The Open for Friday, Jan. 23, 2026

Key Concepts

• Economic Data: Canadian retail sales showed mixed results – a strong November (+1.3% m/m) offset by a weak flash estimate for December (-0.5%). The Bank of Canada is expected to remain on hold in the near term.
• Geopolitical Tensions: US-Canada relations are strained following criticism of coercive tactics by major powers, and the US’s attempted annexation of Greenland signals a potential shift in the global order. Canada-China EV trade is a point of contention.
• Market Performance: The TSX is near record highs, while gold prices are hitting all-time highs. The Canadian dollar is strengthening. US markets are influenced by geopolitical events and AI-driven growth.
• AI Investment & Risks: Significant investment is flowing into AI infrastructure, but profitability remains unproven, raising concerns about a potential “AI bubble” akin to the dot-com bubble.
• ETF Strategy: Investors should prioritize sustainable dividend growth over high yields when selecting ETFs and understand the underlying holdings of complex products.

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Market Overview & Economic Data (Part 1)

The broadcast began with a review of market performance and recent economic data. Canadian retail sales for November increased by 1.3% month-over-month, largely driven by food and beverage retailers, with core sales (excluding autos) climbing 1.6%. However, a flash estimate indicated a 0.5% decline in December retail sales. The Bank of Canada is anticipated to remain on hold next week, prioritizing inflation and employment data, with potential rate cuts expected later in the year contingent on USMCA uncertainty and business investment. The TSX was trading near record highs (above 33,000), oil prices exceeded $61 per barrel, and gold approached $5,000/oz, hitting record highs. The Canadian dollar was strengthening towards $0.73 USD, while Bitcoin experienced a slight increase but remained below previous peaks. November saw a 24% year-over-year decrease in US trips by Canadians, a 28% decrease in car trips from the US, and a 12% decrease in air trips from the US.

Geopolitical Landscape & Trade (Part 1)

Geopolitical tensions were a prominent theme. US President Trump disinvited Prime Minister Carney from a “Board of Peace” following Carney’s critique of coercive tactics employed by major powers. The potential for limited Chinese EV imports into Canada sparked debate, with China’s ambassador suggesting job creation and lower prices, while Ontario Premier Doug Ford urged a boycott to protect domestic auto sector jobs. The attempted annexation of Greenland by the US was also highlighted as a potential turning point in the global order.

Investment Themes: The AI Revolution (Part 2)

The discussion shifted to investment themes, focusing heavily on Artificial Intelligence (AI). Sustained growth in the S&P 500 is seen as heavily reliant on the performance of the “Elite Eight” – mega-cap growth stocks benefiting from AI-related capital expenditure (CAPEX) and infrastructure spending. However, analysts predict continued stock dispersion within this group. The focus is moving beyond “AI enablers” to broader AI adoption across industries, expected to drive productivity improvements and enhance fundamental drivers. A structural bull case for the S&P 500 is predicated on persistent productivity gains leading to better margins and stable earnings. Companies without an AI initiative are expected to face investor scrutiny. Morgan Stanley predicts $3 trillion will be spent on AI data centres.

Risks & Concerns: The AI Bubble (Part 2)

Despite the optimism, concerns were raised about a potential “AI bubble,” with circular deals involving companies like NVIDIA, OpenAI, and Oracle. While investment is substantial, profitability remains largely unproven. The symbiotic relationship between these companies poses a systemic risk, drawing parallels to the dot-com bubble. The construction of data centres and the demand for power and water were identified as key areas of investment driven by the AI boom.

ETF Strategy & Dividend Investing (Part 2)

The ETF report segment emphasized the importance of understanding ETF holdings, particularly with the proliferation of complex products. David Bahnsen of The Bahnsen Group highlighted the USCF Midstream Energy Income Fund (UMAI) as a potentially attractive option due to its diversified energy infrastructure assets and active management. He also discussed the TBG Dividend Focused ETF, emphasizing a focus on dividend growth rather than yield, noting its long-term track record (up 5% in 2022 while the S&P 500 was down 19%). He cautioned that high dividend yields can be misleading. Examples included Energy Transfer LP (around 7% yield) and Williams Companies (3-4% yield with 3-5% growth). Cheniere Energy LNG was also mentioned as a major exporter of liquefied natural gas.

Global Order & Political Discourse (Part 2)

The segment concluded with a discussion of the global world order, sparked by Justin Trudeau’s speech at Davos. European Central Bank President Christine Lagarde disagreed with Trudeau’s assessment of a “rupture,” advocating for a more incrementalist view. Paul Sampson of the Centre for International Governance Innovation argued that the attempted annexation of Greenland by the US marked a significant turning point, signaling a shift beyond traditional forms of influence and potentially leading to a more fragmented global landscape. He noted that while the existing system is strong, it hasn't fully delivered on equality, contributing to the backlash seen in the US.

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Conclusion:

The broadcast painted a picture of a complex economic and geopolitical landscape. While Canadian economic data presented a mixed bag, the dominant narrative centered on the transformative potential – and inherent risks – of AI. Successful investment strategies will require a nuanced understanding of AI’s impact, a focus on sustainable growth, and a careful assessment of geopolitical risks. The potential for an “AI bubble” and the evolving global order represent significant challenges that investors and policymakers must navigate.