Canadian Election 2025: Liberal Continuity Carries Market Implications

April 29, 2025
Trevor Galon
Anil Tahiliani
James Cook

The 2025 federal election saw the Liberal Party, under newly appointed leader Mark Carney, retain power with a minority government. This extends the party’s hold on Parliament despite mounting voter frustration over years of fiscal expansion, regulatory overreach, and persistent cost-of-living pressures. While Carney’s reputation as a former central banker lends a measure of market credibility, his party’s continued leadership raises questions about the future direction of fiscal discipline, tax competitiveness, and energy policy.

For many investors, the anticipated shift toward a more market-friendly, pro-growth agenda under a Conservative government has been delayed. The result may mean ongoing uncertainty around capital gains tax policy, resource sector development, and Canada’s global competitiveness—especially as trade frictions with the U.S. escalate. This piece examines what the election outcome means for financial markets, the Canadian economy, and Matco’s investment strategies in the face of a government with a limited mandate but lasting economic influence.

Global Equity Perspective

A two-horse race that finished with more emphasis on the status quo than policy change. PM Carney brings continued deficit spending, environmental policy that is at odds with Canada’s greatest resource, and a focus on social safety nets rather than economic growth from private sector investment. A minority government is nothing new to Canadians, and it means that some cooperation will be required to make meaningful policy changes. Given the potential for more political gridlock, the election result is unlikely to attract further foreign investment into Canada.  

Matco Global Equity Fund: Portfolio Implications

For global equity managers and investors, like Canadian policy, it is status quo with respect to their Canadian equity allocations – this election result is unlikely to be enough to excite investors to direct further capital to Canada.  

Impact on Fixed Income Market and Interest Rates

Large-scale infrastructure and housing investments—aimed at doubling housing starts and expanding trade corridors—are highly stimulative and could elevate inflation expectations, especially if demand outpaces productivity. Coupled with $22 billion in middle-class tax cuts, this fiscal push may add to consumption and prompt a more hawkish Bank of Canada stance. Proposed counter-tariffs and a carbon border adjustment could also raise import costs, contributing to inflation.

On the other hand, the plan’s focus on boosting supply—via skilled trade development, housing, and infrastructure—could relieve inflationary pressure over time. Carney’s global outlook and central banking background suggest he’ll avoid interfering with monetary policy, and global economic headwinds may limit how far rates can rise.

Matco Diversified Income Fund: Portfolio Implications

Within Matco’s Diversified Income Strategy, we have reduced exposure to longer-term interest rates and increased our focus on medium-term bonds and the mid-point of the yield curve. We believe this segment offers the best combination of income, yield efficiency, and inflation risk management.

Canadian Equity Viewpoint

The federal budget includes $129 billion in new spending over the next four years, along with reduced regulatory timelines, which should benefit several sectors, including infrastructure and construction, defence procurement, steel, aluminum, lumber, homebuilding and associated trades, as well as infrastructure projects in Northern regions. Additional support comes in the form of tax incentives for new machinery, clean energy generation and equipment, and the introduction of new flow-through shares for companies in select sectors. On the downside, there were no major changes for the energy sector—industrial carbon pricing, the emissions cap, and Bill C-69 remain in place. Additionally, higher deficit spending aims to stimulate domestic growth and reduce reliance on U.S. exports.  

Matco Canadian Equity Income Fund and Opportunities Fund: Portfolio Implications

Our Canadian equity-focused funds maintain exposure to companies poised to benefit from increased infrastructure, construction, and defence spending. We also continue to hold positions in energy producers and midstream operators, which are trading at significant discounts to their U.S. and global counterparts while generating strong cash flow for share buybacks, debt reduction, and special dividends.

As always, if you have any questions about Matco’s investment strategies or would like to discuss how the election outcome may influence our portfolio positioning, feel free to reach out to a Matco Portfolio Manager.