Welcome back for another edition of the ETF Insights newsletter.
Every year, Canadians watch new federal budgets drop and have the same reaction:
Here we go again. More spending, more borrowing, more promises.
And yes, there is plenty to criticize. Budgets rarely satisfy anyone. But here’s the reality:
Arguing about government spending doesn’t change government spending. Those dollars are going to be deployed whether we like it or not.
So as investors, we have two choices. We can complain about the fiscal trajectory, or we can pay attention to where the money is going and take advantage of it with our portfolios. In this particular budget, there are industries that are expected to receive a surplus of cash inflows in the form of projects and government grants.
Infrastructure firms, utilities, materials companies, clean-energy developers, industrial suppliers. These businesses didn’t complain about the budget. Because they’re going to get a ton of contracts from it.
This newsletter is about looking beyond the noise and focusing on where Budget 2025 creates real, investable opportunity through ETFs, and where some hidden traps might be.
Don’t get the wrong idea though. Investments based on this 2025 budget won’t see returns over the next 3 months, 6 months, or even a year. Government spending is spread out over the long-term. If you’re a long-term, patient investor, there is a solid opportunity here.
The Federal Budget is a Blueprint for Spending, Stimulus, and Structural Shifts
There was a notable shift here regarding the Federal budget in 2025. It leans toward capital investment instead of routine operations spending. The government plans to dump a ton of money into infrastructure, housing, and defence.
That shift pushes the federal deficit to about $78 billion for 2025–26. Canada’s debt trajectory remains elevated. It’s manageable, but still higher than before the pandemic.
The spending priorities are clear: Infrastructure: major transportation and energy corridors. Housing: efforts to try and boost supply. Productivity & Clean Economy: funding for innovation, advanced manufacturing, and clean power projects. Defence: renewed commitments to continental and cyber security. In this newsletter, I’ll be focusing on all of these except defense.
If you look to the chart below, you can get an idea of how aggressive the government wants to be with infrastructure spending.
This does not include all of the spending. This is only the government spending in regards to grants and incentives.
When we look to the chart below of complete spending, we can see that the public/private markets are expected to fuel over $300B+ in spending.
Infrastructure and Industrial ETFs Set to Benefit
Ottawa plans to direct most of its major funding to transportation networks, utilities, and housing through its infrastructure investment plans. This kind of capital spending feeds directly into construction, engineering, and logistics firms. Industrial firms are set to benefit too. The government’s new “Buy Canadian” approach and targeted manufacturing credits are designed to spur large-scale equipment and clean energy investment. So, which is an ETF you can utilize to take advantage of this? In my opinion, one of the better funds in the country is the iShares Global Infrastructure Index ETF (CIF.TO).
Now, you might be thinking “I thought this was a newsletter on how to get Canadian exposure. This is a global fund!”
What I would say to that is this fund still has plenty of Canadian exposure (nearly 40%) and contains some of the best infrastructure plays in the country. In fact, 3 of the top 4 holdings are Canadian. Capital Power, Stantec, and Atco.
The upside here is large but not guaranteed. Remember, a lot of the budget is incentives/grants from governments to private companies. Private capital ultimately has to follow public capital in order for all of this infrastructure budget to be spent. In this case, there needs to be confidence in the Canadian economy for private companies to invest.
That said, because this fund is only around 40%~ Canadian, you are sheltered from this to some degree, and then benefit if the environment proves to be profitable enough for corporations to spend big money in Canada.
The risk-reward ratio here over the long-term is pretty solid in my opinion.
Lets Say We Want To Go Aggressive on Canadian Infrastructure
When investors think about benefiting from Canada’s infrastructure buildout, they often go straight to global infrastructure ETFs or utilities. It was certainly the first thing I thought of, which is why I included the global infrastructure ETF first.
But, if you are bullish on Canada only, one of the most overlooked ways to capture this theme is through ZIN.TO, the BMO Equal Weight Industrials Index ETF.
ZIN offers something most infrastructure-themed ETFs don’t: pure exposure to the Canadian economy.
These are the companies that actually design, engineer, manufacture, transport, and service the infrastructure buildout across the country.
While something like CIF does cover infrastructure, it also broadens out to utilities etc. ZIN is more so the “picks and shovels.” We’re talking transformers with Hammond, heavy equipment with Finning. Roadway and nuclear power construction with Aecon, etc.
