Morning Markets for Friday, Jan. 23, 2026

Key Concepts

• Retail Sales: Canadian retail sales increased 1.3% in November, driven by food & beverage and alcohol sales, but a flash estimate predicts a 0.5% decline in December.
• AI Chip Market: China is reportedly poised to approve imports of NVIDIA’s H100 AI chips, boosting NVIDIA, AMD, and Taiwan Semiconductor Manufacturing, while Intel struggles with supply and manufacturing transitions.
• Stagflation: Concerns are raised about potential stagflation in Canada due to high food inflation and stagnant economic growth.
• Precious Metals: Gold and silver are experiencing significant price increases, driven by geopolitical uncertainty and investor demand. Silver has surpassed $100/ounce.
• Intel’s Performance: Intel reported a weak outlook for Q1, causing a significant stock decline despite a strong 2025 performance.
• US-Canada Trade Relations: Tensions are rising with the US, highlighted by Commerce Secretary Lutnick’s criticism of Prime Minister Carney’s comments on economic coercion and the US revoking Canada’s invitation to a board.
• Small Cap Stocks: A potential opportunity exists in US small-cap stocks (IWM) due to undervaluation and potential outperformance after a 14-year underperformance period.
• Economic Diversification: Canada is exploring diversification of trade relationships beyond the US, but maintaining a strong US partnership remains crucial.

Market Overview & Economic Data (November/December 2025/2026)

• Canadian Retail Sales: Retail sales rose 1.3% in November, primarily due to increased spending on food, beverages, and alcohol (up 14.3% due to a previous liquor distribution disruption in BC). Core sales climbed 1.6%. However, a flash estimate predicts a 0.5% decrease in retail sales for December, potentially leading to a 0.2% decrease in Q4 2025. Online sales were down 2.8% in November, despite Black Friday.
• TSX Performance: The TSX is nearing a record high, currently up 0.4% and approaching 33,134.
• US Market Performance: Mixed performance in US markets: S&P 500 up 0.17%, Dow down 0.4%, and NASDAQ up 0.5%.
• Food Inflation: Canada has the highest food inflation in the G7, exceeding 7% year-over-year.
• US Economic Outlook: The US economy is projected to perform better than Canada’s.

Technology Sector Analysis

• NVIDIA & AI Chip Demand: China is reportedly preparing to allow orders for NVIDIA’s H100 AI chips, benefiting NVIDIA (up 1.6-3.25%), AMD, and Taiwan Semiconductor Manufacturing. This signals a potential formal approval of essential AI component imports.
• Intel’s Struggles: Intel’s stock is down over 14% due to a weak Q1 outlook, citing supply chain challenges and delays in transitioning to a new semiconductor manufacturing process. Despite a strong 2025 (stock rose nearly 50% due to investments from SoftBank, NVIDIA, and the US government), Intel is struggling to meet surging demand from AI data centers.
• Advanced Packaging: There's potential in Intel's advanced packaging capabilities, possibly becoming more significant in 2027.

Economic Commentary & Analysis

• Stagflation Concerns: Norman Levine (Brook Wagman Private Wealth Management) warns of potential stagflation in Canada, citing high food inflation (over 7%) and stagnant economic growth when excluding the alcohol sales boost. He contrasts this with the stronger US economy.
• K-Shaped Economy: Levine describes a “K-shaped economy” in Canada, where wealthier individuals and Boomers are doing well, while younger people struggle with job markets, rent, and food costs.
• Retail Sales Deception: Levine emphasizes that the retail sales increase was “deceptive” as it was primarily driven by alcohol sales, not broad consumer spending.
• Interest Rate Outlook (C.D. Howe Institute): The C.D. Howe Institute recommends the Bank of Canada maintain its overnight rate at 2.25%, citing a path towards 2% inflation and a softening economy. They see limited justification for rate cuts.
• US Election Impact: The US election in November is identified as a potential disruptor, with outcomes potentially impacting global markets and Canada-US relations.

Investment Strategies & Precious Metals

• Precious Metals Rally: Gold is approaching $5000/ounce, and silver has surpassed $100/ounce, driven by geopolitical uncertainty and central bank demand.
• Silver Volatility: Kenneth Hoffman (Red Cloud Securities) cautions about silver’s volatility, noting its industrial uses and potential for substitution.
• Franco-Nevada (FNV): Recommended as a safer way to invest in precious metals, as it’s a royalty company with diversified production sources, mitigating risks associated with individual mines.
• Small-Cap Stocks (IWM): Advocated for investment in US small-cap stocks (IWM) due to undervaluation and potential outperformance after a 14-year underperformance period. Lower interest rates and a stronger US economy are seen as catalysts.

International Trade & Geopolitical Considerations

• US-Canada Trade Tensions: US Commerce Secretary Howard Lutnick criticized Prime Minister Carney’s comments on economic coercion, warning that these words will be remembered during the upcoming trade review. The US revoked Canada’s invitation to join a board.
• Economic Diversification: Canada is pursuing economic diversification, but maintaining a strong relationship with the US remains crucial.
• Middle Power Cooperation: Prime Minister Carney advocated for middle powers to band together against economic coercion from larger nations.
• China’s EV Market: China is attempting to gain access to the Canadian EV market, but faces opposition from Ontario Premier Doug Ford, who fears job losses in the auto sector.

Notable Quotes

• Norman Levine: “It’s a very bad number other than that [retail sales]. It shows that the Canadian economy, especially compared to the US economy, is actually stagnant with signs of inflation, which I don't want to use the word too casually, but is it the first signs of stagflation?”
• Howard Lutnick: “Give me a break. They have the second best deal in the world, and all I got to do is listen to this guy whine and complain.”
• Kenneth Hoffman: “Gold is truly money. Silver has a lot of industrial uses and particularly in solar, and you could see silver start to price itself out of the solar industry.”

Synthesis & Conclusion

The Canadian economy is facing headwinds, including high food inflation, stagnant growth, and rising geopolitical tensions. While retail sales saw a temporary boost in November, a decline is expected in December. Investment strategies are shifting towards precious metals (gold and silver) and potentially US small-cap stocks. The relationship with the US remains critical, but Canada is exploring diversification. The Bank of Canada is expected to hold steady on interest rates for now, but the situation remains fluid and dependent on global economic developments and the outcome of the US election. The overall outlook suggests a period of uncertainty and the need for careful economic management and strategic diversification.