(performance data as of January 31, 2026)
“This is a very different world than the one we were in just a few months ago.”
– Robert Armstrong, Financial Times, referring to the value rotation and investors’ recent loss of speculative appetite
2026 has picked up right where 2025 left off, with fresh, boundary-pushing salvos from the U.S. administration leading to volatility in markets and a broader rethink of the global order. If your New Year’s resolution was to stop doomscrolling and block out the incessant noise from Washington, you’ve likely already fallen off the wagon.
January was not a month for the faint of heart. Despite equity markets largely finishing the month in positive territory, it was a bumpy ride, at least in North America. Markets fell after President Trump expressed his intention to “take” Greenland, potentially by force, which would have likely brought the long-standing NATO alliance to an abrupt end. Opposition in the U.S. (even amongst Republican lawmakers) and abroad was strong, with Europe showing atypical unity in forceful pushback, which led to further tariff threats by the U.S. President on any countries not supportive of his stance. However, as has been the case repeatedly, he back-peddled and we saw, perhaps, the biggest instance of the TACO trade (“Trump always chickens out”) since “Liberation Day”, after he told the audience at Davos 2026 that he would not use force after all, nor institute the tariffs.
Meanwhile, amidst the recent instability, precious metals like gold, silver and copper have not just been hitting new highs, they have gone parabolic. After appreciating by 67% last year, gold climbed by over 25% in January alone, hitting a peak near $5,600/oz. The appreciation of silver has been even more astonishing, rising 138% in 2025 and then by another 64% just in January to its peak above $116/oz. Several reasons have been cited in the media to help explain this price action. First, you have the tried-and-true explanation that gold and silver are safe-haven, store-of-value types of assets that see increased demand in periods of inflation or geopolitical tension. Second, because the U.S. dollar has been in gradual decline, these precious metals (priced in USD) look relatively more attractive to foreign investors, who then push the price higher. In addition, expectations for lower U.S. interest rates, U.S. debt sustainability concerns, industrial demand within advanced technologies (particularly for silver) and retail FOMO momentum are also all at play.
However, in the fading days of January, President Trump announced Kevin Warsh as his pick to succeed Jerome Powell as the new Chairman of the U.S. Federal Reserve (Fed) once his term expires in May. That announcement was the catalyst for a significant sell-off in both metals, with gold and silver declining 8% and 32%, respectively, over just three days. Because these precious metals are hedges against instability and inflation, perhaps investors are now resetting their expectations. In other words, through their collective selling of these metals, investors could be telling us that Kevin Warsh is an acceptable candidate who is far less likely to be Trump’s yes-man relative to some of the other candidates being considered.
Before the Kevin Warsh announcement, much of the talk surrounding the Fed was regarding news that U.S. prosecutors launched an investigation into Jerome Powell, linked to a US$2.5 billion refurbishment of the central bank headquarters. While the investigation, which seems politically motivated, is unlikely to find anything, its unprecedented nature had people concerned that Trump was taking a blatantly heavy-handed approach to influencing someone who has been steadfast in his independence to date, with regard to monetary policy. While the market has seemed to breathe a sigh of relief regarding the nomination of Kevin Warsh (he still needs to be approved by the Senate), concerns may exist about how far the President and those around him will go to get what they want. These worries could translate into increased inflation expectations and rising risk premia on long-term U.S. debt. In time, fears about central bank independence could exacerbate worries around U.S. debt sustainability and force long bond yields even higher. JP Morgan Chairman and CEO, Jamie Dimon, expressed these same comments, stating, “In my view, (the investigation) will have the reverse consequences. It will raise inflation expectations and probably increase rates over time.”1 And if long-term rates increase, so too will mortgage rates at a time when affordability is at the top of the political agenda.
With regards to affordability, President Trump has also directed Fannie Mae and Freddie Mac (Federal entities that guarantee mortgages) to purchase US$200 billion of mortgage-backed securities (MBS) to address the severe housing affordability problem the country faces. Buying up MBS would have the effect of lowering mortgage rates, but it would not make home buying more affordable. Why? Because it doesn’t address the root cause of the problem, which is that there aren’t enough homes. A reduction in mortgage rates makes home ownership more attractive, pushing up demand and, therefore, increasing home prices while doing nothing to impact the supply side of the ledger. Similarly, his crackdown on restricting institutional investors from getting into residential real estate is going to, ultimately, restrict supply (less construction), again leading to increased prices on existing homes. The irony here is that his actions are running at cross purposes.
