The year is off to a busy start for markets, with no shortage of news and global discussions. In this issue, we review key economic themes, insights from the World Economic Forum in Davos, and how our disciplined investment approach is designed to navigate changing conditions.

Highlights

• Our Observations
• Current Economic Outlook
• Our Investment Strategy
• Contribution Reminders

Our Observations

Markets have started the year navigating a steady flow of geopolitical and policy-related headlines. Events such as renewed U.S. involvement in Venezuela, tensions involving Iran, and broader strategic discussions can drive short-term market volatility, however, their economic impact usually unfolds gradually over time. The broader lesson remains clear: markets often react quickly to headlines, but long-term performance is driven by economic fundamentals and corporate earnings, not short-term news cycles.

World Economic Forum in Davos

The recent World Economic Forum in Davos brought together political leaders, central bankers, and business executives to discuss global economic priorities. While the headlines were wide-ranging, the overall tone was measured rather than alarmist.

Mark Carney delivered a thoughtful, clear and very real address on the changing global order. He emphasized the need for cooperation among middle powers, economic resilience, long-term planning, and cooperation between governments and the private sector. Rather than focusing on short-term political noise, Carney stressed that countries and companies that invest in productivity, innovation, and financial stability will be best positioned in the years ahead. He warned that the traditional rules-based system of global governance is evolving. He framed the current era as one where countries must actively shape constructive engagement rather than rely on old certainties. Carney also underscored the importance of resilience and partnership, advocating for shared security and economic growth frameworks.

Current Economic Outlook

Steady growth, moderating risks

Global growth expectations have improved modestly. The International Monetary Fund now forecasts global GDP growth of about 3.3% in 2025 and 2026, supported by easing inflation, improving supply chains, and continued investment in artificial intelligence (AI).

Canada is expected to be among the faster-growing advanced economies, with GDP growth around 2% in 2026, while U.S. growth is projected at approximately 2.4%. That said, growth remains uneven. Canadian business surveys continue to show cautious hiring and investment plans, particularly in trade-sensitive sectors, and households remain attentive to job security and debt levels.

Inflation, interest rates, and earnings

Inflation continues to cool, giving central banks more flexibility. In Canada, inflation near target allows the Bank of Canada to remain patient, with interest rates expected to stay relatively stable in the near term. In the U.S., markets anticipate modest rate cuts over the next year, depending on how inflation and economic data evolve.

Our Investment Strategy

Our approach remains invested, diversified, and disciplined, with a focus on long-term outcomes rather than short-term market noise.

The current AI investment cycle differs from past technology booms. It is being led primarily by large, established companies, such as Microsoft, Google, and Nvidia, all held in our portfolios, with strong balance sheets and significant cash generation. While we continue to monitor risks, including whether AI investments deliver expected returns or whether infrastructure becomes a constraint, the financial foundation of this cycle is more solid than in previous episodes.

Expecting moderate, sustainable returns

Looking ahead, our strategist’s base case is for moderate equity market returns in 2026, supported by:

• Continued economic expansion without a recession
• Positive, though slower, earnings growth
• Gradual easing in inflation and interest rates

Periods of volatility, particularly during election-cycle years, are normal. Historically, such pullbacks have often been followed by recoveries, reinforcing the importance of staying invested rather than trying to time the market.

Emphasis on quality and resilience

Within portfolios, we continue to prioritize:

• High-quality companies with strong balance sheets and dependable earnings
• Diversification across asset classes, sectors, and investment styles
• Businesses with pricing power and proven execution in uncertain environments

Companies such as Procter & Gamble (as mentioned in our latest Stocks in the News publication), Couche-Tard, and Colgate-Palmolive illustrate the type of resilience we seek, delivering consistent earnings and maintaining market share through operational strength rather than speculation.

While headlines and policy uncertainty may drive short-term fluctuations, economic fundamentals and corporate earnings remain supportive. Our focus is on helping you stay invested through changing market conditions with a disciplined, long-term strategy.

Our tried-and-true approach

 

“If you don’t have a seat at the table, you’re on the menu.”
— Mark Carney, 2026 World Economic Forum in Davos

 

Contribution Reminders

We would like to take this opportunity to remind you that now is the time to contribute to your RRSP, TFSA, FHSA and RESP accounts. Setting up automatic contributions is the best savings discipline because they promote long-term growth. They can be programmed in any account type, at the desired amount and frequency.

• RRSP: The last day to contribute for the 2025 fiscal year is Monday, March 2nd, 2026.
• TFSA: The contribution room for 2026 is $7,000, bringing the total contribution room since 2009 to $109,000.
• FHSA: Contribution room is $8,000 per year, up to a lifetime limit of $40,000.

 

As always, we are available to answer your questions.

Benoit Legros, B.A.A., CIM, FCSI

Senior Portfolio Manager and Wealth Advisor