ZIN spreads exposure across the entire industrial ecosystem.
Budget 2025 reinforces domestic manufacturing, and industrial self-sufficiency. If Canada increasingly sources materials, equipment, and engineering domestically, the beneficiaries are exactly the types of companies found inside ZIN.
Clean Energy Gets a Boost
The new clean electricity investment tax credit changes the tone for many clean energy producers, which have not had a good 3-4 years post-pandemic.
It’s not game changing at only 15%, but it opens the door for larger projects that connect hydro, wind, and solar. I see that as a strong signal that Ottawa wants utilities and private developers to take grid expansion seriously. Clean energy and renewable manufacturing firms stand to benefit most. If we look to the demand that artificial intelligence is expected to suck up in regards to electricity, it’s almost a no brainer we need to expand our grid and we need to expand it fast.
There is no hard fast amount the government has allocated to utility and grid expansion. However, they mention they’re going to:
“Designate and fast-track transmission and energy-infrastructure projects “in the national interest””
Which, if you read between the lines, means they’re going to be spending a lot of money to expand infrastructure in order to generate more power.
My top option in this area? The BMO Equal Weight Utilities Index ETF (ZUT.TO).
This fund focuses specifically on Canadian utilities. However, it has a unique spin to it as well. There are plenty of other utility funds here in Canada, but almost none of them have the renewable exposure of ZUT.
Not only does Canada want to expand the grid and capacity, but they want to do it with as little emissions as possible. This is where players like Brookfield Renewables, a prominent holding in ZUT, come into play.
The push toward nationwide transmission could make grid operators and renewable manufacturers central to Canada’s next industrial cycle. Again, this is a slow moving thesis. Don’t expect returns next month. However, it’s durable, and there are a lot of long-term tailwinds.
Can Real Estate ETFs Capture the Upside From An Affordable Housing Push?
The 2025 federal budget’s housing plan puts the spotlight on affordability, with the new Build Canada Homes agency leading efforts to boost multi-unit housing and expand the rental market.
Canadian housing prices are getting, to put it bluntly, ridiculous. The government needs to do something about affordability, or they risk an entire generation of being priced out of the market and exposed to sky-high costs of living.
For investors, that raises the obvious question.
Can real estate ETFs focused on housing and development turn this policy focus into real returns?
Residential REITs have performed exceptionally bad since the pandemic.
This is an area of the market that plenty are believing could be helped by the budget. But, I believe the opposite will occur. I think residential REITs will struggle amidst a concentrated effort to build houses faster.
And here is my math on this: More supply settles demand. When demand settles, prices either stabilize or they fall. Because many of these REITs trade at a multiple of the value of their properties, this could put pressure on them.
I’m not saying residential REITs will get hammered price wise. I just feel there is a possibility they will underperform the broader indexes. The government’s main goal is to make housing more affordable with this current budget. These REITs benefit largely when housing is not affordable. Why?
Higher prices = higher asset values. Higher rents = higher distributions to shareholders.
That said, there is a fine line here. If construction bottlenecks ease, housing supply and affordability could normalize instead of declining. In this situation, ETFs with more residential weight might quietly gain.
However, I have a feeling the government is going to get aggressive in this regard, and not just settle for average.
Wrapping it up
The 2025 budget is going to spark a lot of debate in political circles. But as investors, we’re playing a different game.
We don’t need to agree with every decision, and we don’t need to love the deficit projections. What matters is understanding where the capital is flowing and positioning ourselves in front of it.
Infrastructure, industrials, utilities, and clean energy all stand to benefit from a multiyear investment cycle. Not instantly, and not without risk, but in a slow, methodical way that often rewards patient shareholders far more than short-term traders.
When the federal government targets an entire sector, the ripple effects can last a long time.
ETFs like CIF, ZIN, and ZUT give investors diversified access to the exact businesses that will be asked to build, expand, and modernize Canada over the coming years.
None of them rely on a single contract, a single project, or a single political outcome. They simply participate in the broad trend of rising capital investment. A trend this budget pretty much makes unavoidable.
There will be bumps. Private capital needs to follow public capital. Execution won’t always be smooth. Housing policy may create winners and losers.
But the overarching direction of this budget is clear: Canada is entering a period of heavy industrial and infrastructural investment, and the companies tied to that expansion have tailwinds behind them.
