The Open for Friday, Jan. 2, 2026

Key Concepts

• Market Performance (2025 & 2026 Outlook): US and Canadian markets began 2026 with gains, though oil continued a downward trend while gold rallied. The TSX had a strong 2025, up almost 29%, while Bitcoin experienced a decline.
• Economic Outlook: Optimism exists for Canadian GDP growth driven by investment, particularly in the US, and government policies. The US economy is entering 2026 in strong shape.
• AI Investment Cycle: A significant $2.1 trillion investment in AI hyperscalers is underway, comparable to past major capital cycles, but valuations are being questioned.
• Trade & Political Landscape: US trade policy, including tariff delays, impacts markets. The Canada-US relationship remains complex, with the CUSMA review in July 2026 being a key concern.
• Commodity Price Fluctuations: Oil prices are at five-year lows, while gold and aluminum are experiencing significant gains.

Market Open & 2025 Review (January 2026)

The trading day in 2026 opened with positive momentum in both US and Canadian markets. The Dow Jones was relatively flat, while the S&P 500 rose 0.67% (approaching 6900) and the NASDAQ increased by 1.3%. The TSX opened up 0.23%, building on a strong 2025 performance of 28.84%. Looking back at 2025, gold experienced a substantial increase of 65.87%, nearing record territory, while the US Dollar was up 0.447% for the year. Conversely, Bitcoin closed 2025 down almost 6%, falling below $90,000 after peaking above $120,000. WTI crude oil finished 2025 down 20.7%, and continued its decline into 2026, down 1.25% for the year.

Company-Specific News & Market Reactions

Several companies experienced notable market movements. Wayfair’s stock increased by 5% following President Trump’s decision to delay tariffs on upholstered furniture and kitchen cabinets. Denison Mines surged 10.7% on news of impending government approval for a uranium mine in Saskatchewan, slated to begin production by mid-2028, though project costs have risen by 20% to $500 million. Sable Offshore saw a 20% jump in share price after receiving court approval to restart an oil pipeline off the coast of California. Tesla, however, reported a larger-than-expected drop in Q4 deliveries and a nearly 9% decline in annual sales due to the removal of tax incentives. Capstone Copper experienced a 1.27% decrease due to a strike at its Chilean mine, potentially reducing production by 30%.

Economic Forecasts & Investment Strategies

Experts offered differing perspectives on the economic outlook. Michael Dahl previously predicted positive developments for the Canadian economy due to the Carney government’s policies, particularly infrastructure spending and new trade partnerships with Asia and the Middle East, and did not anticipate interest rate cuts in 2026. Ashish Dewan of Vanguard Canada expressed optimism for 2026, expecting GDP growth driven by investment spending, particularly from the US. He highlighted the importance of monetary policy, fiscal policy, and “megatrends” (globalization, demographics, debt, AI) in shaping the economy, and believes AI diffusion will lead to long-term productivity gains. Brian Gardner of Velocity Investment Partners forecasted 8-10% growth for the S&P 500, with a potential “bull case” scenario of double-digit growth. Investment spending by AI hyperscalers has reached $2.1 trillion through 2027, comparable to past major capital cycles.

Concerns & Contrarian Views

Despite overall optimism, concerns were raised regarding market valuations and the sustainability of AI-driven growth. John Zechner expressed skepticism about current AI valuations, comparing the situation to the dot-com bubble and suggesting that much of the growth is based on future expectations rather than current productivity gains. He advocated for investing in companies negatively impacted by AI fears, believing they are undervalued. Market volatility is anticipated, particularly with upcoming US midterm elections, prompting recommendations for diversification.

Trade & Political Dynamics

The Canada-US trade relationship remains a key factor, with the upcoming CUSMA review in July 2026 being a significant point of concern. The segment noted a shift in Canada’s approach under the Carney government, perceived by some as a softening of its stance. Two MPs crossing the floor to join the Liberal party brought the government closer to a majority. President Trump’s delayed tariffs on furniture and kitchen cabinets, while providing short-term relief, highlight the ongoing uncertainty in US trade policy.

Commodity Market Trends

Commodity markets presented a mixed picture. Oil (WTI) continued its decline, hitting five-year lows. Gold rallied, increasing by 65% in the last year and 0.53% on the day, exceeding $4300/ounce. Silver also saw gains. Aluminum prices surpassed $3,000/tonne for the first time in over three years, driven by Chinese smelting capacity caps and European production constraints due to high electricity prices. The IEA forecasts a global oil supply glut of 3.8 million barrels per day in 2026.

Conclusion

The start of 2026 presented a complex economic landscape characterized by cautious optimism, significant investment in AI, and ongoing geopolitical uncertainties. While markets began the year with gains, concerns about valuations, trade tensions, and commodity price fluctuations suggest a potentially volatile year ahead. The Canadian economy is positioned for growth, driven by government policies and diversification of trade partnerships, but remains sensitive to developments in the US. The long-term impact of the current AI investment cycle remains a key question, with differing perspectives on its sustainability and potential for disruption.