Market Recap: U.S. and Canada

Considering the major tariff ruling, the U.S. markets ended the week relatively flat. When word first got out, the markets jumped, then pulled back, and then everything settled down. By the end of the week, buyers stepped back in, especially in Canada.

As for the numbers, the TSX led the week with a very impressive gain of 4.20%, followed by the Nasdaq 100 up 1.32%, the S&P 500 rising 1.12%, and the Dow Jones Industrial Average trailing with a 0.35% increase.

Major Economic Stories This Week

Canada’s Inflation Cools, But Food Heats Up

Inflation in Canada eased slightly to 2.3% in January, continuing a gradual moderation.

This report aligns broadly with central bank projections for early 2026. Transportation prices dropped sharply, falling 17% year over year as gasoline plunged 16.7%, helping offset persistent pressure elsewhere. Shelter inflation slowed to 1.7% from 2.1%, while household operations cooled to 2.5% from 3.6%. Food prices, though, accelerated to 7.3% from 6.2%, driven largely in part by restaurant prices spiking 12.3%. The trimmed-mean core rate fell to 2.4% from 2.7%, its lowest level since April 2021 and below the expected 2.6%, adding weight to signs of easing underlying pressure.

• Gasoline plunge drove headline disinflation in January

• Restaurant prices rose at double-digit pace

• Shelter inflation continued gradual cooling trend

• Core inflation hit lowest level since 2021

US Durable Goods Orders Pull Back

Manufacturing activity softened in December, though underlying business investment signals remained relatively steady.

New orders for durable goods fell 1.4% month over month after a revised 5.4% jump in November, a smaller drop than the 2% decline expected. Transportation equipment fell 5.3%, including a sharp 25.9% drop in non-defence aircraft and parts. Excluding transportation, orders rose 0.9%, beating expectations of 0.3%. Orders for non-defence capital goods excluding aircraft increased 0.6%, following a 0.7% gain, so firms are still cautiously investing.

• Aircraft slump weighed heavily on headline reading

• Capital goods orders declined 3.9% overall

• Defence aircraft orders rose 9.5%

• 2025 durable goods orders up 7.8% year over year

Core PCE Inflation Reaccelerates

The Federal Reserve’s preferred inflation gauge showed renewed firmness at year end.

Core PCE rose 0.4% month over month in December, above expectations of 0.3% and marking the sharpest increase since February 2025. On a year over year basis, the index climbed 3%, again highlighting the challenge facing policymakers in their quest for a sustained return toward target. The data was similar to recent central bank commentary that the disinflation process is progressing more slowly than anticipated.

• Monthly increase strongest since February

• Annual core PCE remains at 3%

• Inflation proving stickier than hoped

• Rate cut expectations face renewed scrutiny

US Growth Slows Sharply In Q4

GDP expanded at an annualized 1.4% in Q4, down from 4.4% in Q3 and well below forecasts of 3%.

Consumer spending slowed to 2.4% from 3.5%, with goods purchases slipping 0.1% while services rose 3.4%. Government spending contracted 5.1%, subtracting 0.9 percentage points from growth due to the shutdown. Fixed investment improved to 2.6%, led by intellectual property at 7.4% and equipment at 3.2%, while residential investment declined 1.5%, a milder drop than prior quarters.

• Government shutdown materially reduced growth

• Exports fell 0.9% after prior surge

• Full-year 2025 growth slowed to 2.2%

• Residential investment decline moderated

TOP INSIGHTS

Cooling Inflation Changes The Conversation

This week’s Canadian inflation numbers shift the tone, even if ever so slightly. Headline numbers are drifting lower, and core measures are finally easing in a more convincing way, and that gives the central bank breathing room, but no, it doesn’t guarantee immediate action.

For the everyday family, the story is mixed. Filling up the tank costs less, but right in line with last week’s poll question, eating out is noticeably more expensive. When restaurant prices jump into double digits, it has an impact. Because consumer psychology is more likely to respond more to food and housing, in other words things we feel every day, it matters more.