The question some investors are now asking is whether we’ve moved from benign uncertainty to harmful instability. Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, penned an article for the Financial Times on January 15 entitled, “Investors Must Learn to Deal with Instability”2. Her view is that investors today are characterizing the environment as uncertain but might be understating what is truly different about this cycle. She characterizes today’s U.S. backdrop as persistently and disruptively unstable, likely to last for much of 2026. For investors, this is an environment where the relationships upon which they rely are constantly shifting and one in which they’ll need to navigate a regime where stock market leadership rotates more frequently and where returns are dominated by dispersion between sectors, styles and even companies with the same industry (anyone paying attention to the Information Technology (Tech) sector in January would have seen that). She goes on to write that, “one of the mistakes in volatile markets is the search for a single, dominant storyline which may be emotionally satisfying but analytically limiting. Instability resists clean answers. It rewards flexibility over conviction and process over prediction. It is a reminder that markets can move higher even when conditions feel uncomfortable, and that discomfort is often the price of admission for long-term returns.”
Among the many adjectives used to describe the President and his administration, “unpredictable” was the term referenced by Dan Ivasyn, CIO of the US$2.2 trillion asset manager PIMCO, in recent reporting that the firm would be shifting some exposure away from U.S. assets. “It’s important to appreciate that this is an administration that’s quite unpredictable”, he said. “What are we doing about that? We’re diversifying. We do think we’re in a multi-year period of diversification away from U.S. assets.”3
On, perhaps, a more optimistic note, recession expectations have dropped to a 4-year low. In the January edition of Bank of America’s monthly Fund Manager Survey, findings showed that the percentage of respondents thinking a recession was on the horizon over the next year was just 10%, down from above 70% last April. Meanwhile, Mark Zandi, Chief Economist at Moody’s Analytics, projects that U.S. GDP growth will be 2.5% for 2026, up from 2.1% last year, as the economy gets some juice from fiscal policy (debt-financed tax cuts putting money into people’s pockets this year)4. This will likely be a temporary boost and is all by design in a mid-term election year. He does, however, expect persistent upward inflation pressures based on the lagged effect of tariffs alongside weaker job growth and higher unemployment.
January saw strong equity returns across most markets, with leadership once again coming from international markets – both developed and emerging. The MSCI EAFE Index5, a measure of developed market equities outside of North America, delivered a 3.25% return in the month, which was more than double the U.S. market, while emerging markets (EM) were up a staggering 8.8%. As U.S. political own-goals create more instability and the U.S. dollar depreciates, investors are not only diversifying abroad but increasingly hedging any exposure they have to USD. Despite the potential tailwinds for the U.S. equity market during this mid-term election year, it seems international markets could be primed for yet another strong year after being much unloved for the better part of the past decade plus. Further evidence of diversification and potential risk-aversion in and away from the U.S. was evidenced by Dividend and Value exposures outperforming their Momentum and Growth counterparts. In fact, the MSCI World Growth Index6 was the only major index we track that was down for the month.
According to JP Morgan, EM equities experienced one of their strongest monthly inflows in over two decades7. Latin America in particular was in favour, and the broader group of EM constituent countries is benefitting from a weaker U.S. dollar, improving earnings momentum, moderating inflation and additional scope for monetary easing (stimulative rate cuts if needed). Korea, Taiwan, India and Latin America were the standouts in January, with the latter region buoyed by demand for industrial metals.
The Canadian market took a bit of a breather after a lights-out 2025. Despite roaring ahead of other developed markets for much of January, the sharp decline in certain commodity prices in the final days of the month put a big dent in what otherwise would have been an excellent month. All-told, the S&P/TSX Composite Index8 was up a modest 0.8% with Energy and Materials leading the way from a sector standpoint. The best-performing stocks in this index were Energy Fuels Inc. (Energy, +53%), Denison Mines Corp. (Energy, +48%) and MDA Space (Industrials, +44%).
In the U.S., it was the Russell 2000 Index9 (small caps) that significantly outperformed its large-cap counterpart, the S&P 500 Index10 (5.4% vs. 1.5%). Within the S&P 500, just as in Canada, the Energy and Materials sectors performed best; however, the leaderboard of top-performing stocks was heavily skewed towards Information Technology. That said, there was a wide range of return dispersion in Information Technology, and the sector overall was negative. Nonetheless, the top three stocks in January were SanDisk (Information Technology, +142%), Moderna (Health Care, +49%) and Seagate Technology Holdings (Information Technology, +48%).
