How prorogation will impact capital gains tax changes in Canada + MORE Jan 6th

The Canadian equity market will continue building on its strength from 2024 despite lingering political uncertainties, experts forecast. But investors should prepare for more volatility and be patient as the pace of gains is expected to be a bit slower.

There’s a strong mandate for the current bull market to continue in the new year despite tariff threats from the U.S. and political uncertainties in Canada, said Angelo Kourkafas, senior investment strategist at Edward Jones.

“When we take a step back and look at the foundation … it is ongoing economic growth,” Kourkafas said. “It is rising corporate profits and the outlook for lower interest rates at a gradual pace and all these things will remain in place for 2025.”

The S&P/TSX composite index hit record heights in 2024 and ended 18% higher for the year.

Kourkafas predicts the uptick will continue for another year “but likely, we are going to see volatility increase and the pace of gains slow.”

Tariffs and tech-stock overvaluation could pose threats

A few risks could overshadow the pace of growth of the Canadian index in 2025…

Justin Trudeau’s decision to step down and prorogue parliament will keep his government from implementing its proposed changes to capital gains for now, but Canadians might not be off the hook with tax collectors just yet.

The changes would raise the portion of capital gains on which companies pay tax to two-thirds from one-half. The policy would also apply to individuals with capital gains earnings above $250,000.

The changes were first floated in the government’s April budget, but later broken out from the rest of the fiscal plan in a notice of ways and means motion. That motion never got royal assent because Parliament stalled last year when the Tories began filibustering over the government’s green technology fund.

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As of January 1, 2025, Canada’s criminal interest rate officially reduced to 35% annual percentage rate (APR), and payday loan costs are now capped at $14 per $100 borrowed. On the surface, these changes are meant to make borrowing more affordable. However, they could have unintended consequences. While the lower costs to borrow might reduce the financial strain for some, there’s a risk these changes could potentially leave vulnerable Canadians with fewer loan options and may push those in need toward even riskier, unregulated credit options.

Here’s what the new rules mean for borrowers and lenders, and a look at better solutions to take control of your financial situation.

What is APR?
Short for annual percentage rate, an APR is the amount you pay per year to borrow money. An APR includes the total interest, plus any additional fees, closing costs and required insurance. So, it more accurately reflects the cost of borrowing than interest alone. 

Read the full definition of APR in the MoneySense Glossary of finance and investing terms…

Mortgage rate comparison tool

Customize the filters to compare rate types and terms.

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