January 20, 2026
The Empire Club of Canada Presents
Financial Outlook 2026: Navigating What’s Next for the Canadian and Global Economies
Chairman: Saurabh Popat, President, Board of Directors, Empire Club of Canada
Moderator
Andrew Willis, Business Journalist
Distinguished Guest Speaker
John McKenzie, CEO, TMX Group
Frances Donald, Chief Economist, RBC
Head Table Guests
Dan Nowlan, Vice Chairman & Managing Director, Equity Capital Markets, Corporate & Investment Banking, National Bank of Canada
Welcome Address by Saurabh Popat, President, Board of Directors, Empire Club of Canada
Thanks everyone. Good afternoon everyone. I’ll use my last Happy New Year chip to say Happy New Year to you all here attending today, and those of you attending online. I’m Saurabh Popat, the chair of the board at the Empire Club of Canada, and your host for today’s event.
To formally begin, I want to acknowledge that we are gathering on the Traditional and Treaty Lands of the Mississaugas of the Credit, and the homelands of the Anishinaabe, the Haudenosaunee, and the Wendat Peoples. I encourage you all to learn more about the Traditional Territory on which you work and live.
Now, today’s event would not be possible without the generous support of our sponsors. The Empire Club is a non-profit organization, and our sponsors generously support the club, and make these events possible and complimentary for our online viewers to attend. So, please join me in thanking our Lead Sponsor, National Bank Capital Markets. Thank you. Thank you, as well, to our VIP Reception Sponsors, CPA Ontario, Cleary Gottlieb Steen & Hamilton LLP, and McCarthy Tétrault. Thank you. And to our Supporting Sponsors, Canadian Association of Petroleum Producers, Canadian Bankers Association, Fasken, FGS Longview, KPMG, Red Hat Canada Limited, and Tory’s LLP. Thank you. We also deeply appreciate the ongoing support of our Lead Season Sponsors, Bruce Power, Hydro One, and National Bank Capital Markets, and our VIP Season Sponsors, Ellis Don, McKinsey & Company, the Ontario Road Builders Association, and Waste Connections of Canada. Thank you. And finally, thank you to our Media Partner, the Toronto Star, and our AV Partner, Bespoke Audiovisual. Thank you to you both.
If you have a question for our speakers, please scan the QR code found on your program through the Q&A function, or the Q&A function, if you’re online. For those of you online, if you require technical assistance, please use the chat feature.
Now, ladies and gentlemen, what a start to 2026. As we meet here today, our global political and economic leaders are meeting in Davos, in the midst of seismic economic and geopolitical shifts. Who knows what this year’s economic outlook will be? It may only last a few weeks or months, given the economic challenges and headwinds that Canada faces. But it is important, as we do every year, to give our economic leaders an opportunity to look ahead, challenge the assumptions, and give us a glimpse about where Canada’s economy is, or may be heading. There is no question that 2026 is shaping up to be a pivotal year with regards to the sustainability of the Canadian economy, given the global trade volatility, the accelerating pace of technology, and particularly, AI that is outpacing us and reshaping geopolitical alliances, domestic policies, and uncertain business and consumer sentiments.
So, how do we navigate through these choppy waters? What indicators should we rely upon, and how reliable are they? What cues do we need to take from the Bank of Canada, from our prime minister, and from our business sectors, who are trying to make critical business decisions in an environment that can shift overnight? Canada does indeed have the core resources, and many natural goods that other economies and countries need. Frances, you were here on stage last January for our Financial Outlook, and at that time, you were prognosticating through the lens of the post-US presidential inauguration, and looking at Canada’s place in the global economy in 2025 and beyond. It’s amazing what a year does to the economy and our society. You stated that the bulk of Canada’s problems are not fixable in a one-or-three-year time horizon, but instead, they are a five-to-ten-year horizon. And today, given the Canadian government’s focus on major infrastructure and Building Canada projects, as well as the prime minister’s jet-setting approach to rapidly securing new trade deals and rebalancing trade relationships, I think it’s safe to say that you are absolutely right that it may take, the time horizon that it may take to put Canada back on a sustainable economic path is more in the long term.
So, if that’s still the case, what is the outlook for this year, and what should we expect? Ladies and gentlemen, the Empire Club hosts conversations that matter, and today is no exception. And it wouldn’t be possible without the generous support of our Lead Sponsor, National Bank Capital Markets. National Bank Capital Markets plays a critical role in Canada’s financial ecosystem, connecting capital, ideas, and leadership at moments when clarity matters the most. Their continued support today and all season long helps ensure that these conversations remain accessible, timely, and impactful. So, please join me in welcoming Dan Nowlan from the National Bank of Canada for a few words and context, before we begin. Dan.
Opening Remarks by Dan Nowlan, Vice Chairman & Managing Director, Equity Capital Markets, Corporate & Investment Banking, National Bank of Canada
Hello, my name is Dan Nowlan from National Bank Equity Capital Markets. As Canada navigates an increasingly complex and shifting global landscape, it’s become apparent that we can’t expect to maintain our position as one of the wealthiest nations the world’s ever seen, without being honest about our challenges. For the last 10 years, our government’s shown indifference to growth, and punished innovation and risk-taking with chronically high taxes, overregulation, and debilitatingly long regulatory review timelines. The Canadian markets have seen over $126 billion in companies taken private since 2023. In 2025 alone, 54 companies with a market capitalization of $70 billion were taken out of public markets. Most of these companies were smaller, with limited access to capital, and trading at lower valuations than they could get from private equity or US strategic investors. Canadian employers need capital, and the Canadian capital markets in general, and the TMX in particular, are at the knife’s edge of efficient access to capital. I look forward to hearing today’s discussion, and thank you very much.
