Slower growth is the new normal
While the exact trajectory of global growth is uncertain, the direction is clear. Gramatovich frames it candidly: “The broader economic picture points in one direction. Trade wars and macroeconomic uncertainty are a net negative for businesses, for margins, for consumer spending, and this is conducive to a much lower growth backdrop going forward. This touches every borrower and every industry in different ways but it feels like this was the catalyst for markets and valuations to begin to reprice.”
That uncertainty is having direct consequences on the ground. Hiring decisions are delayed, capital expenditures are cut, and the prospect of layoffs looms larger as the year progresses. “Businesses frankly just can’t plan,” Gramatovich continues. “That affects investment decisions and consumer sentiment. Really, it’s about quantifying how negative the outlook is. I think that’s where the market is sitting right now.”
While equity investors navigate shifting sand and the need to get so many variables correct, lenders at the top of the capital structure benefit from predictability of interest income and a margin of safety. Invico’s strategy does not depend on an optimistic economic scenario, but rather on the sustainability of free cash flows and asset coverage in a wide range of conditions.
Canada and the U.S.: A widening divide
The economic fault line between Canada and the U.S. has only deepened in 2025. While both economies face challenges, Canada’s structural weaknesses are increasingly exposed. An overleveraged consumer, rising unemployment, and an erosion of business investment are converging to create a fragile economic environment and a weaker Canadian dollar. Gramatovich doesn’t mince words: “Canada doesn’t have a ton of negotiating leverage when the economy relies on a single trading partner. Companies and capital continue to move south to access a better economic backdrop and where capital is treated more favourably. Unfortunately for the country, that capital doesn’t come back quickly… even with broad policy changes in Canada,” which Gramatovich is hopeful for.
The Canadian economy, already slowing dramatically, continues to face headwinds and an increasingly aggressive need for interest rate cuts by the Bank of Canada. By contrast, the U.S. economy remains resilient, even as economic growth looks to be slowing. Base interest rates are expected to remain elevated relative to the past 15 years, providing a solid foundation for USD-denominated floating rate loan investments tied to those base rates.