TD Securities forecasts Canada\u2019s real GDP to fall by 0.4% annualised in Q4. The decline is linked to weaker domestic demand. <\/p>\n
Household goods consumption is expected to drop for a second quarter, after a 2.0% fall in Q3. Services consumption is forecast to rise modestly. <\/p>\n
Residential investment is expected to act as a drag due to softer housing activity. Government spending is projected to be the main support in Q4. <\/p>\n
Net exports are also expected to add to growth in Q4. For December, GDP is forecast to rise by 0.2%, supported by stronger services output. <\/p>\n
January \u201cflash\u201d estimates are expected to show growth of 0.1% to 0.2%. This would leave Q1 on a firmer base than Q4. <\/p>\n
We see the expected 0.4% contraction for the fourth quarter of 2025 as confirmation of the technical recession that the market has been anticipating. Official data from Statistics Canada released this week showed the economy shrank by an annualized 0.5%, driven by the slowdown in household spending we saw throughout last year. This backward-looking data is likely already priced into most assets. <\/p>\n
The focus should now shift to the emerging signs of a recovery in the first quarter of 2026. Positive GDP prints of 0.2% in December and a flash estimate for January showing similar growth suggest the economic bottom is now behind us. This turning point is the most critical piece of information for positioning in the weeks ahead. <\/p>\n
This data gives the Bank of Canada the justification it needs to pivot towards easing monetary policy, especially as January\u2019s CPI reading cooled to 2.6%. We expect traders to aggressively price in a rate cut for the Bank’s April meeting. This outlook should put downward pressure on the Canadian dollar. <\/p>\n
Derivative traders should consider buying puts on the CAD against the USD, or using options on the BAX (Banker’s Acceptance futures) to bet on lower short-term interest rates. These positions will benefit directly from the market anticipating a more dovish central bank. The window for these trades is likely in the coming month before the next policy meeting. <\/p>\n
We also anticipate that implied volatility on Canadian equity indices will begin to fall as fears of a deep recession subside. Selling volatility through strategies like short strangles on S&P\/TSX 60 index options could be profitable. The outlook is shifting from economic uncertainty to one of a slow, policy-supported recovery. <\/p>\n
We have seen this pattern before, such as during the brief, oil-induced recession in 2015 where two negative quarters were quickly followed by a rebound. That historical precedent suggests this recent weakness was a soft patch, not the start of a prolonged downturn. This supports positioning for a gradual economic improvement through the second quarter.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" TD Securities expects Canada\u2019s Q4 real GDP to contract 0.4%, with government spending and exports supporting growth.<\/p>\n","protected":false},"author":103,"featured_media":17027,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-50395","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/50395","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=50395"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/50395\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17027"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=50395"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=50395"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=50395"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}