Saurabh Popat
Thanks so much, Dan, for helping to set the stage. To take this conversation further, I’m pleased to welcome a group of familiar and trusted voices to the Empire Club for what promises to be a timely and candid discussion. First, Frances Donald, Chief Economist at RBC. Many of you will remember Frances from last year’s Financial Outlook, where she urged leaders to move beyond familiar playbooks, and pay closer attention to what is actually changing beneath the surface of the economy. Frances brings exceptional clarity to complex economic issues. She leads RBC’s economic team, advises business and government leaders across North America, and translates macroeconomic forces into insights leaders can actually use. Her ability to connect data to real-world decision-making has made her one of the most trusted economic voices in Canada today.
Joining her is John McKenzie, CEO of TMX Group. John operates at the centre of Canada’s capital markets and financial infrastructure. He brings more than two decades of experience across strategy, operations, and market structure, and offers a perspective shaped by his leadership of Canada’s exchanges and clearing systems at a moment of significant global change.
And guiding this discussion is Andrew Willis, business columnist at the Globe and Mail. Andrew has spent more than three decades at the intersection of markets, media, and leadership. His career spans journalism, executive roles in global finance, and authorship, giving him a perspective that bridges boardrooms and newsrooms. He is known for asking clear, direct questions, and for drawing out the insights that matter most to decision-makers.
Together, this panel will explore what 2026 may hold for Canada’s economy, and how leaders can navigate volatility, technological change, and global uncertainty with judgment and confidence. Please join me, in welcoming the panel to the stage.
Andrew Willis, Business Journalist
Well, thank you very much. And to start out, I just want to give a quick shout out to the Empire Club for giving us a fabulous panel—and you don’t even have to go to Davos. Obviously, this is an incredibly challenging time for not only the country, but for the world. Any predictions that we make on this stage may be undone by the time we finish the panel, when Denmark and the United States go to war. So, I’m really looking forward to what John and Frances have to say. And I thought as a starting point, I’d take you all to a report that RBC prepared, as Frances and her team were thinking about the year ahead. The point they made, above all else, is that Canada’s future is in play. That the future we have as an economy, as a country, as a society, is going to be determined by people like us over this year, and the many years to come. I thought that was a pretty provocative theme. I thought that was a very timely theme. And I think, by the way, RBC got it right. I mean, from Trump, to trade wars, to artificial intelligence, energy infrastructure, stock markets, capital market, capital raising. That’s all up in the air right now. And I think there’s a lot of opportunity, but it’s also a little frightening. So, maybe, John, I’ll start with you, and I want to sort of get you to talk about how Canada capitalizes on our strengths. Do you want to just talk a little bit about what Canadian executives, what Canadian investors need to do to really realize the promise of Canada?
John McKenzie, CEO, TMX Group
Yeah, I’m happy to. And first of all, thank you all for doing this today, because these conversations are actually the most important things we can do to actually create momentum. And if you think about the conversation that we had a year ago, we were in the midst of what we all agreed to be was a crisis. New administration, very high discussion around tariffs, what they mean. And all of us were talking about the need to look past the tariffs, and look to what do we need to do as an economy to ensure that Canada can be as competitive as it can be. And in the year that’s passed, so we go 12 months ahead, and what are we hearing around the table, what are we hearing from other executives, is people like the direction of travel that Canada has changed to. So, we are pointed in the right direction. But we already appear like we’re losing momentum on utilizing our crisis to really affect material change.
So, there’s some great new things in the window, like the major projects office that we heard about, some reform around global markets that we can access. But fundamental things that actually help drive competitiveness, in terms of investment and certainty, are still on the table to get executed. And so, that’s what a lot of us are saying, is that we need to move past the ideas, and into execution on major reform. And the nice thing now is those doors are open. I’m finding it, I’m sure you’ll find it as well, that policymakers want to hear the ideas, and they’re actually telling us, get louder. So, it actually is, the ownership is on the communities to be able to demand for change, to be loud, because it actually gives policymakers then the cover to make difficult choices, is what we need to do as a country.
Andrew Willis
And John, when you say that, can you give specifics? Like, I’m thinking of interprovincial trade barriers.
John McKenzie
Yeah.
Andrew Willis
Everybody says we’re gonna get rid of them, yet it seems, as you say, to have been losing momentum. Are there issues specific….
John McKenzie
Well, in fact, not only have we lost momentum, but a lot of the changes that got made were done through MOUs, which actually complicated even more. So, if you’re a small business in Canada, not only do you not have interprovincial trade that’s seamless, but now, you have potentially five different MOUs you need to navigate to do that. Where I sit, I always think about capital markets. Canada does not have a national market regulator. But we do have a national regulatory approach that, if we got all provinces to sign on—and actually, all it takes is them all to sign on—then it wouldn’t matter where you were in the country. A company could raise public money, and be recognized for investors across the nation. We’ve been raising that for 12 months. The progress is too slow. So, we’d like to see that go faster.
Andrew Willis
There we go. So, Frances, over to you then. When you think about the opportunities and the challenges for Canada, like, where does your mind go? And I must say, like, I was at the events last year. And when you and some of the other economists were out, you were talking about recessions in Canada. The future was pretty bleak. You said the stock market took off last year; we’ve had decent growth. So, like, when you think about the challenges and opportunities we’re facing now, that’s a kind of interesting reference. The year we had was pretty good.
Frances Donald, Chief Economist, RBC
Can we level-set? Because I’m already depressed. I’ve heard…
John McKenzie
Sorry.
Frances Donald
…even in the past 10 minutes, I’m, I’m so sad in my heart…
Andrew Willis
Please, don’t be sad.
Frances Donald
…and I think we need to—can we start with a level-set, here? Because you’re right. A year ago, I did speak at the Empire Club. It was a great event. That’s why I’m back. But two weeks after that was another big day. Do you all remember February 1st? It was my husband’s birthday, and I promised him a nap and dinner, and neither of those things happened. It was the day that President Trump announced 25% across the board tariffs in Canada. It was a Saturday morning—it’s probably coming back to you. And that weekend was one of the most stressful professional weekends of my entire life—also personal, given the backstory there—because everybody wanted to immediately know what would be the impact on the Canadian economy. And folks would say, “What’s the impact of GDP?” as if that would summarize what the country was about to go through. And the hard answer was that we didn’t know. And we didn’t know, because we had no historical precedent for this type of shock. This was really a once-in-100 year shock. And we didn’t know, because there were so many factors like how would the currency move? What would the Bank of Canada do? What would provincial governments do? What would federal governments do?
