Posthaste: Canadians’ biggest source of wealth is losing ground and that’s dragging down the economy

For all the challenges Canada’s economy has faced in recent years, the Canadian consumer has remained “resilient” in adversity.

“Consumer confidence surveys have rarely looked worse. Wages for many workers are barely keeping pace with prices. And yet spending keeps climbing on both sides of the border,” said Helen Lao, an economist at CIBC Capital Markets in a recent report.

The explanation for this is no mystery, she said, it’s “sitting in household balance sheets.”

Household wealth in both Canada and the United States hit record highs in the first quarter of 2026, topping $183 trillion in the U.S. and $18.6 trillion here.

“In both countries, rising wealth has been quietly doing the work that stagnant wages and shaky confidence can’t,” said Lao.

But for how long? The fastest growing source of that wealth over recent years has been equities or the stock market.

Equities made up about 23 per cent of household assets in the U.S. in 2010. By the middle of that decade stocks had surpassed real estate and today their share has shot to 35 per cent, the largest component of total household wealth in America.

In Canada equities as a share of household wealth has risen from 26 per cent in 2010 to 32 per cent in the first quarter of 2026, a six per cent increase.

For Canadian households, real estate remains the biggest share of wealth, but it is losing ground. In 2012 it peaked at 52% but has steadily declined to 46 per cent in early 2026 as home prices fell.

How this all affects consumer spending and the economy involves something economists call the wealth effect.

“When portfolios and asset prices swell, people spend more of their income and save less of it — the textbook “wealth effect” on consumption,” said Lao.

CIBC calculates that the equities wealth effect will account for 30 per cent of real consumption growth in the United States this year, almost double the 18 per cent in 2024.

In Canada the equities wealth effect has risen from 18 per cent of consumption growth in 2024 to an estimated 35 per cent in 2026.

The same, however, can’t be said for real estate, where falling home prices have been eroding the wealth.

“In contrast to equities, real housing wealth levels have turned south in both the U.S. and Canada, and are thereby cutting into consumer activity,” said Lao.

Especially in Canada — not only does real estate comprise a bigger share of Canadians’ wealth, its housing market has been harder hit than America’s, pushing the real estate wealth effect into the negative.

“In other words, real estate wealth is expected to be a significant drag on real consumption growth for Canada in 2026,” said Lao.

Overall, the wealth effect is expected to be a tailwind for spending growth in the United States this year, and a headwind for Canada.

Still, CIBC warns that wealth effects are weakening in both countries as slower home price growth reduces real estate wealth.

“As a result, the wealth effect is likely to provide less support for U.S. consumption in upcoming quarters, and remain a headwind for consumer spending in Canada,” said Lao.

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We talk a lot about Canada’s exports to the United States, but what about what the U.S. sells to Canada?

The average Canadian tariff rate on imports from the U.S. is about 1.5 per cent, according to Bank of Canada estimates — far lower than the 5 per cent on Canadian goods going the other way.

What’s notable, says BMO Capital Markets chief economist Douglas Porter, is that even with the lower tariff rate U.S. exports to Canada have dropped about 5 per cent in the past 18 months.

The share of U.S. exports coming into Canada has fallen to under 14 per cent this year, down from 18 per cent in 2024 and 22 per cent when NAFTA was signed.

“While that share had been falling fairly steadily in the prior 15 years, it has broken notably lower since the start of 2025,” said Porter.

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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com .

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