Volatility remains high while our overall positive outlook remains intact

February 2026 Insights & Strategies

Macro Highlights for January

• Canada’s unemployment rate dropped slightly to 6.5% in January, from 6.8% at the end of December, despite the loss of 25k jobs. The rate declined as fewer people were actively looking for work, as the participation rate (employed + actively looking for work) declined from 65.4% to 65.0% of the eligible population (15 yrs+). Publishing of the U.S. unemployment rate has been delayed due to another government shutdown, but was last reported falling slightly to 4.4% in December, as that economy added 50,000 jobs.
• The Bank of Canada (BoC) held its policy rate at 2.25%, which is at the low end of its neutral range, as inflation seems under control at 2.4%, close to the 2% target, and within the 1-3% comfort range. The U.S. Fed rate was also held at 3.75%, with inflation holding steady at 2.7%.
• outlook, impacted by slow population growth and volatile trade. Our U.S. team is forecasting U.S. GDP growth of 2.4% in 2026 and 2.3% in 2027.

Financial Markets in January

• In January, the S&P/TSX Composite posted price and total returns of 0.7% and 0.8%, respectively; excluding January 30, the final trading day of the month, when gold sold off by roughly 9%, price and total returns would have been 4.1% and 4.2%. The S&P 500 recorded price and total returns of 1.4% for the month.
• Energy was the best sector on the TSX in January as geopolitical risks helped to push crude higher. Materials dropped to the second-best sector due to the gold selloff at the very end of the month, and Communication Services ranked third as investors shifted towards this more defensive sector. Health Care, Consumer Discretionary, and Information Technology were the weakest performers in January.
• Somewhat similarly, in the U.S. markets, the best S&P 500 sectors were Energy, Materials, and then Consumer Staples. Health Care, Technology, and Financials were the laggards.

Upcoming

• The joint review of the USMCA, including the July 1 deadline to confirm if the agreement will be extended for 16 more years, will likely be the most consequential event for Canada this year. While we are optimistic of a reasonably good outcome for Canada, we are also braced for high-priority demands from the U.S. related to rules of origin, digital services, and the dairy industry.
• We continue to await the U.S. Supreme Court’s ruling on the legality of the IEEPA-based tariffs. While the ruling may cause volatility and uncertainty, we see minimal impact on Canada with the USMCA currently shielding the vast majority of Canadian exports to the U.S., and those industries that are most impacted are subject to tariffs from other authorizations that are not in question.
• As Canadian 4Q25 earnings reason ramps up, we are watching for guidance confirming consensus EPS forecasts that currently price in an almost 16% improvement into 2026, after an almost 12% increase in 2025.