And so, what economists do when we have that level of uncertainty is we created a range of plausible scenarios. We had six on our team; the Bank of Canada had a variety of other ones. And they ranged. They ranged from a very plausible, within the realm of possibilities outcome, where we could have something that looked like a three year long recession in Canada, with the unemployment rate rising to 10%. And I have to tell you, I didn’t want to talk about that. I felt like a doctor that had to give like a cancer diagnosis, in that I knew that folks at businesses and households deserved to know that this was a possibility, but also knew that this shouldn’t be the headline. Now, all the way at the top of those possible paths was something that looked like a mild slow down. No recession, a jump up in unemployment that sort of solved by the end of the year, and knocked us off of the path that we were on, but not materially.
Then came a second date, April 2nd. This one, you all remember—President Trump, Rose Garden, Liberation Day, it’s coming back to you? And do you remember President Trump stood there with a billboard with 186 countries, including the one with just penguins, something like that? Do you remember where Canada was on that board? We weren’t there. It wasn’t there, it wasn’t there. And on April 2nd, something really important for Canada happened, that I still don’t think that we have really internalized. Which is, on April 2nd, Canada went from being the largest victim of American trade policy to, actually, its smallest. Canada went to having the lowest average effective tariff rate of all of America’s trading partners, in that moment. And this was really important. Now, we as Canadians were still feeling very viscerally attacked, and still are, and it’s still a sizable economic shock. But the rest of the world started asking questions. The rest of the world started saying, well wait a second, we’re in a global trade war, where can we hide? And they would run spreadsheets and heat maps; they would look for, okay well, who has actually low tariffs? Who has all of the trading goods that we’re gonna need in 10 years, that we should start establishing relationships with? Who has critical minerals? Who has electricity? Who has access to the Arctic? Who has water? Do all these things sound familiar to you?
And so, on April 2nd, something interesting happened, which is that Canada, on all of the global investors landscapes, started to rise up the ranks very, very quickly in a short period of time. And yet, Canadians were consistently told we are in very dark times, we are in a crisis. How many times did you all hear that? I heard that every day: wake up, we’re in a crisis. And so, consumer confidence dropped to one of its lowest readings ever. Business confidence collapsed in the country. But the real economy did not. And I can tell you today, of all of those scenarios that we laid out, Canada is actually traversing the best of them. We started to see a pickup in business confidence that was coming through. And that worst case scenario has been entirely avoided.
I’m gonna put an asterisk on that. Not if you’re in Southwestern Ontario. If you’re in Southwestern Ontario, you are living something that looks like one of those bottom experiences, not ones at the top. But the rest of the country has been impacted by other types of things. Chinese tariffs, for example, were painful in the Prairies and the Atlantic, but not the US trade war, to the same extent. And the reason I mention this is because I’m actually somewhat relieved that our conversation is shifting back towards regulation, and taxes, and productivity crisis, because it’s an incredible luxury that we can talk about those things again, we’ve traversed the other side.
But you say your question was what are the opportunities and what are the risks? And maybe, I’ll summarize it in what I’m seeing in my conversations. I spend a lot of time with business owners. And I like to, you know—they like to talk to me, and others. And so, I will generally spend the first half of these meetings hearing about how much Canada sucks at regulation, and permits, and tax systems, and productivity, and it’s not business-friendly. And that may all be true. And at the end of that, I like to say, and sir—it’s usually sir—how is your business going? And the answer to how is your business doing is, oh, actually we’re doing great…
Andrew Willis
Okay.
Frances Donald
…and we know that, because we have a booming stock market, we have corporate profits that are doing particularly well this year, that have been a big upside surprise. And we’ve seen a turnaround in foreign direct investment into the country. And then the funny thing is, I’ll travel around the world to places like London or New York. And when you go there, traditionally, no one would care about Canada. They, it’s too small of an investable pool. So, I bring my US economic outlook. And halfway through these meetings, time and time again, folks would slam the notebook shut and say, you’re from the Royal Bank of Canada. Can you tell us about Canada? Because on all of our dashboards, Canada keeps coming up as one of the top places for us to invest. And yet, every person we talk to in Canada is so darn depressed.
Andrew Willis
Okay, so that’s my fault.
Frances Donald
So….
Andrew Willis
We run these stories in the Globe and Mail. Frances says there’s a 2% chance of a three-year recession; that is the headline the next morning, “Recession coming to Canada.” And it becomes this sort of self-fulfilling prophecy. And Frances, just to pick up on what business owners are saying to you, you know, one of the problems we’ve had in this country, in terms of economic growth and productivity, is a lack of business investment in businesses. And you had a lot of reasons to sit on your hands last year. So, what are you seeing on investment, on business investment, and on productivity, the kind of productivity gains that we’re all looking for?
Frances Donald
So, first of all, I think we use the word productivity as sort of like this generic, no investment, you know, the business community is not being supported, tax systems. Productivity is output per worker. Okay? It’s a very specific word. So, I think the question is, are we actually seeing businesses being innovative and entrepreneurial, as they’re coming through. And the answer is, it’s extraordinarily early to want to have seen the economy turn around this quickly. Just like I said last year, when you make productivity changes, you have to actually engage in the infrastructure development, and those are three year, five year types of developments.
