Money talks

Key points

• Canadian household net worth hit a record high in Q2 of 2026, largely driven by gains in the equity market. 
• Recent spending growth has been propped up by market gains, savings, and borrowing. 
• Rising interest rates, upward-trending inflation, and the risk of a market correction threaten this spending, highlighting the need to shift Canada's growth engine toward investment and exports. 

November is Financial Literacy Month!  At ATB Economics, our goal is to provide insight on economic trends that inform financial decisions. Today, we discuss the role of household wealth in driving consumer spending in Canada, and why we think recent gains in consumer spending will be difficult to sustain.  

Unrealized gains

By one measure, Canadians have never been wealthier. According to Statistics Canada’s national balance sheet accounts, household net worth climbed 2.9% in the second quarter of 2026, reaching a record $19.1 trillion.

The driving force? Financial markets. Strong equity performance pushed household financial assets higher, with Canadians holding $1.24 in financial assets for every dollar of non-financial assets—the highest ratio since 2000.

But wealth isn’t distributed evenly and neither are the benefits of a rising stock market.

At the end of 2025, the wealthiest 20% of Canadian households held nearly two-thirds (65.7%) of total household net worth. The bottom 40% held just 3.0%, according to Statistics Canada.

Put differently, two Canadians can experience the same economy very differently. For someone with a sizable investment portfolio, rising equity markets can build wealth without an additional dollar earned. For someone whose income is largely absorbed by housing costs, groceries and other necessities, those market gains offer little immediate relief.

There is a “catch” to wealth and valuations propped up by equity gains: what the market gives, the market can take away.

Unlike physical assets or cash in the bank, stock market gains can be unrealized wealth. If equities experience a correction, that net worth can shrink rapidly. Meanwhile, the pressures on the other side of the household ledger—elevated borrowing costs, impending mortgage renewals, and rising inflation—are entirely realized.

For households banking on asset appreciation to outrun inflation, high financial market volatility represents a distinct vulnerability.

Can we keep spending?

This dynamic also casts the celebrated 'resilience' of the Canadian consumer in a much more fragile light. 

The latest Bank of Canada (BofC)  Monetary Policy Report highlights that consumption on a per person basis grew strongly–largely supported by earlier interest rate cuts and rising financial wealth.

At ATB Economics, we have raised concerns about the durability of the consumer for a few reasons:

1. Reliance on savings/borrowing for lower-income households. Outside of the top 20% of earners, growth in spending isn’t coming from income growth. Households are increasingly relying on savings, borrowing, and for some, leaning on rising portfolio values.

According to recent Boston Consulting Group estimates, between 2021 and 2025, income growth covered just 57 cents of every additional dollar spent by the middle 60% of Canadian earners. For the top 20%, income growth was sufficient to fully support increased spending.

2. Higher interest rates. The BofC hiked rates for the first time since 2023 and Government of Canada bond yields, which are the benchmark for longer-term debt like fixed rate mortgages, have been trending upwards since August of this year.

3. Inflation. Inflation continues to trend upward—driven by higher energy prices—and puts an additional strain on more discretionary consumer spending.

4. Vulnerability to stock market correction. Because consumption growth has been heavily sustained by a market-driven wealth effect rather than broad wage increases, an equity market pullback risks erasing the very unrealized gains that have been quietly propping up consumption.

5. Slower population growth. After a post COVID population boom, Canada is adjusting to a new normal that will weigh on overall consumer spending.  

In other words, the consumer hasn't thrown in the towel, but the factors that have buoyed resilient consumption historically are unlikely to be able to support the Canadian economy through this next leg of growth. As we’ve discussed, this is another reason to shift the growth engine towards investment through nation-building projects and growing Canada’s export capacity.

Answer to the previous trivia question: Movember is a portmanteau of "mo" (Australian slang for a moustache) and "November” and refers to the annual global charity event held every November where people grow moustaches to raise awareness and funds for men’s health issues.

Today’s trivia question: Who insures stocks in the stock market?