CIO says it’s bad news, but that a focus on labels may not be very helpful
Canada fell into the technical definition of a recession in Q1, according to a Statistics Canada report released on Friday. Annualized negative growth of 0.1 per cent followed a decline in Q4 of 2025 and two quarters of negative growth meets the technical definition of a recession.
“It’s pretty bad when you look at the high-level numbers, but I think there was quite a bit of distortion from imports. So that definitely had quite a bit of impact,” says Jason Lemire, Chief Investment Officer at Bold Wealth. “When you kind of look a little bit more into detail, I think it was probably not as bad as what the numbers show. I think the initial numbers for April are out as well and we’re back to growth with the mining and energy sectors contributing more positively. I don’t think it was disastrous, but it’s definitely not good news.”
Lemire explained how advisors can make sense of this news to clients, and where he sees investment opportunities in this environment.
What now stands out to Lemire is a Canadian bond market that’s still pricing in an interest rate hike before the end of the year. He contrasts that with the United States, where a stronger economy and higher inflation has markets pricing in a lower likelihood of hikes. If a deal reopens the Strait of Hormuz, he adds, the primary driver of inflation in Canada should be brought under control, which would further support more dovish policies from the Bank of Canada. His investment strategy, regarding Canadian bonds, runs against market consensus. He expects a greater likelihood of cuts than hikes this year.
The latest report also serves as a reminder, in Lemire’s view, that the Canadian stock market and the Canadian economy are extremely distinct. Recent bank earnings were solid, mining and energy stocks have been top performers this year, and the overall S&P TSX index has performed very well. A weakening Canadian economy, he says, is not something that gives him too much concern about the state of the Canadian stock market, at least in the shorter term.
One potentially double-sided factor highlighted by the GDP print, in Lemire’s view, is around the Canadian population. A silver lining from the topline bad news was that real GDP per capita actually grew by 0.2 per cent because of a declining population. That may be some relief in a GDP per-capita story that’s been tough for Canada for a decade, but Lemire also expresses concerns about what population stagnation could mean for Canadian businesses in the long-term.
For advisors speaking with clients about the impact of this technical recession, Lemire believes that a focus on labels may prove unhelpful. He prefers appropriate context, and says that advisors should remind their clients that underlying data, rather than its labels, should drive decision making.
“You have to move away from the labels. Growth was at negative 0.1 per cent or something like that. If it were positive at 0.1 per cent, we wouldn’t really be having that same type of discussion,” Lemire says. “it’s definitely not the greatest news that we saw today, but I think we really need to kind of not focus on the, on the definition of what a recession is and kind of focus on the underlying numbers and just what the Canadian stock market is actually made out of. So when we look at growth in terms of earnings, it’s actually pretty decent. So in terms of what’s happening this year and perhaps into early next year, there’s not too much that I see that I’m I’m quite worried about.”