But here’s what we are seeing. Most business confidence is starting to turn around in the other direction. And this is an important thing. I’m a second derivatives type of person. Which is to say, it’s the change and the change that matters, most importantly to us. We are starting to see that turn around in business sentiment. We are starting to see the unemployment rate come down. What’s happening? We’ve seen a stabilization in steel aluminum and the auto exposure. They are not dropping production anymore. They are not laying off. Canada has seen very few layoffs this year. I know we’ve seen a lot of headlines about it. The unemployment rate is not rising because people are getting fired; it’s because people aren’t getting hired, which is another thing that we can talk about later. The Bank of Canada has dropped rates in half. That’s starting to filter through the system, so interest rate costs are coming down. And that big stock market acceleration, up over 40% since that April 2nd day, that’s a good return, is really producing a lot of household balance sheet wealth underneath the surface, as well. And let’s not forget, there is still a lot of government money in this system, okay? But if you’re asking me, has this government turned the country around in less than a year, that is not a realistic timeline. We have a tanker ship that needs to be turned around. We’ve taken the first step towards making that move. If we are going to see the strategy from this government be successful, it is still on a three-to-five-year horizon.
Andrew Willis
John, do you just want to add to that, on…
John McKenzie
Yep.
Andrew Willis
…what you’re seeing from business leaders, in terms of capital deployment, and then capital allocation?
John McKenzie
Yeah. You’re seeing it in the numbers, as well. And you’re seeing the numbers, particularly, coming at the end of last year. And I’m not an economist, so I can make up my own leading indicators.
Frances Donald
Go for it.
John McKenzie
You look at last year, in terms of public financing done by public companies—and I love the point you raised, Dan, in terms of the contraction we’ve had in public companies, because that actually is part of the challenge. When companies have confidence issues and the valuations in their sectors don’t make sense, you know, the go public option is a little harder, and it’s easier to go private, in some cases. But on the overall, 33 billion in capital raised across our two exchanges last year, 60% up from the year before. And these are already listed companies raising net new money to invest, expand, build operations, both Canada and abroad. So, that’s a really good indicator.
Andrew Willis
And in terms of a trend, that was up significantly from previous years.
John McKenzie
Yeah, 60% year-over-year. You know, The Globe loves to write about the no IPO pipeline.
Andrew Willis
Guilty.
John McKenzie
But, you know, again, in the Canadian ecosystem of what do we have to take for granted, we actually have one of the best junior-to-senior market ecosystems in the world. Nobody has what we have, in terms of that junior market ecosystem. We’re not reliant on the IPO, the way a lot of other jurisdictions are. And we listed on the venture market last year almost 40 new companies. We had 11 companies graduate up to the senior market, which in any other market, those are IPOs. So, the numbers are there, in terms of companies that are starting to access the market. And then, the soft piece that we get from the teams that are working with private companies today is that that pipeline of companies that could raise public money and expand in Canada is as deep as it’s been in years.
Now, let’s be candid. It was like that a year ago, in December-ish of ’24, and then something happened. And that caused a lot of disruption and uncertainty. So, we are sitting in Canada with what I like to say is, you know, we have a poker hand that’s fantastic, but there’s jokers in the deck that we didn’t know were there—I’m not putting the joker’s name on anyone, but you can, not for attribution. And that’s what we have from a marketplace standpoint. So, we’re now looking at a marketplace and a leading indicator standpoint, there are a lot of private companies that could raise public money, that could expand and invest. And the only question mark we’ve got on that is, will the confidence and certainty be there? And the piece I take from that financing data, that 33 billion raised, mostly in the back half of last year, is that companies are now starting to look through the noise. And I always hate to talk about new normal. I hate the term new normal, but that’s essentially it. When companies and boards are making investing decisions, they have to take this geopolitical noise as a factor that’s just going to exist, and you’re working through it. You can’t wait for it to go away.
Andrew Willis
And Frances, I’m interested in sort of building….
Frances Donald
I think it’s already working. Like, I’ve already turned him into an optimist.
Andrew Willis
Yeah. I’m interested in how you see, like how you’re telling CEOs and clients of RBC to navigate the road ahead. I mean, in the last couple of years, the story from an economics point of view has been partly a monetary policy story, right? High inflation, fought with relatively high interest rates, then interest rates came down. Inflation—I’d be interested in your view on this, but feels relatively benign right now. So, like, what are the signals? What are the indicators that you’re following now, as you think about how to measure the performance of the economy, and how business leaders should think about capital deployment?
Frances Donald
Well, I guess one of the first responses to that is, which economy. Because we like to talk about Canada like it’s one big economy. And I could easily say to a business leader, our GDP forecast for this year is 1.3%, and then they would fire me, because there’s absolutely no value in that, right? So, one of the things that we’ve been talking about a lot is let’s focus a little bit more on regional economy. So, for example, Alberta is gonna grow twice as fast as the national average, and Ontario is going to grow below that national average. So, we really have to start having a perception across this country that we are not one economy that is operating exactly the same, but we have been fragmented. And in many ways, the US-Canada trade war has been a US-Ontario trade war. Ontario has been much more disproportionately impacted by these tariffs that have come through. And places like BC, Alberta, even the Atlantic provinces, have been marginally impacted by that. In fact, they’ve been more hit by the confidence element around it than they have by the tariffs themselves. So, the first step is really trying to say, which economy are you looking at? Because this dispersion across the whole country is becoming enormously important. I think it’ll be a big theme in 2026.
Andrew Willis
And that plays into politics, too. I mean, you’ve got an election in Québec coming up that’s probably gonna bring the PQ back. You’ve got whatever Danielle Smith is up to in Alberta. I mean, does that exacerbate, does that lead to a lack of confidence in business, the kind of quirky nature of Canadian provincial politics right now…
Frances Donald
Well…
Andrew Willis
…and the regional development scenario that you just outlined?
Frances Donald
…well, I think businesses—John, you’re gonna agree with this one—want certainty and visibility on a road ahead. So…
John McKenzie
A hundred percent.
Frances Donald
…one of the things that we’ll focus on are what are the large trends that you can be focusing on that will outlive some of these economic or these political types of dispersions. So, things that we talk about a lot, for example, is there will be an extraordinary demand for resources, not just critical minerals, but food, for example. We’re gonna need electricity. If you want to be bullish AI, you gotta be bullish electricity at the same time…
Andrew Willis
Right.
