Despite a positive outlook on the overall macroeconomic trends, many Canadian investors are concerned about the possibility of a recession in the next 12 months, according to the latest BMO investment survey. Additionally, with higher values on tax-free savings accounts (TFSA), many respondents reported seeking more financial advice.
"It was a good year for many investors with the two main asset classes, stocks and bonds both performing well in 2024, likely helping to increase account values for many Canadians," Brent Joyce, BMO Private Counsel’s chief investment strategist and managing director, said in a statement.
"While economic headwinds, including the prospect of tariffs may be a concern for Canadian households, we still see room for the major markets to continue making gains in 2025. For investors, it’s important to remember, the Canadian stock market is not the Canadian economy, and it is often the case that markets climb a wall of worry."
Almost half (48%) believe the economy will weaken over the next 12 months, while only 19% expect the economy to improve.
Canadians’ economic outlook
Elsewhere in the survey, a majority (63%) of respondents expressed concern about the potential for a recession in the next 12 months, while only 28% were not concerned about a deeper economic decline.
Rising prices and the cost of living continue to be top of mind for Canadians, with over two-thirds (67%) of Canadians indicating inflation is having a negative impact on their current financial situation. Canadians are also expressing concerns about rising prices in the future, with 61% saying inflation is currently high and they expect prices to continue to increase.
The survey quantifies how much extra Canadians are spending on basic living expenses due to inflationary forces, and found:
- 44% say they are spending an extra $100-$300 a month
- 38% say they are spending over $300 a month extra
"While the trade concerns are front and centre for many Canadians and should be taken seriously, global economic growth is expected to continue and we expect underlying Canadian economic growth to improve in 2025, barring serious and sustained tariff action," Robert Kavcic, senior economist, BMO capital markets, said in a statement.
"On the inflation front, recent data also indicates price growth has stabilized around the Bank of Canada’s target. Canadians can expect the Bank of Canada to continue to reduce interest rates modestly further in 2025."
The TFSA’s record highs
Canadians’ TFSA values are now sitting at just under $44,987, an increase of 8% over last year, according to the survey results. However, respondents also indicated they are planning to contribute an average of $6,499 to their TFSA this year, which is a slight drop from $6,606 last year and below the high-water mark of $7,434 set in 2022.
Boomers hold a significant lead over younger generations for their average TFSA account balance at $72,211. Gen X was $47,210, Millennials at $32,204 and Gen Z at $13,779.
As well, 56% of respondents say it is more important to seek professional financial advice during the current market conditions, while only 8% believe it is less important.
Almost nine-in-ten (89%) believe their advisor is helping them meet their financial goals, which is an increase of seven percentage points over last year’s survey.
Survey methodology
This study was conducted by Pollara with an online sample of 1,500 adult Canadians aged 18 years and older from Nov. 8 to 18, 2024.
Sources
1. BMO News Releases: BMO Investment Survey: Concerns About the Economy Emerge, Despite Rising TFSA Values (Jan 20, 2025)
This article Sound the alarm: Half of Canadian investors think economy will weaken over the next 12 months, recession looming
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
