Technical recession? Really?

   By Guest Blogger Ryan Lewenza

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Last week, we received first quarter GDP for the Canadian economy, which showed a modest contraction of 0.1% on an annualized basis. This follows a 1% decline in the fourth quarter of last year.

By the standard definition of two consecutive quarters of negative growth, we are now in what is referred to as a technical recession, and this has sparked considerable debate among economists and politicians.

Pierre Poilievre and the Conservatives were quick to criticize Carney and the Liberals, but the situation is more nuanced than the headline suggests.

First, a 0.1% decline is essentially flat and not statistically meaningful. Looking beneath the surface, consumer spending remained positive, while the weakness came from government spending. There was a sharp pullback in defense related purchases during the quarter, even as Carney has been allocating more toward the military sector since becoming Prime Minister.

The bottom line is that the economy is stagnating, not collapsing. Growth is clearly weak, in part due to Trump s tariffs, but this is not a broad-based downturn. We are not falling off a cliff.

Contributions to Canada s GDP growth

Source: Statistics Canada, RBC Economics

Second, alongside the GDP release, we also received the May employment report, and it was very strong. The Canadian economy added 88,000 jobs in the month, far surpassing expectations of 10,000 and reversing the recent pattern of job losses. The unemployment rate also declined from 6.9% to 6.6%. This suggests the economy is not in dire straits and may in fact be stabilizing.

Canada monthly job numbers

Source: Trading Economics

Finally, recessions are officially determined by the C.D. Howe Institute s Business Cycle Council, which evaluates downturns through three lenses: duration, amplitude, and scope. They define a recession as a pronounced, persistent, and pervasive decline in aggregate economic activity. A 0.1% quarterly contraction does not meet that bar.

What we have instead is an economy that has essentially flatlined and is treading water, not one that is falling off a cliff. That is why there is a legitimate debate about whether this should be called a recession at all.

Looking ahead, I expect the Canadian economy to rebound modestly in the second quarter and through the rest of the year. Government and consumer spending should continue to grow, particularly if we see further strength in the labour market.

There are still areas of concern. Business investment is likely to remain weak given tariffs and ongoing uncertainty, and net trade will probably be muted. That said, consumer spending should help offset some of this softness, leading to modest improvement in overall economic growth as the year progresses.

The technical recession label is grabbing headlines, but it overstates the reality on the ground. Growth has stalled, but the economy is showing signs of resilience, particularly in the face of the tariffs. For now, this looks like a pause in growth rather than the start of a deeper contraction.

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This week we witnessed the first ever trillionaire following Elon Musk s SpaceX IPO. The company raised $75 billion, valuing it at roughly $1.75 trillion. To put that into perspective, the next largest IPOs were Saudi Aramco in 2019 at $29 billion and Alibaba in 2014 at $21 billion.

Looking at the fundamentals, revenues grew 33% year over year to $19 billion, but due to heavy expenses, the company is still not profitable.

At current levels, the stock is trading at very elevated valuations, with a price to sales ratio of 92. Compare that to Nvidia at 24x, Apple at 10x, and Alphabet at 11x. This is a stock priced for perfection, and in my view, it looks significantly overvalued given it could be years, if not decades, away from consistent profitability.

That said, the stock will likely see strong upside in the first few days of trading, as hype and momentum drive demand. But with valuations stretched and profitability still a distant goal, those gains could fade as fundamentals begin to matter. Invest accordingly.

Space X valuations

Source: Argus Research Company

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Investment Advisor, Private Client Group, of Raymond James Ltd.

Source: https://www.greaterfool.ca/2026/06/13/technical-recession-really/