Frances Donald
…you gotta be bullish critical minerals. We talk a lot about demographics in Canada. I think population growth is gonna be a huge issue in the year ahead. We’re going from 3% population growth to 0% population growth. We have already seen outflows out of BC and Ontario. That’s gonna have a range of impacts for labour supply, for wages, companies need to know how to navigate these things. So, there’s a lot of themes that we can speak to, and really trying to ground in what is gonna be true with that.
I will say as an economist, it is my view that we need to be more forthright about how different these economies are. Because if your sense of belonging comes from feeling seen and recognized and appreciated, then that starts with saying the Alberta economy is not the Québec economy, is not the Nova Scotia one. That’s gonna lead to better policy in this country. It’s gonna help businesses who have national strategies navigate the economy better. And it’s currently missing from the Canadian economic discourse.
Andrew Willis
Well, that alone is a lesson for this audience, that just to appreciate and kind of embrace the different regions of Canada. John, one of my colleagues in the Globe and Mail ran a story last year about what wonderful exporters of capital we are. The focus was on the pension plans. Basically, they’ve been incredibly successful in meeting the obligation, the pension obligation of Canadians, by investing around the world. And the flip side of that is that governments in Canada and leaders in Canada are trying to ensure that as much of that Canadian capital as possible does get deployed in this country if it makes economic sense. So, my question to you would be, how do we make Canada more investable? How, if you were a policy, if you were a prime minister, just for fun, how would you….
John McKenzie
Yeah.
Andrew Willis
Your current job keeps you busy enough. How do you make Canada more investable? How do you attract more of that pension fund money?
John McKenzie
There are two pieces I’m gonna talk to here, because there’s actually two parts of the same story. When you think about the pension money, but also our bank structure, our dealer network, things like that in Canada, in terms of the investing ecosystem, we are a bit of a victim of our own success, in some of those things. Because we’ve actually created some very large-scale players in a country for the size of our economy. And that makes it kind of challenging for a very large pension fund to deploy assets in small and growth-stage companies. And that’s kind of the gap. That’s the funding gap that we have in the Canadian market. We have got some really great big companies. We’re very good at creating new entrepreneurial companies, but we have a scale-up gap, in terms of how do you build them over time.
And so, when we were talking about this in the last couple years, we started to make recommendations on how do you create structures, so you can bridge that gap of big money and small companies with fund-to-funds, innovation funds, different managed products that would allow our pension funds to deploy that capital into the growth economy in the way that’s hard for them to do. And you want to give credit to the [Indiscernible]. They’ve done an exceptional job of this over the years. There’s a model there that’s gonna work. So, we’ve gotta do things that we can do on the tooling side, to match that supply of capital with where the growth demand’s gonna be.
The flip side to the other part of your question is how do you just simply make this marketplace more investable?
Andrew Willis
Yeah.
John McKenzie
And more and more, we’re getting consensus around there’s three real levers. You’ve heard the comment before: capital is very much like water, and water flows where it has the least frictions, right? And there are things that impact friction, in terms of where capital can flow. Regulatory processes, and those are both how do you get big projects done, but also how do you do actual regulatory regime around actual raising capital. Our regulatory partners in Canada, they’ve got eyes on this now, and we’re starting to see reforms around burden reduction. One of the reasons that we’re seeing companies stay private longer or go private is when you’ve got a lot of money that’s in private capital, if you have a lot of regulation in the public market, that’s not a good match. So, we have to think about how do we get the regulatory model smarter, so we’re regulating where it adds value and take out the burden and the noise. And the same thing on major projects. So, great that we have a major projects office there. But let’s not lose sight of the fact that we need to do fundamental reform around actually how we approve things, so we can take that mining sector approval down from double digits in years to one or two, so that we can get those great critical minerals out to marketplace.
So, you’ve got the regulatory piece. And the other piece is simply around do we incent risk-taking through our tax and ecosystem? And the two biggest places where we’re really not competitive—and this is, you know, this is not a diss on Canada, it’s just a recognition of where are we competitive and where we’re not. So, despite the world of tariffs, if you just look across borders, you know, we’re a heavy tax regime on investing. Whether that be on the marginal tax rates of our people, and what they can deploy afterwards, or our capital gains structures. And we don’t incent long-term. If you’re in the US, you actually get incentive to invest long-term, through the structure. We need that kind of thinking on regime change.
Andrew Willis
Do you think governments understand that? I’m not hearing a lot about changes in tax policy, given the deficits that everybody’s running.
John McKenzie
I think they understood, when they saw the visceral response on capital gains, that that was the wrong direction.
Andrew Willis
Right.
John McKenzie
I don’t know that we’ve gone the other way to realize that if that was bad, then going the other way could be good, in terms of unlocking investment. But these things don’t need to be revenue negative. Because we have so many of these bespoke tax pools and productivity funds that the government has, because they like to do check presentations and cut ribbons. If you took a lot of those vehicles and just deployed it into lower business taxes, lower capital taxes, you could lift all boats, and you get the government out of the decision-making of which sectors are going to get the support, and let the people that actually are the experts in the sectors decide where they want to deploy risk capital.
The third piece of that is around, you know, how do you invest in capital assets? There’s been a complaint, there’s really good reporting on this that companies aren’t investing enough for their own balance sheets and growth. There was the super productivity tax deduction that came out in the last budget, but it was sector-specific again. What we asked for is let companies deduct their capital investments wherever they decide is the best use of capital to grow the business. They’re the experts on how to do that. Don’t cherry pick what the sectors are. So, I do think there’s appetite to hear the ideas, and as long as we as a community can come up with ideas that are also helping the government, well, how do you offset that, either through growth or other tax reform, so you can deal with the deficit problem at the same time, you’re gonna get an ear.
Andrew Willis
Frances, do you want to build on that, in terms of what needs to happen to make Canada more investable? I mean, what do foreign investors tell you about when they look at Canada as a place to invest, versus other jurisdictions?