With regard to the Canadian dollar, it appreciated by 0.7% in January, rising from US$0.7286 to $0.7338 amid further U.S. dollar weakness that saw the greenback decline 1.4% vs. a basket of global currencies11.
Performance within fixed income markets was broadly robust, particularly in Canada, where investment-grade bonds outperformed governments, and the longer duration profile of the FTSE Canada Universe Bond Index12 led to outperformance vs. its shorter duration counterpart. In the U.S., high yield was the best performer, followed by investment-grade corporate bonds outpacing both ‘aggregate’ and short-duration exposure.
As we’ve written for the past couple of months, our Fixed Income team remains of the view that 2026 is likely to be a coupon-clipping year as opposed to one offering much in the way of capital gain opportunities. For investors looking at corporate bonds for incremental yield pickup, but concerned about tight credit spreads, our team believes corporate bond exposure can outperform yet again and rhyme with the experience of 2025 for four main reasons. First, economic growth projections, despite pressures from U.S. tariffs, appear to remain benign and likely to remain ‘on trend’. Second, the rise in rates since 2022 has shortened the duration profile of investment-grade corporate bonds, making them less susceptible to rate changes moving forward. Third, default risks appear to be subdued and, fourth, all-in yields remain at levels that should support continued investor demand. When evaluating the credit curve here in Canada, the team believes the most attractive segment from which to harvest excess returns is in the middle part of the curve, between 6-10 year range, based on a combination of yield carry (the amount of income earned by simply clipping coupons) and roll-down (prices rising as bonds “roll down” closer to their maturity date).
Both the Bank of Canada (BoC) and the Fed met in January and held pat on interest rates. Here in Canada, that means rates remain at 2.25%. Notes from the BoC indicate that they expect modest economic growth in the near term, but it will be vulnerable to unpredictable trade policies and geopolitical risks. Nothing new. They went on to say that unemployment remains elevated and “relatively few businesses say that they plan to hire more workers”. Based on this and the economy operating with excess supply, they expect inflation to trend lower, falling from around 2.5% today to 2% by the end of the year. As of writing, the market is currently expecting Canadian interest rates to remain unchanged at 2.25% for all of 2026.
In the U.S., the Fed’s target range remains at 3.50-3.75%. With just two meetings left before the end of Jerome Powell’s tenure, Guardian Capital’s own VP of Economics, David Onyett-Jeffries, expects the Fed to remain on the sidelines at least until then. The market is pricing in two more rate cuts (50 bps) by the end of this year.
With regards to changes in the yield curves here in Canada and the U.S., it was much ado about nothing in January. While the U.S. did see some marginal uptick in the middle part of the curve, yields ended the month largely unchanged relative to where they started.
U.S. high yield spreads ended January at 2.80%, down just one basis point relative to December. Intra-month, we saw spreads go as low as 2.64%, though they climbed 16 bps higher in late January, largely due to President Trump’s remarks about taking control of Greenland, leading to some risk-off sentiment.
Our Buy the Way podcast schedule for February will include a macroeconomic update episode with David Onyett-Jeffries, as well as a discussion on International equity opportunities with Guardian Capital’s Senior Portfolio Manager, Andrew Cox. Be sure to follow us on your platform of choice so you don’t miss them!
Thanks as always for your attention. Have an excellent month of February!
John Pagliacci
Vice President, Investment Programs and National Accounts | Guardian Capital LP
John Pagliacci is Vice President, Investment Programs and National Accounts for Guardian Capital LP. He contributes to strategic planning for the Canadian retail asset management business, including product strategy and development, overall sales enablement initiatives and serving as a brand ambassador.
David Onyett-Jeffries
Vice President, Economics & Multi Asset Solutions | Guardian Capital LP
David Onyett-Jeffries is Vice President, Economics & Multi Asset Solutions, at Guardian Capital LP (GCLP). He provides macroeconomic guidance to GCLP and its affiliates. Additionally, he is a portfolio manager of GCLP’s multi-asset portfolios and funds and works closely with GCLP’s Directed Outcomes team.
