Key Concepts
- Canadian Inflation: Consumer Price Index (CPI) increase of 2.4% year-over-year in December, impacted by a 2024 tax holiday. Food prices rose over 6%, the largest jump since 2023.
- Bank of Canada Concerns: Trade uncertainty impacting business optimism, leading to potential payroll reductions and declining sales forecasts.
- IAMGOLD Performance: Strong gold production exceeding expectations, targeting up to 820,000oz output in 2025.
- US Tariffs & Greenland: Potential tariffs on European nations threatened by President Trump, linked to troop contributions regarding Greenland.
- CUSMA Negotiations: Upcoming renegotiation of the Canada-United States-Mexico Agreement (CUSMA).
- Tariff Economics: Argument that tariffs are effectively a hidden sales tax borne primarily by consumers (around 70%).
- Canadian Economic Resilience: Despite tariffs, Canada’s economy, particularly its service sector (70-75% of GDP), has proven resilient.
- Mullen Group Outlook: Targeting up to $2.4 billion in revenue by 2026, driven by acquisitions, freight demand, and infrastructure spending.
- Robotics & Automation: Investment in robotics for warehouse operations to improve efficiency.
- HumanoID Robotics Challenges: Significant hurdles in replicating human dexterity and the lack of sufficient training data compared to Large Language Models.
- AI & Cybersecurity: Increasing cybersecurity budgets driven by the adoption of AI and the expanding attack surface.
- Software Stock Opportunities: Positive outlook for Palo Alto Networks, Rubrik, and Atlassian despite broader sector concerns.
- Demographic Trends: Positive outlook for companies catering to the aging population, such as Savaria and Sienna Senior Living.
Canadian Economic Update & US Trade Tensions
The Canadian Consumer Price Index (CPI) rose 2.4% year-over-year in December. This figure was somewhat distorted by a tax holiday in 2024, which artificially lowered prices a year ago. Food prices experienced a significant increase, rising over 6% – the largest jump since 2023. The Bank of Canada has expressed concern about trade uncertainty, noting that it is negatively impacting business optimism and potentially leading to payroll reductions, with a third of businesses expecting sales declines. Despite these concerns, export sales are expected to improve.
US Tariff Threats & Potential Impact
US President Donald Trump has threatened to impose tariffs on several European nations due to their limited troop contributions regarding Greenland. This has sparked discussion about potential EU counter-tariffs, potentially impacting $793 billion worth of US goods. The EU is also considering freezing approval of a US trade deal. KPMG Law’s Lachlan Wolfers highlighted that tariffs are essentially a hidden sales tax, with approximately 70% of the cost ultimately borne by consumers. He also noted the pattern of Trump issuing tariff threats followed by walk-backs, and emphasized that Canadian businesses are largely treating these threats as “speed bumps” in the road. Wolfers pointed out Canada’s economic resilience, particularly its strong service sector, which is unaffected by tariffs. He stressed the importance of the upcoming CUSMA review.
Mullen Group’s 2026 Outlook
Mullen Group, a Canadian trucking and logistics company, released targets for 2026 projecting up to $2.4 billion in revenue. This growth is expected to be driven by strategic acquisitions, improving freight demand, and increased infrastructure spending. Murray Mullen, Chair and Senior Executive Officer, emphasized the need for diligent work and cost management, but expressed confidence in achieving these goals. He noted that a significant portion of the Canadian economy is service-based, lessening the impact of potential trade disruptions. Mullen Group is also investing in robotics for warehouse operations and data management tools. The company’s business is primarily in Canada, but it sees greater growth potential in the US due to increased capital investment and deficit spending.
Robotics & AI: A Disparity in Learning
Professor Ken Goldberg of UC Berkeley discussed the challenges of developing humanoid robots. He argued that training robots is fundamentally different from training Large Language Models (LLMs) like ChatGPT. LLMs operate in a one-dimensional space (text), while robots operate in a much higher-dimensional space requiring control of numerous joints. Crucially, there is a severe lack of training data for robots compared to the vast amounts of textual data available for LLMs. He cautioned that the “ChatGPT moment” for robotics is likely much further off than many expect. He also noted that self-driving cars are a simpler problem than general-purpose humanoid robots.
Software Sector Opportunities & Demographic Trends
Fatima Bulani of Citi highlighted three software stocks with strong potential: Palo Alto Networks (driven by increasing cybersecurity budgets fueled by AI adoption), Rubrik (benefiting from the need for backup and cyber resilience in the age of ransomware), and Atlassian (undervalued despite the potential for AI coding tools to increase productivity). She emphasized that the current generational shift in IT infrastructure, driven by AI, creates opportunities for these companies.
The report also noted positive performance in stocks catering to the aging population, with Savaria (stair lifts and vehicle modifications) and Sienna Senior Living both hitting record highs. Agnico Eagle and Wheaton Precious Metals also saw significant gains, driven by investor interest in gold as a safe haven asset.
Market Performance
The TSX Composite reached a new record high, driven in part by strong performance in gold stocks. Over the past five years, the TSX has outperformed the S&P 500 (including dividends). However, the S&P 500 remains ahead over a ten-year period, largely due to the strong performance of US tech stocks.
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