Frances Donald
So, now that we’ve level-set, I feel like I can go a little bit more to where the challenges are, and some of the issues in play. So, I’ve used this example before, but I sometimes, especially after I had my second kid, my whole house was a disaster. Like, every single room was bad. And I remember, my mom came over, and I said, “I don’t even know where to start.” And she said, “It doesn’t matter where you start, just pick one corner and get going, and then move outwards.” This was incredibly good advice at the time, but it’s also the advice that I frequently give to policymakers, which is that there are a thousand things that could be done to make Canada more investable. In fact, the list is so long that it would be ridiculous to try to accomplish all of them at the same time. And this is the challenge that this government, I think, is in. Which is that it had to, first of all, snuff out the fire, right? So, there is a fire that has to be put out. This was the trade war, effectively. And now, it has to rebuild the firehouse. But you wouldn’t rebuild the firehouse while the house was on fire, right? You do one thing at a time. Then they had one budget. And of course, they can’t spend an enormous amount on one budget; they have to maintain fiscal credibility. So, they have to lay out a strategy, and incrementally start moving, which is what the first budget did.
Now, we’re missing one critical piece. We’ve heard the strategy. We’ve heard we want businesses to invest. We’ve heard we’re gonna spend, you know, 500 billion, and then we’re gonna get the private sector to take over. It’s gonna be a baton pass to the private sector, and then the private sector, like letting go of your kid on training wheels, is gonna go off by itself, after we’ve pushed them and held on. This is the idea, right? I think the critical piece missing—I’m gonna echo John on this—is it has to come with significant deregulation.
Now, to my earlier point, global investors are not afraid of investing in Canada, and one of the reasons is, again, our relative attractiveness is changing daily. So, the relative attractiveness of the United States is sort of falling like this, and so Canada comparatively is looking different, even having done nothing. But the issue is, Canadians are struggling with entrepreneurship. They’re struggling with the idea of business innovation. Now, I’m gonna say exactly what John said in different words—I think you’re more educated than I am, you have a little more experience….
John McKenzie
You just said I was older.
Frances Donald
Yeah. But that’s the benefit, though. It comes with experience. Here’s how I think. When I talk to businesses, they say, “You know, Frances, it’s just not business-friendly”. And what I think is happening is that the risk/reward for businesses in Canada is messed up, in some capacity. So, the incentive to take on risk is being skewed, but then also the upside is skewed, so risk/reward. The upside is skewed because of the tax system. I think that’s really the issue in play, and because it’s hard to scale in Canada. But the other issue that I think is easier to fix and will hit much less political walls is that it just takes forever to get from I have a business idea to your business to actually come off the ground. So, just think about it in practical terms. You’ve borrowed some money, you want to put it to play. You can’t work while your business is getting off the ground. You need to wait. If you can wait one year before you start to see benefit, then that is a much more attractive business environment than 10 or 15 years, which is some projects.
And the most important thing about deregulation is that it’s costless. It doesn’t cost anything to wipe a regulation off—give or take; there’s some examples where that’s less true. It does, however, require a lot of collaboration with provinces, which is the issue with interprovincial provinces. But deregulation is the fastest path, in my view, towards this next evolution in investibility—is that a word? My Québec is showing….
Andrew Willis
That is definitely a word.
Frances Donald
Yeah. Okay. The investibility of Canada.
John McKenzie
Let me add an anecdote, if I can. Because the challenge, I agree that actually doing regulatory reform is costless, but there’s a political cost. And that’s actually where policy makers need to have backers behind them, in terms of the ability to make change. And we, in the budget this year—and I actually talked about this last year, we’ve been lobbying for changes on the R&D tax credit regime for Canada. That’s where small companies can get, actually, credits back to support their R&D efforts. We’ve been working on this directly with the government for, I think, actively at least 7 years, inactively over 10. And it was in the budget this year to reform this, so that small companies going public could still get them. This was a massive win for small companies scaling up. The interesting thing we learned later on, though, was that the bureaucracy, as we were working through that, what they were guiding the government on was, 98% of the industry says the program works fine, so you don’t need to do anything. Where all of our constituents, and all the public companies and private companies we work with say this system is broken, we can’t go public because we’ll lose our credits, we’re spending 30 to 40% of what we get back on lawyers and accountants—no offence to the lawyer and accountant tables—but that was the industry view, that this program doesn’t work, but the bureaucracy and the inertia and the implied interest in there are guiding that as fine. So, as we look to do regulatory reform, we have to bust through that, and we have to raise the voice of industry on both what’s not working, but also what’s the solution, and what we’re gonna do with it.
Andrew Willis
Yeah, there’s no government that’s biased to downsizing.
John McKenzie
No.
Andrew Willis
It just doesn’t….
Frances Donald
I would also say, though, that the political pressures against deregulation are probably less than tax reform. I think tax reform is real tricky for governments to put forward, especially with a minority government. So, it’s all relative, right?
Andrew Willis
Yeah.
Frances Donald
It’s all relative.
Andrew Willis
As we talk about where this year’s gonna go—because this is sort of a forecast luncheon—one of the things that the Globe and Mail is going to give you over the next year is blow-by-blow accounts of what’s going on in trade negotiations. You know, every day, when Trump reports something on Truth Social, we’re gonna have a headline on it. If you read RBC’s forecast for the year, Frances and her team are saying you should ignore the day-by-day—basically, don’t read the front page of the Globe and Mail on a regular basis, because it’ll only upset you. You’ve got a different view on trade. Do you want to just sort of go through the way that you are advising your clients, the way that you’re thinking about the big picture on trade as it applies to the Canadian economy?
Frances Donald
Yeah. You’ve highlighted it’s just a little bit of a rebuttal against, maybe, some excessive headlines we might see. Now, to be clear….
Andrew Willis
We’ll write the excessive headlines anyways. I, I….
