3 Things We're Watching: Week of May 7

1. Canada’s sovereign wealth fund

Prime Minister Mark Carney is moving forward on the pitch for Canadian strategic autonomy he laid out earlier this year at Davos.¹ On April 27, he unveiled the Canada Strong Fund,² seeded with an initial $25 billion from the federal government and earmarked for nation-building projects like ports, mines, and trade and energy initiatives.³

A sovereign wealth fund pools public money, often surplus government revenues or reserves, and invests it for long-term returns in stocks, bonds, real estate and infrastructure.⁴ Norway, for example, runs the world’s largest fund, with assets that topped $3 trillion at the end of 2025, fuelled largely by oil and gas revenues. Canada’s fund is modest by comparison, and it’s still unclear how it will be funded, given that we run a deficit, not a surplus. However, Carney described it as a “national savings and investment account” designed to grow wealth for future generations,⁵ and the Department of Finance has said that investors’ contributions will be protected.⁶

What we’re watching: The Government’s Spring Economic Update⁷ lays out more details of the fund, and mentions that regular Canadians will have the chance to invest in it. How exactly, though, is still unclear. It all comes as Canada continues to hold one of the strongest credit ratings in the G7⁸ and, at a projected $66.9 billion deficit for the 2025-2026 fiscal year,⁹ one of the smallest deficits relative to the size of its economy among most peers.¹⁰ Will Canadians buy in?

2. Where are the jobs?

Landing a first job in one’s teens or 20s has long been a rite of passage, as well as an introduction to the working world. But for many young Canadians, finding work has become more challenging. The unemployment rate among 15- to 24-year-olds reached 14.3 per cent in April, more than double the national average.¹¹

New university grads are struggling, too. Unemployment among 20- to 29-year-olds with a bachelor’s degree or higher hit 8.1 per cent in September, up from 6.4 per cent three years earlier.¹² The picture isn’t much brighter further up the ladder. Rogers recently offered a buyout¹³ to about 10,000 employees and Meta is considering laying off 20 percent or more of its workforce¹⁴ – the latter of which is part of a broader trend of big tech trimming headcount to free up cash for AI spending. Add tariffs and global economic uncertainty¹⁵ to the mix, and many employers are holding off on hiring while they wait to see how things unfold. However, analysts at RBC Economics note that the unemployment rate across Canada has fallen modestly in recent months, and they anticipate it will drop further by the end of 2026.¹⁶

What we’re watching: A slack labour market is worrisome, no doubt, but the bigger concern may be what happens to young job seekers if the work just isn’t there. Research shows that a tough start to a career can lead to “labour market scarring,” where reduced hours and wages compound over time into lower lifetime earnings, fewer job opportunities and slower career progression.¹⁷ For a generation already squeezed by housing and the cost of living, how much can they afford to fall behind?

3. Coffee’s hot streak

Don’t underestimate the power of cold foam to break a two-year slump. Starbucks reported a “milestone” quarter in its latest earnings report, with same-store sales up 7.1 per cent and traffic rising across all customer groups.¹⁸ This includes Gen Z, a crowd many had thought was drifting away from coffee shops.¹⁹ Cold foam, a fluffy layer of cold-frothed milk poured over iced drinks, is now the chain’s top-selling modifier,²⁰ with sales up 40 per cent due in part to the virality of flavours like pistachio and matcha, and a new protein-infused version.

Globally, the company’s 10 largest markets all posted positive same-store sales, a first in nine quarters, and Starbucks raised its expectations for sales and earnings this year. The turnaround comes following CEO Brian Niccol’s “Back to Starbucks” plan,²¹ which leans on personal touches like free refills and baristas writing personal messages on cups,²² all part of an effort to win customers back from rivals like Dutch Bros and 7 Brew.²³

At Tim Horton’s, the coffee chain with the most locations in Canada,²⁴ same-store sales were up 2.9% in the fourth quarter of 2025.²⁵ Cold espresso beverages – including trendy protein lattes – were especially popular, surging 8.6% despite the chilly weather to make up almost 27 per cent of beverage sales.

What we’re watching: The strong sales come even as coffee prices keep climbing,²⁶ along with food and drink prices in general.²⁷ Is this the “lipstick effect” at work? That’s when people facing tighter budgets cut back on big purchases before they give up their little luxuries.²⁸ If so, cold foam sales could prove to be one of the more telling signals of where consumer spending is headed.