Trading Day for Wednesday, Jan. 14, 2026

Key Concepts

• Prime Minister Mark Carney’s China Visit: Focus on trade, energy, and security, with potential easing of canola tariffs linked to EV tariffs.
• Bank Earnings Reports: Wells Fargo, Citigroup, and Bank of America reported earnings, revealing challenges with expenses, asset caps, and market conditions.
• Market Performance: Downward trend in major indices (TSX, S&P 500, Dow Jones, NASDAQ) despite a positive start to the year.
• Economic Outlook (2026): Shift towards broader earnings growth and participation, driven by smaller and mid-cap companies.
• Consumer Spending: Continued resilience despite economic uncertainties, powering GDP growth.
• EV Market in Canada: Potential for growth, focusing on domestic supply chain development and technological innovation.
• Saks Global Bankruptcy: Filing for Chapter 11 due to debt from the Neiman Marcus acquisition and changing retail landscape.
• Richard Baker’s Retail History: A track record of both successes and failures in turning around department stores.

Trading Day Summary – January 26, 2024

I. Market Overview & Global Developments

The trading day opened with a generally negative sentiment across North American markets. The TSX was down 0.35%, while the S&P 500, Dow Jones, and NASDAQ experienced more significant declines of over 1%, 0.43%, and 1.5% respectively. This followed a recent rally at the start of the year. A key international story is Prime Minister Mark Carney’s visit to Beijing – the first by a Canadian Prime Minister in eight years. Discussions are expected to cover trade, energy, and international security. A potential trade agreement is being discussed where China might ease restrictions on Canadian canola in exchange for relaxed tariffs on Chinese-made electric vehicles (EVs).

II. Bank Earnings & Financial Performance

Several major US banks reported earnings, leading to stock declines.

• Wells Fargo: Shares fell 5.5% due to missed profit estimates, driven by severance costs and operating under constraints from a previously imposed asset cap (lifted in June). The bank plans further headcount reductions and increased AI implementation for efficiency.
• Citigroup: Experienced a 13% drop after a $1.2 billion loss from selling its Russian operations. Overall market revenue declined, but financial advisory fees surged 84%, reaching an all-time high due to increased merger activity.
• Bank of America: While numbers appeared “okay”, the market reacted negatively due to concerns about expense leverage not meeting expectations set during their November investor day.

III. Economic Outlook & Investment Strategy (Mike Dixon – Horizon Investments)

Mike Dixon, Head of Research and Quantitative Strategies at Horizon Investments, presented a bullish outlook for 2026, emphasizing a shift from concentrated earnings growth among mega-cap companies to broader participation from smaller and mid-cap firms. He noted a strong year-to-date performance in the smaller mid-cap space (S&P 600/Russell 2000 up 5-6%), contrasting with the stagnation of large caps. This is fueled by increasing earnings growth expectations and momentum in these smaller companies.

Dixon attributed this shift to:

• Lower Interest Rates: Reduced interest rates are benefiting smaller and mid-cap companies that lack the strong balance sheets and cash flow of larger corporations.
• Strong Consumer Spending: Consumer spending is exceeding expectations and driving GDP growth, as evidenced by recent upgrades to Fed estimates for 2026.
• “Quote: Stronger, broader earnings and participation will be the story for 2026 and not necessarily rates.” – Mike Dixon

He expressed confidence in the resilience of consumer spending, citing strong retail sales data and significant assets held in money market funds and home equity.

IV. Canadian EV Market & Technological Innovation (Dr. Arvind Gupta – University of Toronto)

Dr. Arvind Gupta, Professor of Computer Science at the University of Toronto, discussed the Canadian EV market. He emphasized that EVs are the future of mobility and Canada needs to participate in the EV revolution. Key points included:

• Adoption Challenges: Initial hesitancy due to cold weather performance is being addressed, citing examples like Norway and Iceland with high EV adoption rates.
• Supply Chain Development: Canada should focus on developing a complete EV supply chain, from critical mineral mining to battery remediation and manufacturing.
• Technological Focus: Investing in core technologies like semiconductors, battery technology (specifically solid-state batteries), and robotics is crucial.
• Government Support: Strong government signals and investment are needed to encourage innovation and attract investment.
• “Quote: We need to be part of that supply chain.” – Dr. Arvind Gupta

V. Retail Sector Challenges & Saks Global Bankruptcy

The luxury retailer Saks Global filed for Chapter 11 bankruptcy due to debt incurred from acquiring Neiman Marcus in 2024 and increased competition. The discussion highlighted:

• Richard Baker’s History: Richard Baker, the CEO, has a mixed track record of turning around department stores (Lord & Taylor, Hudson’s Bay), with both successes and failures.
• Changing Retail Landscape: Brick-and-mortar stores need to evolve by incorporating experiences like nail salons, fitness studios, and breweries to attract customers.
• Luxury Market Trends: Global sales of luxury goods are expected to contract in 2026, indicating a shift in consumer spending patterns.
• “Quote: Adding something to the mix. What's working in retail? It's where your nail salon is or your fitness studio is.” – Jack Manley, Morgan Asset Management

VI. Conclusion

The trading day reflected a cautious market sentiment despite positive economic indicators. The focus is shifting towards broader economic participation and earnings growth, particularly in smaller and mid-cap companies. Canada faces opportunities in the EV market, requiring strategic investment in technology and supply chain development. The retail sector continues to face challenges, exemplified by Saks Global’s bankruptcy, highlighting the need for adaptation and innovation. The overall takeaway is a need for strategic positioning and a focus on long-term growth potential in a dynamic economic environment.