Here’s what what we should look for next. If food inflation remains elevated and shelter continues to cool, the Bank of Canada may tolerate uneven price pressures as long as the broader trend stays intact. That’s the key. Markets will likely interpret continued core moderation as a green light for eventual rate relief.

Sticky US Prices Complicate Rate Hopes

The 0.4% jump in core reinforces a pattern. Inflation in the US is no longer falling smoothly toward target. It is grinding lower, with periodic flare-ups. What makes this especially important is that core PCE is the Federal Reserve’s preferred inflation gauge, meaning it carries more weight in policy decisions than headline CPI.

This could mean a longer wait for rate cuts than many investors pencilled in late last year. That translates into continued pressure on borrowing costs, from credit cards to mortgage renewals. For businesses, it means capital decisions will remain very closely tied to the language coming out of the Fed.

If monthly readings continue to print around 0.4%, expectations for rate cuts could shift meaningfully and fairly quickly.

Growth Is Slowing Faster Than Expected

Given the huge miss relative to expectations, not a lot of us saw this coming. The sharp deceleration in US GDP tells a broader story. Momentum is fading, and the engine of consumer spending is cooling. We saw that in last week’s numbers as well. Services remain solid, but goods purchases have stalled, and that’s a classic late-cycle signal.

I believe the government shutdown’s drag should be temporary, but the slowdown in consumption feels more like a structural concern. Households are navigating higher financing costs and fading excess savings, and that shifts behaviour.

When we get out of all of this is tension. Slower growth supports the case for lower rates, but sticky inflation pushes the other way. The balance between those forces will define the next quarter.

TOP STORY
Supreme Court Blocks Trump’s Tariff Playbook

• RisingCourt limits unilateral tariff power, pushing fight back to Congress

• White House pivots to alternate tariff authority right away

• Refund and compliance questions hang over importers and markets

• Trade partners face a fresh round of policy uncertainty

In the biggest news of the week, the U.S. Supreme Court struck down President Donald Trump’s far-reaching global tariffs in a 6-3 decision, delivering a rare, high-profile rebuke on a cornerstone of his economic agenda. The ruling centered on Trump’s use of the International Emergency Economic Powers Act to impose what he called “reciprocal” tariffs and other duties tied to declared emergencies, with the Court deciding that this kind of sweeping, economically significant move needs congressional authorization. That is a huge decision, and it matters because tariffs function like a broad tax on imports, and the opinion openly acknowledged the messy aftermath, including the question of what happens to the billions already collected and how unwind mechanics might work in practice.

Why This Ruling Changes The Rules

Chief Justice John Roberts wrote that there is no emergency-statute carveout from the major questions doctrine, meaning Congress must speak clearly when an action carries major economic and political consequences. The Court also highlighted how unusual this tariff strategy was under IEEPA, noting that prior uses of the law leaned toward sanctions rather than blanket import duties. Business groups and small firms that challenged the tariffs framed the decision as a step toward predictability, and the broader takeaway for markets is that “tariff risk” is now as much a legal and procedural question as it is a policy one.

What Happens Next For Trade Policy

In true Trump fashion, the President’s response was to vow new levies, including the imposition of a 10% global tariff using Section 122 authority, a path the AP notes is limited to 150 days and has not been used this way before. On Saturday, he said he would increase that to 15%, the maximum allowed under a never-used trade law.

So now we move to the next phase as a test of alternative statutory tools, political appetite, and the again, we’ll have to see whether the courts will tolerate Trump’s creative workarounds. The end result isn’t 100% settled, but at least there is some sense that once again, the law matters, and that should bring a stronger sense of certainty.

Read the full story here.

The Supreme Court’s ruling has shifted the balance of power in a way that goes beyond one administration or one policy. Trade authority now sits squarely in a constitutional spotlight, and markets are recalibrating what that means for future tariff risk and political strategy. What do you think this major ruling actual says?