¹ Financial Times article, “Unpredictable Trump Fuels Multiyear Shift by PIMCO from US Assets”, January 15, 2026
² Financial Times article, “Investors Must Learn To Deal with Instability”, January 15, 2026
³ Financial Times article, “Unpredictable Trump Fuels Multiyear Shift by PIMCO from US Assets”, January 15, 2026
⁴ Vox Media, Prof G Markets podcast, What Venezuela’s Regime Change Means for Oil, January 6, 2026, https://www.youtube.com/watch?v=cVxwq_jMr4c
⁵ The MSCI EAFE Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada.
⁶ The MSCI World Index captures mid- and large-cap representation across 23 developed market countries.
⁷ U.S. News & World Report L.P., “Analysis-Emerging Market Stocks Rally Appears Intact After Buoyant January Inflows, February 2, 2026,
https://money.usnews.com/investing/news/articles/2026-02-02/analysis-emerging-market-stocks-rally-appears-intact-after-buoyant-january-inflows
⁸ The S&P/TSX Composite Index is the benchmark Canadian index, representing roughly 70% of the total market capitalization on the Toronto Stock Exchange (TSX) with
about 250 companies included in it.
9 The Russell 2000 index is an index measuring the performance of approximately 2,000 smallest-cap American companies in the Russell 3000 Index.
10 The S&P 500 is an index of 500 stocks designed to reflect the risk/return characteristics of the large-cap US equity universe.
11 US Dollar Index (DXY), MarketWatch, https://www.marketwatch.com/investing/index/dxy
12 The FTSE Canada Universe Bond Index is the broadest and most widely used measure of performance of marketable government and corporate bonds outstanding in the Canadian market.
This commentary is for general informational purposes only and does not constitute investment, financial, legal, accounting, tax advice or a recommendation to buy, sell or hold a security. It shall under no circumstances be considered an offer or solicitation to deal in any product or security mentioned herein. It is only intended for the audience to whom it has been distributed and may not be reproduced or redistributed without the consent of Guardian Capital LP. This information is not intended for distribution into any jurisdiction where such distribution is restricted by law or regulation.
The opinions expressed are as of the date of publication and are subject to change without notice. Assumptions, opinions and estimates are provided for illustrative purposes only and are subject to significant limitations. Reliance upon this information is at the sole discretion of the reader. This document includes information concerning financial markets that were developed at a particular point in time. This information is subject to change at any time, without notice, and without update. This commentary may also include forward-looking statements concerning anticipated results, circumstances, and expectations regarding future events. Forward-looking statements require assumptions to be made and are, therefore, subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. Investing involves risk. Equity markets are volatile and will increase and decrease in response to economic, political, regulatory and other developments. Investments in foreign securities involve certain risks that differ from the risks of investing in domestic securities. Adverse political, economic, social or other conditions in a foreign country may make the stocks of that country difficult or impossible to sell. It is more difficult to obtain reliable information about some foreign securities. The costs of investing in some foreign markets may be higher than investing in domestic markets. Investments in foreign securities are also subject to currency fluctuations. The risks and potential rewards are usually greater for small companies and companies located in emerging markets. Bond markets and fixed-income securities are sensitive to interest rate movements. Inflation, credit and default risks are all associated with fixed-income securities. Diversification may not protect against market risk and loss of principal may result. Index returns are for information purposes only and do not represent actual strategy or fund performance. Index performance returns do not reflect the impact of management fees, transaction costs or expenses. Certain information contained in this document has been obtained from external parties, which we believe to be reliable; however, we cannot guarantee its accuracy.
Guardian Capital LP manages portfolios for defined benefit and defined contribution pension plans, insurance companies, foundations, endowments and investment funds. Guardian Capital LP is a wholly owned subsidiary of Guardian Capital Group Limited, a publicly traded firm listed on the Toronto Stock Exchange. For further information on Guardian Capital LP, please visit www.guardiancapital.com. All trademarks, registered and unregistered, are owned by Guardian Capital Group Limited and are used under license.
Published: February 10, 2025
Please note that for certain documents provided on this webpage, accessible formats can be made available, free upon request, from Guardian’s Human Resources department.
You may contact us via telephone, e-mail or in writing at:
Human Resources
Guardian Capital Group Limited
Commerce Court West
199 Bay Street, Suite 2700, P.O. Box 201
Toronto, ON M5L 1E8
Phone: 416-364-8341 | 1-800-253-9181
Email: hr@guardiancapital.com
