Canada and the United States are expected to see continued economic growth in 2026, though trade uncertainty, housing pressures and geopolitical risks could contribute to higher volatility.
BNN Bloomberg spoke with Michael Dehal, senior portfolio manager at Dehal Investment Partners at Raymond James Ltd., about the outlook for North American economies, the role of artificial intelligence and the risks facing trade, housing and financial markets in the year ahead.
Key Takeaways
- Economic growth in both Canada and the United States is expected to continue in 2026, though volatility is likely to increase.
- Trade uncertainty, including the upcoming review of the USMCA agreement, remains a key risk for the Canadian economy.
- Artificial intelligence adoption is still in early stages but is expected to drive productivity and earnings growth over the coming quarters.
- U.S. economic resilience could be supported by tax cuts, deregulation and easing monetary policy, despite slower growth than recent years.
- Mortgage renewals and housing affordability pose potential headwinds for Canada’s financial sector in 2026.
Read the full transcript below:
ROGER: All right, time to look ahead to see what we can expect for the U.S. and Canadian markets. For 2026, our next guest thinks Canada will see some developments in its economy, especially with new collaborations with Asian and Middle Eastern countries, thanks to the Carney government. Here to talk about his predictions for the market is Michael Dehal, senior portfolio manager at Dehal Investment Partners at Raymond James. Michael, thanks for joining us. Happy New Year to you.
MICHAEL: Happy New Year as well, Roger. Good morning.
ROGER: All right, we want to talk about both big pictures — the U.S. economy and the Canadian economy — but let’s touch on Canada first. Your thoughts? You think there could be some good signs and good times ahead?
MICHAEL: Yeah, absolutely. We do think that the Carney government and some of the policies they’re putting into place could provide some tailwinds to our Canadian economy and to our Canadian equity market areas that we do like, such as industrials, as well as other types of financial sectors within the Canadian economy. We do think that the current government will have some great policies in place. More of the heavy lifting has been done by the Bank of Canada, so we do not expect any changes to interest rates in 2026 in terms of rate cuts, but we do think that now fiscal policy should do its job.
ROGER: And start kicking. What else would you like to see from the Carney government?
MICHAEL: Continued spending — more spending on infrastructure, on construction — to really beef up our economy here in Canada, as well as trade partnerships outside of the U.S. I know Carney has been going to other parts of the world — the Middle East, Europe and Asia — to strengthen those relationships. So what I’d like to see in 2026 and beyond are more partnerships with other countries outside of the U.S., really strengthening those relationships and helping our exports go across borders.
ROGER: Now, I think a lot of people were expecting these magical deals to be signed all in the first three months after he made these announcements that we’re looking outside the U.S. What kind of possible headwinds might we see for the Canadian economy?
MICHAEL: The big headwind is obviously the U.S.-Canadian trade relationship. We do have the USMCA agreement coming due — I believe it’s August of 2026 — so we could see some volatility ahead of those talks, and if there are any agreements prior to that date. That could be a headwind. Another headwind to our Canadian economy could be the job market. We are seeing a bit of fragility in the job market. Although over the last three months the unemployment rate has come down slightly better than expected, that’s been driven primarily by part-time jobs. The job market is something we’re watching closely — whether the unemployment rate goes higher and the impact on immigration. Obviously, the government has reduced the number of immigrants to Canada, and that could have an impact on the economy as well.
ROGER: And it does seem like a lot of companies have adjusted or adapted to the tariffs, and they didn’t have as much of an impact. But of course, if CUSMA goes by the wayside, as Trump has hinted could happen, that would have a huge impact, wouldn’t it?
MICHAEL: Absolutely. That’s the big question — the uncertainty around the trade talks. If that does go a bit sour, that could be a headwind to our economy. That’s something we’re definitely looking out for. But we do think that our government — Carney and the party — will have the best interests of Canadian consumers in mind to help alleviate any negative impacts from those discussions or from any agreement that could come forth.
ROGER: OK, let’s talk a little bit about the U.S. economy. What are you seeing? Unemployment was down there as well. It seems to have defied expectations, hasn’t it?
MICHAEL: Absolutely. We had such a resilient U.S. economy in 2025. After the Liberation Day of April, many people thought the U.S. economy was going to derail. However, the U.S. consumer once again proved resilient, and GDP growth in the U.S., I believe, will probably come in for the full year higher than expected. We do think that continues. We think U.S. resiliency continues in 2026. We’ll probably see more tailwinds on the AI front. We’re looking at companies that are benefiting from AI, from productivity and from efficiencies through adopting AI. We do think that in 2026 the U.S. economy continues to march higher — obviously at a slower pace than the last two years — but we do think we’ll probably get another robust year in the U.S. economy and another good year in U.S. markets. We’ll probably get more volatility this year than last year, but with tax cuts the Trump administration is implementing, deregulation, as well as the Fed continuing to ease throughout 2026, that can all be very fruitful for U.S. stocks.
ROGER: And you mentioned AI. Companies are starting to incorporate it now. Are we starting to see actual figures on savings, or potential savings, from it?
MICHAEL: Yeah, we’re sort of in the early days. A lot of CFOs and CEOs, on their earnings calls today, are talking about AI — how they’re adopting it, how they’re increasing margins and improving gross margins using AI. We are still in the early days of AI adoption for beneficiaries, but we do think over the next several quarters it will get better as more companies adopt AI to improve efficiencies. Again, that goes right to the bottom line, improving gross margins, which in turn helps stock prices.
ROGER: OK, I just want to bring it back to Canada for a second. Mortgages in 2026 — it’s always something everybody’s talking about. The housing industry, the housing market for Canadians, is a big deal. What are you seeing there?
MICHAEL: That is a potential headwind. We do have a number of mortgages renewing in 2026. Remember, these are the so-called COVID mortgages people got five years ago. That’s something we’re looking at. During the most recent Canadian bank earnings season last month, banks increased their PCLs, putting money aside for potential loan-loss provisions if consumers are unable to renew mortgages or have difficulties renewing at higher rates. That’s something we’re definitely watching. Housing is a topic of concern in 2026.
ROGER: OK, we have to wrap it up there. Michael, thank you as always for joining us. All the best for 2026. That’s Michael Dehal, senior portfolio manager at Dehal Investment Partners at Raymond James.
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This BNN Bloomberg summary and transcript of the Jan. 2, 2026 interview with Michael Dehal are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
