Global Insight Weekly - January 16, 2026
Markets have entered the new year digesting a steady stream of headlines, underscoring the importance of staying focused on fundamentals.
Geopolitics
The year has begun with heightened geopolitical activity, led by U.S. actions in Venezuela alongside renewed tensions involving Iran and Greenland.
In Venezuela, the removal of President Nicolás Maduro and the possibility of U.S. involvement in rebuilding the country’s oil sector have revived expectations that production—currently near 1 million barrels per day—could rise over time.
However, decades of underinvestment, infrastructure decay, corruption, and political instability suggest that any supply recovery would be slow, costly, and complex.
For Canada, the longer-term risk is competition from Venezuelan crude for U.S. refiners, which rely heavily on Canadian supply. That said, Canada benefits from an entrenched pipeline network into the U.S. and improved export optionality following the Trans Mountain Pipeline expansion to the west coast, both of which should help preserve market share.
Elsewhere, the U.S. administration has warned Iran about civilian harm in the regime’s suppression of widespread domestic protests and reasserted its desire to “acquire” Greenland. While these events underscore persistent geopolitical uncertainty that may bring episodes of market volatility, the broader lesson from recent years has been the importance of maintaining perspective—avoiding overreaction to headlines and focusing instead on economic fundamentals and corporate earnings trends.
Corporate earnings
Corporate fundamentals remain constructive. Forward earnings expectations across major markets continue to trend upwards, and the U.S. Q4 2025 earnings season began this week, with analysts expecting high-single-digit earnings growth for the S&P 500 Index. More broadly, after approximately 12% global earnings growth in 2025, consensus expectations point to a further 14% increase in 2026.
While a good deal of economic and earnings optimism may already be reflected in valuations—which remain above long-term averages and can thus leave markets more sensitive to negative surprises—consistent earnings delivery can help support elevated multiples.
Central banks
In Canada, recent labour market data could allow the Bank of Canada (BoC) to remain patient. Both RBC Economics and futures markets expect the BoC’s benchmark rate to remain unchanged over the coming quarters.
In the U.S., markets are currently anticipating roughly 50 basis points of rate cuts over the next 12 months. However, uncertainty surrounding the legal status of certain tariffs continues to cloud the economic outlook and post a challenge for Federal Reserve (Fed) policymakers.
Separately, recent headlines regarding subpoenas served by the U.S. Justice Department related to Fed building renovations have renewed debate around central bank independence. Nevertheless, the near-term risks of a politicized Fed seem relatively contained, given the strength of U.S. institutional checks and balances. Notably, several prominent Republican senators have committed to defending the Fed through their authority to advance Fed nominations, and Fed Chair Powell’s vigorous response has likely increased the likelihood that he remains on the Fed’s board beyond the end of his term as chair in May. Importantly, market reactions typically associated with threats to central bank independence—such as higher inflation expectations—have remained muted, suggesting continued investor confidence in U.S. institutional safeguards.
Takeaway
While geopolitical developments and policy uncertainty may drive intermittent volatility, corporate earnings and underlying economic fundamentals remain the primary drivers of equity markets. These factors continue to look supportive in the quarters ahead.
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