Frances Donald
And it’s okay. Because this is, Canadians feel such a social and economic, a cultural assault through these negotiations. So, it’s okay that they want the blow-by-blow through it. But where should we put the emphasis? And maybe, this is the RBC take here, which is that there is no question that the trade order is changing, and in our view, will benefit Canada. Just from some of the examples I’ve given you today, where trade is going puts Canada firmly at the centre of what I think is the new trading environment, just because we have won the geographic lottery. We absolutely have. In fact, I think that we as Canadians forgot we were a resource-based economy, and are waking up to the absolute treasures that we have here, and trying to be thoughtful about how do we engage in this next level of trade in partnership with Indigenous communities in a sustainable way. Very important.
There is a weird and inappropriate amount of focus on the USMCA mandatory renewal conversation itself. And I’ll tell you why. First of all, the reason that we’re focused on this is because one of the reasons that Canada was protected over this past year, and actually had low tariff rates, is because 90% of our trade heading to the United States is protected under USMCA or CUSMA. So, I tell folks this, and they say, well, CUSMA’s gonna go away in June, in July, right? So, first thing to know, this mandatory review conversation would have happened no matter who was president. This is not a President Trump decision that came through. CUSMA or USMCA does not expire this year. It expires in 2036. This conversation is to decide if we want to extend it beyond 2036. If no one agrees in July, then it just stays as is, or they punt the conversation to next year. So, it’s not like the whole thing can blow up this year.
But I have a little bit of a different angle—which is positive or negative, depending on who you are—which is that the US can screw us on trade, regardless. And they already have. So, they’ve done this through sector tariffs, but also, a lot of folks don’t know this: US, Canada, or Mexico can withdraw from the USMCA with six months notice at any time. They could agree to it, and then the next day be like, psych, we’re out six months from now. And the truth is, they haven’t done this yet, which I think is important, as a kind of go-through. There’s other elements that we should be aware of. We have a rule on the team, we don’t make forecasts about political events based off of whether they are good or bad, economically. US tariffs were and are a horrible idea for the US economy, economically, but they still did them. So, you can’t make that argument coming through.
However, the US negotiating position is much, much worse this year than it was last year. Their unemployment rate is rising, ours is falling. Our inflation is contained—although, don’t tell that to most Canadians; they’re feeling enormous affordability issues—theirs is actually stuck around 3%, with upside risk associated with it. A little distracted with some other stuff—I don’t know if you’ve noticed—going on, and their list of items that they’ve started with on the negotiation seem relatively manageable. So, I think we actually should spend an enormous amount of time talking about what trade means for the future of this country. In fact, I think it would help Canadians feel excited about their country, but this narrow focus on this one negotiation in these meetings is just, we’re just overweighted it.
Andrew Willis
Message received. John, one of the functions of the trade wars with the States is a realization that Canadians need to trade more with the rest of the world. So, you’ve got Carney talking a lot about a pivot to Europe, a pivot to Asia—it’s part of his jet setting, as someone put it off the start. What are you hearing from CEOs, in terms of their ability to shift from that wonderful market that’s just a few minutes south of us to opening up new markets in Asia, or opening up, finding new customers in Europe?
John McKenzie
I don’t think there’s an aversion to finding new customers, globally. But even in the near term, in terms of what I see in some of the Canadian CEO engagement, to the largest degree, continue to see the investment in the US as the biggest market to expand into. And it’s not a political judgment. It’s regardless of the noisier, that market is very much open for business, and there is a degree of both capital and regulatory certainty to operating there. It is a very competitive market. But for Canadian companies that want to be global leaders, they have to have strong US presence. That is just part of the marketplace. So, I actually saw some statistics about the, you know, Canadian companies looking to invest in Canada with something like 50 to 60% of them, looking to invest in the US 60 to 70%. And again, it’s the nature of the size of our market, but the size of the geographies that we want to go after. Even like TMX, as a company, we run the primary pieces of the Canadian capital market. More than 50% of our revenue comes outside of Canada. So, it’s the nature of trying to be a global player. And I don’t think that changes. And to your point around the kind of the Canadian brand in the world, this is a really good place to invest to do business in North America. You know, we have that still preferential access—trade wars and tariffs aside, this is the most open border between any two countries in the world from a trade standpoint, from a capital standpoint, from a regulatory standpoint. So, we don’t want to lose sight of that. And that makes Canada an investable destination to do business into North America, through.
So, the other piece I’m taking away from that is the fact that, of that mix of CEOs, the fact that the majority of them are looking to continue to invest and grow is a great positive outlook. And it is a bit of a different feel, because we feel like it sucks, but we’re gonna keep investing. We just had a record year for the stock market, but didn’t feel very good. And so, we’ve got to separate, you know, the facts and feelings here, and look to where the opportunities are. And great Canadian companies, if you’ve got a really good strong base here, you’ve got a robust base to build off, whether that’s in Europe or the US.
Frances Donald
And John, listening to you speak, I’m sort of maybe even reconciling the same issue that I’ve had, which is, how can we hear so much complaints, but also see this investment? And really, I think the solution is that we do know our potential, and we know what it will take for us to be exceptional, and good just isn’t good enough for most Canadians.
QUESTIONS & ANSWERS
Andrew Willis
That is the reset. Part of what the Empire Club has done today is they brought in an MBA student from Western, and through the miracle of technology—and I’m looking at my friends at the back—we’ve got a question from our…can we roll that?
Video Question from Arham Ali, MBA Candidate at Ivey Business School, Western University
Hi there, my name’s Arham Ali and I’m an MBA candidate at Ivey Business School. My question to you is, Canada’s currently at an inflection point, when it comes to the demands of mobilizing capital into productivity-enhancing assets such as energy, digital infrastructure, and AI-enabled firms. And from your respective perspectives, I’d love to understand, obviously, one shaping Canada’s market infrastructure, and the other forecasting global macroeconomic conditions. What is the single most important structural change Canada must make over the next three years to ensure that private capital actually flows into these opportunities, rather than remaining on the sidelines, or leaving the country? Thank you.
Andrew Willis
John, you want to take the first shot at that? And thank you very much for the question.
John McKenzie
I always thought it was interesting that with all your experience, the hardest question we got came from the Ivey MBA.
