Morning Markets for Monday, Jan. 12, 2026

Key Concepts

• Federal Reserve Independence: The principle that the Federal Reserve should operate without political interference, particularly from the Executive Branch.
• Monetary Policy: Actions undertaken by a central bank to manipulate the money supply and credit conditions to stimulate or restrain economic activity.
• Shrinkflation: The practice of reducing the size or quantity of a product while maintaining its price.
• Interprovincial Trade Barriers: Regulations and policies that hinder the free flow of goods and services between Canadian provinces.
• Yield Curve: A graphical representation of the relationship between interest rates and the time to maturity of debt securities.
• EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization – a measure of a company’s operating performance.
• Meg Seven: Refers to the seven largest US technology companies (Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta).

Market Overview & Political Interference with the Federal Reserve

The broadcast opened with significant developments concerning a potential conflict between the Trump administration and Federal Reserve Chair Jerome Powell. The administration has threatened to indict Powell over his testimony regarding a Fed building project, a move Powell views as political pressure to influence monetary policy. Powell stated, “No one, certainly not the Chair of the Federal Reserve, is above the law. But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure. Public service sometimes requires standing firm in the face of threats. I will continue to do the job the Senate confirmed me to do with integrity and a commitment to serving the American people.” Economists, like Ryan Young of the Competitive Enterprise Institute, warn that undermining the Fed’s independence could lead to higher inflation and instability, stating that markets “love stability more than anything else.” The potential for political interference is causing concern, with the US dollar falling – its biggest drop since the Christmas break – as investors seek safe haven assets like gold and silver.

Market Performance & Sector Analysis

Market performance was mixed. The TSX continued its surge, up 0.63% for the day, driven in part by strength in the materials sector (up 12.5% year-to-date). US markets were more volatile, with the S&P 500 and NASDAQ largely unchanged, while the Dow Jones was down 0.22%. Several companies experienced notable stock movements:

• Lululemon: Shares rose 2.15% following positive guidance for fourth-quarter sales exceeding $3.5 billion, fueled by strong holiday sales. However, Bruce Campbell of Stonecastle Investment Management doesn’t currently favour the stock, citing a lack of sustained revenue and earnings acceleration.
• Sunopta: Shares surged nearly 20% after issuing a full-year revenue forecast that beat expectations, projecting 13% growth.
• Energia: Recommended by Bruce Campbell, this company focuses on renewable natural gas, converting waste from facilities like Frito-Lay into energy. They recently turned EBITDA positive and are attracting attention.
• Freeport: Received a 40% price target boost from City analysts due to rising copper prices and ramping up production at its Grasberg mine in Indonesia.
• ExxonMobil: Shares declined after President Trump expressed dissatisfaction with the company’s reluctance to invest in Venezuela’s energy industry.
• Majestic Gold & Lithium Americas: Both saw significant gains, reflecting the broader trend of investors seeking safe haven assets and benefiting from rising commodity prices.

Economic & Industry Trends

Several economic and industry trends were highlighted:

• Restaurant Closures: A Dalhousie University study projects over 4000 restaurant closures in Canada this year, following 7000 in 2025, due to rising food prices, wages, and consumer financial pressures.
• Interprovincial Trade Barriers: CTV’s Paul Hollingsworth reported that interprovincial trade barriers contribute to higher grocery costs in Atlantic Canada. Sylvain Charlebois of Dalhousie University emphasized the need to address these barriers to reduce transportation costs and overall food prices.
• Shrinkflation: Consumers are experiencing shrinkflation, where product sizes are reduced while prices remain the same or increase.
• Rotation in Market Leadership: The dominance of the “Meg Seven” tech companies is showing signs of broadening, with the Russell 2000 index hitting a new high.
• Renewable Natural Gas: Energia’s business model, converting waste into renewable natural gas, is gaining traction as companies seek sustainable energy solutions.

Investment Strategies & Outlook

Bruce Campbell of Stonecastle Investment Management offered insights into investment strategies:

• Focus on Earnings & Revenue Acceleration: Campbell’s firm prioritizes companies demonstrating consistent growth in both revenue and earnings.
• Diversification: He advocates for diversifying portfolios beyond the US market, highlighting opportunities in Europe and Japan.
• Canadian Market Potential: Campbell believes Canada offers attractive investment opportunities, particularly in the materials and energy sectors, contingent on pipeline expansion and government support.
• Gold as a Safe Haven: He noted the increasing appeal of gold as a safe haven asset amid geopolitical and economic uncertainty.

Key Quotes

• Jerome Powell: “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
• Ryan Young: “Central bank independence is key to affordability, stable prices, America's international trade, all these things are very important.”
• Bruce Campbell: “Markets love stability more than anything else.”

Synthesis & Conclusion

The broadcast highlighted a period of heightened political and economic uncertainty. The potential for interference with the Federal Reserve is a major concern, impacting market sentiment and driving investors towards safe haven assets. While the TSX continues to perform well, driven by the materials sector, US markets are exhibiting more volatility. Investment strategies focused on earnings growth, diversification, and identifying opportunities in emerging sectors like renewable natural gas are recommended. The challenges facing the restaurant industry and the impact of interprovincial trade barriers underscore the need for policy solutions to address rising costs and support economic stability.