may 2025

With the federal election behind us, Canada now has a government with a mandate to lead and tackle the challenges ahead for the country. From Donald Trump’s trade war to the housing crisis, to the rising cost of living and other issues facing the country, it’s certainly a long list.

Since the new government is just short of a majority, it will need some help from opposition parties to pass legislation. But given the instability across the globe – and particularly the tension in Canada-US relations – another vote seems unlikely anytime soon.

With that in mind, here are four big-picture items for investors to watch as the dust settles – including government spending to real estate and more. And then from that perspective, we’ll delve into four financial strategies that make sense now.

Government Spending: Minority could mean higher deficits

Let’s start with government spending, which could rise more than would be the case if a majority government were taking the reins in Ottawa.

That’s because the governing party has to appeal to at least one opposition party to pass legislation, and those parties can place expensive conditions on their support. For investors, that could eventually mean higher taxes, as the current (or a future) government moves to address deficits.

As we move forward, it makes sense to watch what the opposition is proposing, since at least some of these ideas stand a chance of becoming reality.

Economic Growth: All parties agree – it’s time to get shovels in the ground

That said, there is lots of common ground, both between the federal Liberals and Conservatives and the federal Liberals and the current NDP government in BC.

For example, Prime Minister Carney has pledged to fast-track approvals  for resource projects. The province, for its part, has released a shortlist of 18 priority projects . Those include gold, silver and copper operations, as well as natural gas pipelines, power-transmission lines and wind farms.

The speed at which these projects move ahead will, of course, be critical. (See below for some sectors that could benefit from an infrastructure buildout.)

Real Estate: New policies, lower rates could ease prices – but buyers are wary

Housing and trade seem like separate issues, but they’re quite integral to each other. Here’s how.

In the Lower Mainland, home sales have slowed and prices have slipped to $1,146,698 on average in March from $1,198,858 a year earlier, according to the British Columbia Real Estate Association.

That’s even with a Bank of Canada rate cut, something that would normally entice buyers. But that doesn’t seem to be happening at the rate it did in the past. Part of the reason likely goes back to trade, with tariffs and other economic worries keeping buyers cautious.

Meantime, the federal Liberals have promised a basket of policies aimed at building more homes and bringing down prices. A major proposal is a new government entity called Build Canada Homes, which will act as a developer itself, seeded with about $35 billion in government funds to finance private developers and homebuilders.

More homes will help, of course, but changing policies and actually getting construction started will take time – perhaps beyond the next election (especially possible with a minority government). For now, prospective buyers will have to wait and see how these efforts progress

If you're thinking of shopping for a new home in the next while,  you could benefit from today’s lower rates, greater selection and lower prices. If you are considering a purchase, check with your financial advisor to look over your options – including how you could be preapproved for a competitive mortgage rate. 

Household Budgets: Middle-class tax cut could help manage food costs 

Finally, on the tax front, the federal government has proposed a tax cut for the middle class of up to $825 for a two-income family.

That roughly lines up with the $800 increase a family of four will see in their grocery bill in 2025, according to the yearly Food Price Report. While that’s not a big cut, it seems the government’s aim is to help offset those rising grocery bills.

may 2025

Four Moves to Position Your Portfolio for the New Government

Now that we’ve covered some of the main issues, let’s look at some potential moves for investors to consider as the new government settles in. 

1. Make the most of these tax shelters

Now is a great time to make sure you’re getting full value from tax-saving tools like the tax-free savings account (TFSA), registered retirement savings plan (RRSP) and first home savings account (FHSA).

The FHSA is the newest of these, so it warrants a bit of extra attention. You can contribute up to $8,000 to these accounts yearly, to a lifetime maximum of $40,000, with room carrying forward . These contributions are tax-deductible, your money grows tax-free, and you can also withdraw it with no tax.

What are some good options to hold in an FHSA? If you’re planning to buy a home in the near term, investments that guarantee your principal should be top priorities. A high-interest savings account may make sense, but with the Bank of Canada expected to cut rates further , the interest rate on these could fade over time.

Another option? A market-linked term deposit, where your principal is guaranteed but returns are tied to a stock index . This gives you some exposure to the market’s growth without the risk of loss.

Your financial advisor can give you a full review of your TFSAs, RRSPs and FHSAs so you can be sure you’re not missing out on the many tax benefits they offer.

2. Look to these sectors as infrastructure spending rises

One sector that could benefit from higher infrastructure spending – especially the new government’s plan to build an east-west electricity grid – is utility stocks.  

Other potential infrastructure winners include railways, thanks to upgraded ports and moves to diversify trade. Also, proposals to export more Canadian energy could benefit pipeline firms and oil and gas producers. But we do need to bear in mind that these projects will take years to build.

3. Young investors: Resist the urge to time the market

Young investors have a big advantage: a timeline that will outlast any government. That’s why, for them, it’s best to stick with their financial plans, especially if the invested funds are meant for a goal that’s still far in the future.

Research on investing consistently shows that those who pull back or pull out earn less than those who stayed invested.  The takeaway? Staying invested – even during periods of uncertainty – can be one of the best financial decisions you make.  

Your financial advisor can help you build or update strategies according to your needs and help keep you on track toward your goals – and avoid knee-jerk moves that could prove costly. Make an appointment today.

4. Retirees: Focus on liquidity

Finally, for retirees, the latest shift in the political winds are a reminder to keep part of your portfolio in safe, liquid assets – like cash – that you can access during market turbulence.

This way you won’t be forced to sell stocks at low prices to get the money you need to fund your lifestyle and meet your minimum registered retirement income fund (RRIF) withdrawals. Your financial advisor can work with you to make sure you have the free cash you need during uncertain times like these. Get in touch for further details.

Financial strategies that work – no matter what the headlines say

Governments – and markets – change constantly. Through it all, your advisor is there to help you make smart financial decisions and keep moving toward your goals. Book your appointment today. 
 

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Kelly Gares
Investment Advisor

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