Andrew Willis
Yeah. I am humbled, and I will be replaced.
John McKenzie
When I thought about this question, it was really hard to narrow it down to the one thing. But I like the advice that you got is you gotta pick somewhere to do. And we have to do things around execution certainty. So, whether that is some kind of reform around project approval, multiple approvals of jurisdictions, things like that. If you know in Canada that you can get a power plant to power an AI site done, or a new AI development site done, and you can get it in a reasonable time with a reasonable degree of certainty—because the problem with the time piece we talked about earlier is, time costs money. And if you have that ability to create certainty that I’m gonna invest this and I’m gonna get a yes and I can start to build, then that will put us ahead of other marketplaces to do that.
The inverse is also true. And I’ll give you the anecdote on that. When you look at the last 10 years on energy sector, Canada was known as being the hardest place to approve energy products—you don’t have to ask me, you can go to the cap table over there, and they will explain it all to you. Hardest place in the world to actually approve an energy project. What did that mean? It didn’t mean that money didn’t go to the energy sector anymore. It just didn’t go to the Canadian one. It went to Texas. And we went from a Canadian market that had over 400 public energy companies doing 20 billion a year in capital to 180 last year doing 1 billion. So, policy matters. And if you’ve got policy that actually creates certainty that you can actually invest, the money will flow to it.
Andrew Willis
Frances, over to you.
Frances Donald
We should have talked, before because I was just gonna do that one.
Andrew Willis
I’ve got two more.
Frances Donald
Maybe, I’ll do a different angle. It’s actually a good thing when two folks from very different places come at the same conclusion from very, two different angles. But I once heard this line—and I think about it a lot, when I’m asked questions like this—which is, it is not the big that eat the small, it’s the fast that eat the slow. And I have been feeling in Canada that this disgruntledness, this frustration that we feel, is because we are being restrained. We can’t run as quickly as we know that we can run. And it becomes down to speed up the time it takes from an idea to turn into metaphorical or literal shovels in the ground.
But maybe, I’ll add one element, since we came to the same conclusion, which is that I once spoke to a developer in British Columbia. And he told me that he started his business 80% Canada, 20% in the United States. And now, he’s 50/50, and he expects to grow until he’s 80% in the US, 20% in Canada. And I said, “What would it take for you to reverse this plan, and go back into Canada?” And he said, “I love Canada, I want to invest in Canada. But the problem is when I want to invest in Canada, I’m given a pile of paperwork that I have to navigate. And when I want to invest in the United States, the literal governor will call me and say, how do I help you with this?” And I said, “Well, aren’t you encouraged by this new government?” And he said, “Frances, I don’t need one government. I want to see three consecutive governments of different political backgrounds who give me the certainty [that you’re describing, John] that this policy will be in place as long as my business horizon, which is not one years or two years, but decades out.” Now, that’s a very big answer to your question. But to unleash Canada and allow for that speed would have a transformative impact on this country.
Andrew Willis
That’s a fabulous question. You will have the chair next year. The lights are telling me now that our time is up. I just want to say, on behalf of my fellow panellists, I mean, I think all of us woke up this morning a little bewildered at what was going on in the world. Markets were capping out, US interest rates were flying, and as I joked before, the Americans and Canadians are about to go to war. I now feel that I’ve got some positivity, that I’ve had a level-set, and that there’s some encouraging signs of what needs to happen. The challenge to all of us is to actually make it happen. So, on behalf of the Empire Club, on behalf of my fellow panellists, thank you for being part of this lunch, and let’s all go take action.
John McKenzie
Thanks.
Note of Appreciation and Concluding Remarks by Saurabh Popat
Thank you panellists. You can take your seats. So, thank you, John, Frances, and Andrew for such a thoughtful and engaging conversation. I don’t know about the rest of you; I feel much more optimistic than when the lunch started, and feel good about the opportunities ahead for our great country. You made some complex issues clear, as you grounded today’s discussion in the realities that Canadian leaders are navigating right now. So, on behalf of the Empire Club in 2026, and on behalf of future members of this club who look back on this conversation, thank you for sharing your insights, your perspectives and time with us today. Can I have another round of applause for our panellists? And of course, thank you to our sponsors and of course, to all of you for joining us here today. I’d also like to take a moment to recognize the students and young leaders joining us here today who will be navigating the economy this year ahead and in the future. Their presence is made possible by our charitable arm of the Empire Club Foundation, and the generosity of our donors. This support enables us to invite future leaders to take part in today’s dialogue, and to empower them to turn knowledge into leadership that shines in communities, boardrooms, and national conversations shaping Canada’s future.
To stay connected, please subscribe to our newsletter by scanning the QR code on your tables, and we also have an exciting membership program. Please see our staff, as you exit today. I also hope that you’ll join us for two exciting upcoming events. On Wednesday, February the 4th, the Empire Club is very, very excited to honour the Toronto Blue Jays with the 2025 Nation Builder of the Year Award at a special ceremony in downtown Toronto. The award will be accepted by Mark Shapiro, President and CEO of the Toronto Blue Jays, followed by a fireside chat with Hazel May of Sportsnet. Together they will—[Applause] that’s right—they’ll explore how Canada’s team has built national pride, strong communities and lasting impact well beyond the ballpark. And perhaps, they’ll also answer some questions how they’re attracting so many great players to Toronto with all the capital they’ve earned from the World Series sessions last year.
Then on February the 5th, join us for a keynote address by the Governor of the Bank of Canada, Tiff Macklem. This will be his first major speech of 2026. It will be moderated by Rita Trichur, and this timely conversation will examine how the force is shaping Canada’s economy, and what they mean for monetary policy in 2026—and hopefully, he’ll be as upbeat as our panellists today.
Tickets for both events are now on sale. And as always, as a club of record, the Empire Club events are available to watch and listen to on our website, and the recording of today’s event will be available shortly. Thank you all for being a part of this important conversation. All the best in the year ahead, and we look forward to seeing you at future events. This meeting is now adjourned. Thank you.
