Morning Markets for Monday, Jan. 26, 2026

Key Concepts

• GST Credit Increase: A 25% increase over five years, plus a one-time payment equivalent to 50% of the current credit, aimed at addressing affordability concerns, particularly grocery costs.
• Allied Gold Acquisition: Zijing Mining Group (China) acquiring Allied Gold for $5.5 billion CAD ($44/share), adding three African assets to its portfolio.
• Canada-China Strategic Partnership: A new agreement focusing on trade diversification and easing Chinese tariffs on Canadian canola, not aimed at the US.
• TSX & US Market Performance: Both Canadian (TSX) and US markets (S&P 500, Dow, NASDAQ) experiencing positive gains.
• Federal Reserve Policy: Anticipation of a pause in interest rate cuts, with potential for 2-3 cuts in 2026.
• Equities & Investment Strategy: Preference for equities, particularly global equities, with a shift towards value stocks and a focus on the AI theme in emerging markets.
• Supply Chain Resilience: Focus on improving supply chains to address inflation and rising grocery prices.
• Winter Storm Impact: Severe winter storm impacting travel and infrastructure across Eastern Canada and the US.
• Canadian Craft Beer Industry: Challenges faced by the industry due to pandemic, inflation, and changing consumer behaviour.
• Critical Minerals & Arctic Development: The untapped potential of Canada’s Arctic region and the need for investment in critical mineral production.

Market Update: Morning Markets – February 26, 2024

I. Economic & Political Developments

Prime Minister Mark Carney announced significant changes to the Goods and Services Tax (GST) credit system, designed to alleviate affordability concerns. The GST payments will increase by 25% over the next five years, supplemented by a one-time payment equal to 50% of the current GST credit. This initiative is directly linked to addressing the root causes of inflation and specifically, the rising cost of groceries in Canada. The government’s strategy emphasizes improving the resilience of Canadian supply chains, recognizing that disruptions in transportation, processing, and distribution contribute to higher grocery bills.

A preliminary trade agreement between Canada and China has been established, characterized as a “new type of strategic partnership.” This agreement aims to ease Chinese tariffs on Canadian canola and facilitate visa-free travel for Canadians. Crucially, officials emphasize this agreement is not directed against the United States, particularly in light of recent threats of 100% tariffs on Canadian goods from the US.

II. Market Performance

Both Canadian and US markets demonstrated positive performance. The TSX reached record highs, closing up 0.29%, while the S&P 500 rose by 0.57%, the Dow by 0.34%, and the NASDAQ by 0.65%. This follows a weaker week previously.

III. Federal Reserve & Investment Outlook (with Clay Khan, Neuberg Berman)

Clay Khan, Managing Director at Neuberg Berman, discussed the anticipated Federal Reserve announcement. He predicts a pause in interest rate cuts in the upcoming meeting, but anticipates potential for 2-3 cuts throughout 2026, bringing the policy rate down to 3%. This assessment is based on a dual mandate of maintaining stable employment and controlling inflation, with inflation showing signs of decline.

Khan advocates for a focus on equities, particularly global equities. He highlighted the strong performance of international equities in 2025 (up 32-34% compared to the S&P 500’s 18%), but suggests reducing weighting due to valuation levels. He favors US equities currently, trading at 26x forward earnings, compared to 18x for international equities. He noted a recent shift towards value stocks, with the Russell 1000 Value Index outperforming growth by 4-6%.

A key investment theme identified by Khan is the potential of Artificial Intelligence (AI) in emerging markets. He cited a projected doubling of AI-related capital expenditure (CAPEX) by 2026, driven by the “Magnificent Seven” tech companies and the CHIPS Act, totaling approximately $800 billion. This investment is expected to benefit companies in China, Korea, and Taiwan that supply the necessary infrastructure and components for AI development.

IV. Allied Gold Acquisition by Zijing Mining

Allied Gold is set to be acquired by Zijing Mining Group (China) in a $5.5 billion CAD cash deal ($44/share). This acquisition will add three African assets to Zijing’s portfolio, capable of producing up to 400,000 ounces of gold. Peter Maroney, Chairman and CEO of Allied Gold, defended the deal, stating it represents fair value for shareholders, particularly given the current gold price and a 30% premium to the 30-day volume-weighted average price. He emphasized the risk mitigation benefits of a cash deal and the certainty it provides, regardless of future gold price fluctuations. He acknowledged some shareholder concerns but expressed confidence in the vote’s approval.

V. Weather & Infrastructure Disruptions

A severe winter storm impacted parts of Ontario and Quebec, causing widespread travel disruptions. Over half of the flights at Toronto’s Pearson International Airport were cancelled, and significant snowfall (40-60cm in some areas) created substantial cleanup challenges. The storm also extended down the Eastern Seaboard of the US, impacting flights as far south as Texas, with over 12,000 flight cancellations across the US on Sunday alone.

VI. Canadian Craft Beer Industry Challenges

The Canadian craft beer industry is facing headwinds due to the pandemic, inflation, and changing consumer behaviour. Sales have decreased by 20% since 2019, and more breweries have closed than opened in the last two years. Consumers are reducing alcohol consumption due to health concerns, lifestyle changes, and financial pressures.

VII. Arctic Development & Critical Minerals

Canada’s Arctic region, comprising 40% of its landmass but only 0.5% of its GDP, holds significant untapped potential in mineral resources. Experts emphasize the need for increased government investment to attract private capital, enhance security, and compete with countries like China in developing this region. Canada possesses substantial reserves of critical minerals essential for technologies like smartphones and electric vehicles, but lags behind in processing capacity.

VIII. Trade Tensions & US Tariffs

US President Donald Trump has threatened to impose 100% tariffs on Canadian goods if Canada proceeds with a trade agreement with China. Geoff Mahone, former Deputy Director at Global Affairs Canada’s China Division, believes this threat is largely rhetorical, as such tariffs would severely damage the US economy. He clarified that the Canada-China agreement is a “strategic approach” focused on resolving trade disputes and diversifying economic relationships, rather than a traditional free trade agreement. He emphasized the importance of Canada finding a new modus vivendi with China, given its unique economic system, and highlighted the need for continued collaboration with the US.

Conclusion:

The market demonstrated resilience despite geopolitical uncertainties and economic challenges. The focus on affordability measures, strategic trade partnerships, and investment in key sectors like AI and critical minerals signals a proactive approach to navigating a complex global landscape. The Allied Gold acquisition highlights the growing interest in precious metals, while the winter storm and craft beer industry challenges underscore the ongoing impact of external factors on the Canadian economy. The situation with US tariffs remains a point of concern, but experts suggest a degree of posturing rather than an imminent trade war.