Massive Jump in Defense Spending Will Accelerate Inflation, Fiscal Stress, and Monetary Supply Growth

CALGARY, ALBERTA, CANADA, July 14, 2025 /EINPresswire.com/ -- Omnigence Asset Management fears that Canada’s pledge to increase defences pending to 5% of GDP by 2035 could trigger persistent inflation, larger fiscal deficits, and ultimately monetization of public debt. In a recent market commentary, Omnigence analyses the impact of annual defence outlays rising from C$41 billion to over C$150 billion. The firm believes this historic fiscal expansion could have profound implications for portfolio construction, capital preservation, and long-term investor strategy.

“This is not just a defense policy—it’s a macroeconomic turning point,” said Stephen Johnston, Managing Director at Omnigence. “When a G7 country shifts 3.5% of GDP into defense spending without offsetting cuts or tax hikes, the result is structurally higher deficits, pressure on the central bank to accommodate, and a lasting inflationary regime.”

Structural Economic Risks Emerging
Omnigence sees multiple transmission channels through which the defence buildup could impact inflation and market dynamics:

• Material inflation: Massive procurement cycles across infrastructure, critical minerals, telecom, and energy will collide with existing supply constraints—fueling cost-push inflation across sectors.
• Monetary accommodation: With debt issuance likely to surge, the central bank may face indirect pressure to cap bond yields—leading to real-money supply expansion and inflation entrenchment.
• Credit ratings and risk premia: Persistent deficits and rising debt-to-GDP could trigger a sovereign downgrade, raising borrowing costs and pressuring equity valuations.

Johnston added. “We could be approaching a scenario where inflation isn’t cyclical—it’s built into the policy." In light of these macro risks, Omnigence advocates a reallocation toward structurally defensive, income-producing alternatives. Investments that offer real-asset exposure, inflation hedging benefits, and durable real returns—precisely the characteristics investors need in an environment where fiscal stability may not be able to be taken for granted.

About Omnigence Asset Management:
Omnigence Asset Management is a Canadian alternative investment platform specializing in farmland, operational private equity, and secondaries. With offices in Toronto and Calgary, the firm is committed to helping investors preserve purchasing power and build durable portfolios in a structurally challenging macro environment. Omnigence has grown to over CA$1 billion in platform assets by focusing on what it describes as the neglected middle —investment opportunities that are too small or too operationally complex for large institutions and mainstream alternative managers under pressure to deploy billions in capital.

DISCLAIMER: Our reports, including this paper, express our opinions which have been based, in part, upon generally available public information and research as well as upon inferences and deductions made through our due diligence, research and analytical process. The information contained in this paper includes information from, or data derived from, public third party sources including industry publications, reports and research papers. Although this third-party information and data is believed to be reliable, neither Omnigence Asset Management nor its agents (collectively “Omnigence”) have independently verified the accuracy, currency or completeness of any of the information and data contained in this paper which is derived from such third party sources and, therefore, there is no assurance or guarantee as to the accuracy or completeness of such included information and data. Omnigence and its agents hereby disclaim any liability whatsoever in respect of any third-party information or data, and the results derived from our utilization of that data in our analysis. While we have a good-faith belief in the accuracy of what we write, all such information is presented “as is,” without warranty of any kind, whether express or implied. The use made of the information and conclusions set forth in this paper is solely at the risk of the user of this information. This paper is intended only as general information presented for the convenience of the reader and should not in any way be construed as investment or other advice whatsoever. Omnigence is not registered as an investment dealer or advisor in any jurisdiction and this report does not represent investment advice of any kind. The reader should seek the advice of relevant professionals (including a registered investment professional) before making any investment decisions. The opinions and views expressed in this paper are subject to change or modification without notice, and Omnigence does not undertake to update or supplement this or any other of its reports or papers as a result of a change in opinion stated herein or otherwise.

Matt Barr
Omnigence Asset Management
+1 587-393-0893
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