Morning Markets for Wednesday, Jan. 7, 2026

Morning Markets - Summary of Broadcast (January 16, 2026)

Key Concepts:

• Geopolitical Risk: Impact of US-Venezuela relations, US-China relations, and Canada’s position within these dynamics.
• Economic Slowdown: Forecasted slowdown in Canadian economic growth and its implications for investment and labour markets.
• Sector Performance: Analysis of key sectors including aerospace & defence, AI, energy, and housing.
• Trade & Tariffs: Discussion of US tariffs on Canadian goods and the upcoming USMCA review.
• Market Volatility: Observations on market fluctuations, particularly in silver and the TSX.

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1. International Relations & Trade

The broadcast focused heavily on shifting geopolitical landscapes and their economic consequences.

• Canada-China Relations: Prime Minister Mark Carney is scheduled to visit China (Jan 13-17) – the first Canadian PM to do so in over eight years – to rebuild relations and reduce Canada’s economic reliance on the US. Discussions will cover trade, energy, agriculture, and international security.
• US-Venezuela Oil Deal: US President Trump announced a deal allowing Venezuela to send up to 50 million barrels of oil to the US (valued at ~$2.8 billion at current prices). This is seen as a blow to China, previously a major Venezuelan oil buyer, and addresses a backlog of unsent crude due to US sanctions.
• USMCA Review: The upcoming review of the Canada-US-Mexico Agreement (starting July) is a key factor influencing Canadian economic outlook.
• Trump’s Foreign Policy: A discussion highlighted Trump’s unpredictable foreign policy, referencing past comments about Greenland and the potential for disruption to established trade relationships. The US is increasingly focused on protecting its interests amidst growing competition from Russia and China.

2. Economic Outlook & Market Performance

Deloitte Canada forecasts a slowdown in Canadian economic growth to 1.5% in 2026, citing ongoing uncertainty.

• TSX Performance: The TSX experienced a slight decline (-0.64%) after a strong start to the year, with energy and materials sectors underperforming.
• US Market Performance: US markets were mixed, with the S&P 500 up slightly (0.23%), the Dow Jones up (0.18%), and the NASDAQ showing stronger gains (0.66%).
• Silver Volatility: Silver prices remain volatile, fluctuating after peaking at a record high recently.
• Interest Rates: Interest rates are expected to remain relatively stable.

3. Sector-Specific Analysis

Several sectors were highlighted with specific insights:

• Aerospace & Defence: Jed Ellerbroek (Argent Capital Management) identified aerospace and defence as the strongest demand environment currently, driven by AI infrastructure demand and increased US defence spending (growing at a double-digit rate). Companies like Transdigm (favoured pick, strong M&A potential, returns capital to shareholders via special dividends – recent dividend was 4-5% of market cap) and Heico (smaller company, PMA business offering cheaper alternatives) are positioned to benefit. Transdigm’s success is attributed to acquiring product lines with limited competition and FAA-specified requirements.
• AI & Semiconductors: Demand for accelerated compute in data centres remains exceptionally strong, benefiting companies like Nvidia, Micron, Sandisk, Broadcom, and Marvell. Applied Materials (ticker ABG) is also benefiting from increased demand for semiconductor fabrication equipment. Concerns about capital expenditure (CAPEX) were addressed, with confidence expressed in continued financing and demand for AI applications.
• Energy: The US-Venezuela oil deal poses a potential threat to Canadian crude exports. Grace Wilton (Enpro) noted that while Venezuela’s oil is the same type as Canadian crude, it will take years and significant investment for Venezuela to regain substantial market share. The need for pipeline infrastructure (specifically to the West Coast) was emphasized to maintain Canada’s competitiveness. OPEC’s current stance is separate from the Venezuela situation.
• Housing Market: The Toronto housing market saw a 0.4% decline in sales in December, with average prices down 5% annually and overall sales off by over 11%. Economic uncertainty is cited as a key factor, despite lower interest rates and increased listings. Jason Mercer (Toronto Regional Real Estate Board) noted a lack of confidence among potential buyers, despite improved affordability. Condo sales were particularly affected due to increased rental supply.

4. Alternative Asset Managers

The broadcast briefly touched on alternative asset managers (Blackstone, Apollo, Hamilton Lane, Carlyle), noting a buying opportunity despite recent banking downgrades. Favourable conditions include strong capital markets, GDP growth, falling interest rates, and rising M&A/IPO activity.

5. New Brunswick Cabinet Manufacturer

James McKenna of Glenwood Kitchens in New Brunswick expressed relief at the delay of increased US tariffs on furniture and wood products, but acknowledged the ongoing challenges of navigating trade uncertainty. The company is actively seeking new markets to mitigate potential losses from the US.

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Notable Quotes:

• Jed Ellerbroek (Argent Capital Management): “Another exceptional area of demand is aerospace and defence…The US defence budget is growing at a double-digit rate.”
• Jed Ellerbroek (Argent Capital Management): “Transdigm’s value proposition is they try to acquire and they try to grow product lines where they are either the sole source or just two sources of that product.”
• Grace Wilton (Enpro): “This is where the rubber meets the road for sure…If you can't get a more clear signal than that, companies being poised to invest in Venezuela, it'll be in the next few years that they decide whether they want to invest.”
• Jason Mercer (Toronto Regional Real Estate Board): “There’s a lot of households that are just sort of waiting to see what their economic fortunes look like, what their job situation looks like as we move through 2026.”

Synthesis/Conclusion:

The broadcast painted a picture of a complex and uncertain economic landscape. While opportunities exist in sectors like aerospace & defence and AI, Canada faces challenges from shifting geopolitical dynamics, potential trade disruptions, and a slowing economy. The need for strategic infrastructure investments, diversification of trade relationships, and a focus on restoring business confidence were recurring themes. Market volatility and the unpredictable nature of US foreign policy add further layers of complexity.