Market Update January 2026
2025 Market Recap
Despite ongoing volatility, financial markets experienced robust performance throughout 2025. There were pronounced sector rotations in equity markets, largely in response to inflation trends, changing expectations around interest rates, and significant geopolitical developments.
Throughout 2025, all of our portfolios achieved steady and positive returns, demonstrating resilience amid market fluctuations. This strong performance was characterized by minimal volatility, underscoring the effectiveness of our disciplined investment approach. By maintaining diversified allocations and adhering to sound risk management practices, we were able to deliver consistent results for our clients, regardless of broader market uncertainties.
This success was rooted in intentional portfolio construction, with a focus on generating income, maintaining diversification, and managing risk effectively.
We maintained our commitment to a long-term perspective, avoiding reactionary decisions during brief market swings and prioritizing portfolio resilience.
Breaking News: Leadership Change in Venezuela
Over the past weekend, Nicolás Maduro was ousted as the leader of Venezuela. This marks a significant geopolitical event with the potential to impact global energy markets.
Why This Matters for Canada
Competitive Pressure: Refineries on the U.S. Gulf Coast may favour Venezuelan heavy crude, which competes directly with oil from Canada’s oil sands. This competition could put pressure on Canadian oil producers and affect pricing.
Pipeline Opportunity: Should China reduce its imports of Venezuelan oil, Canada could have an opening to strengthen its relationships with Asian markets. Expanding the Trans Mountain pipeline could position Canada to meet this demand, but it comes with higher costs compared to discounted Venezuelan barrels.
Portfolio Impact: These shifting dynamics reinforce our strategy of maintaining energy sector exposure below 1% in your portfolio. Any current exposure is incidental and achieved through diversified mandates; we do not make stand-alone energy sector investments.
Current Portfolio Positioning
Income & Stability: We hold high-quality, investment-grade bonds arranged in a ladder or barbell structure to provide predictable cash flow.
Liquidity Buffer: A dedicated cash reserve allows us to remain flexible and to rebalance your portfolio during market downturns.
Growth: Your portfolio includes diversified equity investments across Canadian, U.S., and international markets, with a preference for companies that have strong balance sheets and reliable dividends.
Alternatives: We selectively use gold and other alternative strategies to diversify your portfolio and help smooth returns.
We would only consider increasing energy investments if several criteria are met: a clearer policy environment, reduced sanction risks, more predictable pricing and transportation, and compelling valuations, particularly in integrated or utility companies.
2025 Economic Highlights
Canada’s GDP grew at a rate in the low-2% range, buoyed by steady commodity prices and consistent demand.
Inflation moderated towards the Bank of Canada’s 2% target by the end of the year.
The Bank of Canada kept its overnight rate steady at 2.25%, signalling a stable monetary environment.
2026 Macro Outlook
Looking ahead, the Canadian economy is expected to continue growing, though at a slower but still positive rate, with GDP growth projected between 1.4% and 1.8%. Inflation is anticipated to remain close to 2%, and monetary policy is likely to stay steady, offering support for balanced portfolio allocations and downside risk protection.
Borrowing & Interest Rates
Overnight Rate: Expected to remain near 2.25%, within a range of 2.0%–2.75% by the end of 2026.
Prime Rate: Projected to stay in the mid-4% range, approximately 4.2%–4.8%.
Mortgages: Five-year fixed mortgage rates are likely to range from 4.0%–4.4%, with potential increases to 4.8%–5.2%. Variable rates are expected to stay in the mid-3% to low-4% range, typically remaining below fixed rates, though subject to change.
Borrowers should anticipate mid-single-digit borrowing costs, as a return to ultra-low interest rates is not expected.
Bottom Line
The recent developments in Venezuela underscore how global events can affect markets. Our investment approach is built to provide steady income, protect your capital, and support growth without overreacting to headlines. We will continue to monitor the evolving situation closely, adjusting your portfolio thoughtfully as needed, with a continued focus on stability and long-term results.
If you have any questions about this update or how these changes may affect your financial plan, please don’t hesitate to reach out. Please remember, we are always here for you.
Sources: Information and data presented herein are derived from various reputable sources, including the National Bank Monthly Fixed Income Monitor, National Bank Financial, BMO Nesbitt Burns 2026 Capital Markets Outlook, National Bank Investments Asset Allocation Strategy, Borrowing & Mortgage Outlook, Bank of Canada Monetary Policy Report Projections, Financial Post Bank of Canada Rate Outlook, and Canadian Mortgage Rate Data. These sources are believed to be accurate and reliable at the time of publication; however, no warranty is made as to their accuracy or completeness.
