Markets have opened the year with a familiar mix of geopolitical headlines, earnings optimism, and policy debate. Volatility has returned to the forefront, but history reminds us that disciplined investing - grounded in fundamentals rather than headlines - is key.
Geopolitical Tensions: Separating Signal from Noise
Venezuela and Global Oil Markets
Renewed U.S. engagement with Venezuela has reignited discussion around rebuilding Venezuela’s oil sector. However, decades of underinvestment and political instability mean any supply recovery will be slow and costly. For Canada, this raises concerns about competition for U.S. refiners, but the nation’s robust pipeline network and the Trans Mountain expansion provide a strategic advantage. Early market jitters, such as widening WCS-WTI spreads (the price difference between cheaper, heavier Canadian oil (WCS) and pricier, lighter U.S. oil (WTI)), may overstate near-term risks.
As we manage your portfolio, we remain focused on long-term energy fundamentals, Canada’s infrastructure strength, and the reality that geopolitical shifts tend to unfold gradually rather than overnight.
Greenland and Strategic Positioning
President Donald Trump’s renewed focus on Greenland reflects a blend of military, economic, and geopolitical priorities. Strategically, the island’s location is critical for U.S. defense, offering missile surveillance capabilities and a counter to Arctic activity by Russia and China. Economically, Greenland holds significant rare earth minerals and potential oil reserves, while melting ice may open new shipping routes. That said, Trump’s tariff threats against Europe (escalating to 25% if unresolved by June) have strained NATO relations and added to market uncertainty. Greenland’s leaders insist the island isn’t for sale, suggesting negotiations or delays lie ahead.
History shows such tensions often spark volatility before fading into deals or delays. We continue to monitor developments closely while keeping portfolios anchored for the long-term.
Corporate Earnings: Keeping Momentum
Global earnings growth (the rate at which companies' profits worldwide are increasing over time, reflecting overall economic health) remains robust, with profits rising 12% in 2025 and expectations of 14% in 2026. U.S. earnings for the most recent quarter are on track for high-single-digit growth, supported by resilient consumer spending and operational efficiencies. However, elevated valuations mean execution matters. Companies must deliver on expectations to justify current multiples, or markets may recalibrate.
Within your portfolio, we prioritize businesses with durable cash flows, pricing power and proven earnings resilience, ensuring stability amid sensitivity to setbacks.
Central Banks: Balancing Act Continues
In Canada, the Bank of Canada maintains a cautious stance, with inflation near target and labor markets stabilizing. RBC Economics anticipates an uneven recovery, supporting a steady benchmark rate. In the U.S., markets are pricing in two more rate cuts this year, but tariff uncertainty and political debates (particularly around Federal Reserve Independence) complicate the outlook. Despite headlines, U.S. institutional safeguards remain strong.
We vigilantly track labor data and inflation trends, aligning our investment strategies with long-term policy direction while preparing for near-term shifts.
Looking Ahead: Invested, But Watchful
Our approach remains “invested, but watchful.” After a strong year in the markets, we’ve taken profits and rebalanced your portfolio back to strategic weight, focusing on quality and resilience while sticking with your long-term plan. For the year ahead we are staying invested in quality companies with strong fundamentals, monitoring upcoming earnings for growth trends, and staying attuned to central bank signals. Volatility is inevitable, but by grounding decisions in data - not short-term headlines – we remain positioned to navigate 2026 with discipline and clarity.