Diversified Industries 2026 Outlook

Industrials Underperforming in 2025:
Through December 11, the S&P/TSX Composite Index is up 28.0%, with the Industrials subindex up 1.6%, while the real estate subindex is down 1.9% and the US benchmark S&P 500 is up 17.3%. Stock trading through the year saw significant volatility, with the US tariff imposition “Liberation Day” sparking a sharp sell-off, before a retracement. Concerns and issues around tariffs and trade, and a fundamental attempt to reshape established global trade norms, impacted different sectors in different ways, with Industrials, which includes much of our coverage universe, notably affected. The highest returns in our coverage universe in 2025 included Dexterra Inc. (DXT) and Exchange Income Corp. (EIFT), as Company-specific initiatives sparked re-ratings and outperformance versus S&P/TSX Composite. 

Themes We Are Watching for 2026:
Uncertainty seemed to be the keyword for 2025, and we expect that to extend into 2026. The level of uncertainty being felt by consumers and businesses remains elevated, continuing above levels seen during major global events like 9/11, the Global Financial Crisis, and the COVID Pandemic in 2020, but has fallen since its peak in April. With a preexisting review of the CanadaUnited States-Mexico Trade Agreement (CUSMA) scheduled for mid-year, we believe trade policy will likely become more topical. While there seems to be widespread business support for CUSMA across North America, President Trump’s comments to date have been more circumspect and cannot be taken lightly. How these negotiations fare is likely to weigh on sentiment in Canadian markets, and we expect uncertainty levels to return to those of March and April, with the upcoming US midterms also becoming a significant factor. Tariffs on Canada are estimated to have reduced GDP by about 25 bps on a structural basis, and further changes to CUSMA could lead to a larger decline and further structural adjustments.

We Likely Don’t Enter a Recession, but We’re Not Set for a Boom Either: 
Current economic forecasts for Canada and the US suggest restrained real GDP growth, with the consensus average for 2026 at 1.2% for Canada and 2.0% for the United States. Inflation is expected to remain in check in Canada at the BoC target (~2.0%) and to remain higher in the US, mainly due to tariff impacts on consumer goods. Again in 2026, industrial production is expected to be near zero in Canada and about 1% in the US, implying that demand for certain industries, such as transportation services (rail, trucking), is likely to remain weak.

Top Ideas for 2026: 
Heading into 2026, several names in our universe are either trading at valuations below what we see as fair value or are expected to have unique catalyst events that we see having an impactful effect on shares. While some of these names have already seen significant share price appreciation, we continue to see them with further opportunities to outperform the broader universe. Our best ideas over the coming year include Air Canada (AC) AtkinsRéalis Group Inc. (ATRL), NFI Group Inc. (NFI), and Northstar Clean Technologies (ROOF).

Request the Full Report