The Open for Tuesday, Jan. 27, 2026

Key Concepts

• Defense Sector Growth: Significant increases in US defense spending are driving strong performance for companies like Northrop Grumman, RTX, and General Dynamics, fueled by geopolitical tensions and long-term government contracts.
• Geopolitical & Trade Risks: Multiple “black swan” events pose significant risks to the global economy, including conflicts, technological disruptions, and trade wars. US-China tensions and potential tariffs on Canadian goods are a specific concern.
• Market Adaptations: Companies are adapting to changing consumer preferences (Eataly’s quick-service options) and regulatory environments (GM’s emissions rule change).
• Fixed Income Strategies: Active management in fixed income, particularly in mortgage-backed securities, can offer opportunities for outperformance.
• Commodity Price Volatility: Gold and silver prices are experiencing significant surges, driven by central bank buying and speculation, but carry correction risk. Oil prices are rallying due to geopolitical fears.

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Market Open & Major Deals (Part 1)

The trading day opened with several significant developments impacting Canadian and US markets. Algoma Steel and Hanwha Ocean signed a Memorandum of Understanding (MOU) valued at over $340 million, contingent on Hanwha Ocean securing Canada’s submarine contract. This deal will fund a new structural steel beam mill for Algoma Steel, as part of a broader partnership of over a dozen Canadian companies involved in the Royal Canadian Navy’s submarine project. Eataly, the Italian food marketplace, is expanding rapidly with plans for 15 new stores this year, focusing on North America (50% of current locations) and Asia, adapting to consumer demand for convenience while maintaining a commitment to sourcing 50% of ingredients locally.

Corporate Earnings & Stock Movements (Part 1 & 2)

Several companies reported earnings with notable stock impacts. General Motors (GM) shares rose 4% in pre-market trading due to forecasted profit growth of up to $2 billion USD, increased dividends, and share buybacks, driven by strong demand for trucks and SUVs and a favorable regulatory environment. UPS also saw gains, projecting full-year revenue exceeding analyst estimates by over $1.5 billion (over $89 billion total), achieved through a new profit-boosting plan that includes reducing deliveries for Amazon. Conversely, Metro shares fell approximately 6% following a Q1 earnings report impacted by a temporary frozen food distribution centre closure and accounting changes. Cogeco Communications experienced a 7% decline after Caisse de dépôt et placement du Québec (CDPQ) announced the sale of an 11% stake, generating $229 million. Northrop Grumman reported higher Q4 profit and revenue, benefiting from strong aircraft sales amid geopolitical uncertainty. Boeing is showing signs of recovery, increasing plane deliveries from 57 in Q4 2023 to 160 per quarter, and a potential dividend reinstatement is being discussed. GM’s performance was also boosted by a regulatory change eliminating fines for fleet emissions, adding approximately $1 billion to annual profit. Humana and UnitedHealth both experienced a nearly 20% sell-off due to Medicare Advantage rate changes.

Market & Economic Indicators (Part 1)

US futures were generally higher in pre-market trading. The TSX had accelerated earlier in the week due to higher gold prices but lost some ground. The Canadian dollar (Loonie) was marginally higher against the US dollar, trading above $0.73 (unfavorable for exporters). Oil prices were rallying sharply due to geopolitical fears, with OPEC likely to maintain its production freeze in Q1. Gold prices reached record highs near $2,100 USD per ounce, while silver experienced a dramatic surge, up 250% in one year. Bitcoin was declining in value, and the US dollar was sliding, nearing a four-year low.

Commodity & Investment Perspectives (Part 1 & 2)

Tim Regan (King West & Company) cautioned against underestimating the risk of a correction in gold and other metals, citing historical boom-and-bust cycles and the dominance of speculation over central bank buying. In fixed income, Skylar Weinand highlighted two ETFs: MSAF (agency floating rate mortgage bonds) yielding 1-1.5% over US Treasuries, and MBES (fixed rate mortgage-backed securities) with 2-3 year duration and potential for prepayment upside. MSAF returned almost 9% between May 1, 2023 and the present, while TLT returned 4.5%.

Geopolitical & Trade Risks (Part 2)

BCA Research identified five key “black swan” risks: collapse of the Iranian government, a technological breakthrough by China, a military incident between Russia/NATO or China/Taiwan, a US-China trade war escalation, and a disruption to the US dollar’s reserve currency status. Concerns were raised about potential 100% tariffs imposed by the US on Canadian goods if Canada pursues a trade deal with China. Canada’s options beyond the US market were acknowledged, but the continued importance of the US market was emphasized.

Defense Sector Analysis (Part 2)

James Callahan (Barometer Capital Management) presented a bullish outlook for US defense stocks, driven by increasing budgets (projected to reach $1.5 trillion by next year) and geopolitical instability. Northrop Grumman was highlighted as strategically important due to its role in the US nuclear triad (Sentinel ICBMs and B-21 Raider). Raytheon is expected to benefit from the “Golden Dome” project and increased demand for Patriot missile systems. General Dynamics, particularly its Gulfstream business jet exposure, was also favored. Earnings in this sector are less driven by quarterly results and more by budget increases and contract wins.

Conclusion

The market landscape is characterized by a complex interplay of factors. While corporate earnings are mixed, the defense sector is experiencing significant tailwinds due to geopolitical tensions and increased government spending. Commodity prices, particularly gold and silver, are volatile and subject to speculative pressures. Furthermore, a range of “black swan” risks and potential trade disruptions necessitate a cautious and diversified investment approach. Active management in fixed income and a keen awareness of geopolitical developments are crucial for navigating the current market environment.