or another overhyped software cycle. They debate whether Big Tech is “exhausting its available capital” or whether capex “must mean revert,” as if infrastructure were optional and competition courteous. They are using valuation models from the wrong century for the wrong game.

AI is not an app store. It is a weapon system—and the operating system of the next industrial era. The capital going into it is not a bubble. It is rearmament.

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