The Open for Tuesday, Jan. 6, 2026

Key Concepts

• Canada faces economic uncertainty in 2026, largely tied to potential US trade policy shifts and USMCA renegotiations.
• A divergence in consumer spending (K-shaped recovery) is emerging, with high-income earners driving luxury spending while lower-income earners face financial pressure.
• The era of consistently falling ETF fees is likely ending, with providers exploring alternative revenue models.
• Geopolitical events, particularly US intervention in Venezuela, can impact oil markets, but the market often demonstrates resilience unless supply is directly affected.
• Individual stock picking is favored over broad economic strategies due to the current high level of uncertainty.

Prime Minister’s China Visit & Trade Relations

Prime Minister Mark Carney is scheduled to visit China (Tuesday-Saturday) to rebuild relations, focusing on trade, energy, agriculture, and international security – the first such visit by a Canadian PM in over eight years. This follows a period of strained relations stemming from the Meng Wanzhou case. Concerns exist regarding potential negative impacts on Canadian investment due to threats to Canadian sovereignty from former US President Trump. While a delay in increased tariffs on Canadian goods provided temporary relief, Canada’s open economy remains vulnerable, with a 25% tariff already in place and a potential increase to 50% previously threatened. The case of Glenwood Kitchens in New Brunswick, experiencing a 50% drop in US sales after the initial 25% tariff, illustrates this vulnerability.

Economic Outlook: Canada & US

ATB Capital Markets forecasts modest economic growth for Canada in 2026, around 1.2%, citing ongoing uncertainty surrounding USMCA renegotiations and unpredictable Washington politics. Deloitte predicts slower Canadian economic growth this year compared to 2025, but sees potential for improvement through infrastructure spending and government policies. Despite current US economic strength, concerns exist regarding long-term weaknesses, driven by large deficits and a reliance on government spending, particularly within the tech/AI sector, which is characterized as “over concentrated, fragile, and vulnerable.” A “hawkish repricing” of growth and monetary policy expectations is anticipated, potentially lifting the US dollar.

Market Performance & Trends

The Toronto market reached a record high, up 29% (excluding dividends) in 12 months, while the S&P 500 also closed at a record high. US futures are set for a flat open. Oil prices are slipping due to fears of a glut, despite geopolitical uncertainty. Gold is down almost 1%, while the Canadian dollar is holding steady at almost 72.5 cents US. Silver prices experienced a run, driven by industrial demand (particularly in photovoltaics) and China’s designation of silver as a strategic mineral, but have since declined due to index re-weightings and potential US tariffs. Copper is trading at record highs. Vanguard’s decision to raise ETF fees signals a potential end to the “fee war” in the ETF industry, with BlackRock’s ability to monetize ETFs through strategies like Bitcoin ETFs and stock lending revenue highlighted. The emergence of active ETFs is also noted.

Energy Markets & Venezuelan Oil

A dispute is brewing between Alberta Premier Danielle Smith and British Columbia Premier David Eby regarding energy infrastructure. Smith advocates for expedited pipelines to the BC coast, while Eby prioritizes oil refinery capacity, noting the Trans Mountain pipeline isn’t at full capacity. The threat of Venezuelan oil displacing Canadian crude in US refineries is a key concern. Trump’s intervention in Venezuela, ousting a dictator, is viewed positively as it freed up oil supply. However, the potential for similar interventions in Greenland and Canada raises concerns. Canada produces 4.5 billion barrels of crude per day and is attempting to secure alternative markets for its oil, particularly in Asia.

Investment Recommendations & Stock Analysis

Investment strategies are shifting towards individual stock picking due to economic uncertainty. Recommended stocks include: Air Canada (Outperform rating, $32 price target, driven by travel demand), Atkins (positive outlook due to construction activity and expansion into nuclear energy), NFI Group (expected earnings recovery due to record backlogs), Gilead (leadership in HIV treatment and cell therapy), Disc Medicine (potential FDA approval of Bitopertin), and Eli Lilly (leadership in GLP-1 drugs and diversification). Capstone Copper experienced a decline linked to a strike at a Chilean mine and a large block trade, demonstrating the impact of global events on individual stock performance. Algonquin Power yields approximately 4%.

Consumer Spending & Economic Divergence

A “K-shaped” consumer profile is emerging, with high-income earners continuing to spend on luxury goods (autos, travel) while lower-income earners face wage pressure and employment concerns. This is reflected in retail trends, with some retailers observing consumers “trading down” while travel and luxury vehicle sales remain robust.

Technical Considerations & Warnings

Stifel is warning investors about Z Core Inc. (ZDC.V), citing competition from Amazon’s lower-priced surveillance trailers and the company’s limited financial history. The US Supreme Court is set to rule on President Trump’s trade tariffs, with potential for market volatility as businesses react.

Conclusion

The Canadian economy faces a period of uncertainty driven by potential US trade policy shifts and a diverging consumer landscape. While markets have shown resilience, a shift towards individual stock picking and a cautious approach to broad economic strategies are recommended. The evolving ETF market and geopolitical factors, particularly regarding energy markets, add further complexity to the outlook. Canada’s economic vulnerability to US policies remains a significant concern, highlighting the need for diversification and proactive trade strategies.