Please vote on this week’s question:

LAST WEEK’S POLL RESULTS

In last week’s poll, I asked how rising restaurant costs are affecting your dining habits. A decisive 77% said you’re eating mostly at home, 21% are dining out about the same as before, and only 2% are going out more. Clearly, higher menu prices are nudging most of you back toward your own kitchens. In a lot of cases, the food actually tastes better too! 😋 Thanks to everyone who voted.

INVESTMENT CHOICES
ETF Boom Masks Bigger Questions

• ETF inflows shattered records again this year

• Product growth has exploded over the decade

• Mutual funds steadily losing relative momentum

• Experts warn investors misjudge what they own

Canadian ETFs are having a moment. After pulling in $125.8 billion in 2025, January of this year alone set another record with $22.3 billion in new money, which looks like a decisive shift in investor preference. Assets in ETFs have nearly tripled since 2020 to $713 billion, while mutual funds have grown more modestly to $2.528 trillion. The product shelf has also expanded dramatically, with 1,489 ETFs now available, up from 374 just 10 years ago.

The Wrapper Is Not The Strategy

For new investors, it’s important that we all remember is that ETFs and mutual funds are just containers. One trades intraday and one settles at day’s end, but structurally they are both baskets of securities. I think that sometimes that distinction gets lost in the marketing. Investors often assume ETF automatically means low cost and diversified exposure, but that isn’t guaranteed anymore.

Choice Is Growing, So Is Confusion

Lisa Kramer of the University of Toronto highlights something behavioural finance has warned about for years: representativeness bias. Early ETFs were broad, low-fee index trackers. Today’s lineup includes leveraged and niche strategies that look nothing like those original products, and when there are nearly 1,500 options on the shelf, picking the wrong one becomes easier. The real risk isn’t choosing ETFs; it’s choosing them without understanding what is inside.

Read the full story here.

WHO WOULD HAVE THOUGHT?
A Stunning Comparison For Canada

• Canada briefly slipped below Alabama on GDP per person

• Investment surge reshaped parts of the Deep South

• Population growth distorts per capita comparisons

• Competitiveness questions are getting louder

When I first saw the headline that Canada had become poorer than Alabama on a per capita basis, I must say I was puzzled. The comparison came after economists adjusted GDP for currency and cost differences and found Canada sitting around US$55,000 per person in 2022, roughly level with Alabama before slipping slightly behind. The numbers have since gone back and forth, but the symbolism is pretty harsh.

Alabama’s Reinvention Is Real

The linked article tells the story of a state that has aggressively reinvented itself. Major auto plants from Mercedes-Benz, Toyota and Hyundai now anchor a manufacturing ecosystem that produces 1.2 million vehicles annually, not far behind Ontario’s 1.3 million. Huntsville’s biotech cluster and aerospace legacy have attracted investments like Eli Lilly’s US$6-billion facility. What really jumps out at me is the emphasis on speed to market. Permits move quickly. Incentives are structured with clawbacks. The pitch to global capital is clear and unapologetic.

GDP Per Capita Is Not The Full Story

Still, before those of us in Canada panic, per capita GDP can oversimplify reality. Alabama’s life expectancy sits at 74 years versus Canada’s 82. Income inequality is stark, minimum wages are low and public services vary widely by community. Another factor to consider is that Canada’s population has spiked by two million people in just two years and that temporarily weighs on the per capita math. I think the deeper takeaway isn’t so much about one state outperforming one country but rather it’s more about competitive pressure. Capital is mobile. If Canada, or any other region, can’t clearly state why investment belongs here, someone else will.

Learn more here.

Wall Street’s Take On The Dow Right Now: Analysts weighed in on all 30 Dow components, ranking them buy, hold or sell, offering a snapshot of where large-cap conviction is strongest in today’s shifting rate and growth backdrop.

Jet Red Tape Could Slow Luxury Deliveries: Transport Canada is tightening oversight on Gulfstream jet certifications, a move that could delay aircraft deliveries and raise compliance costs, adding fresh turbulence to Canada’s aerospace supply chain.

‘Made In Canada’ Comes With A Price Tag: A retailer was fined after imported food was marketed as Canadian, a reminder that supply chain shortcuts can carry regulatory penalties and reputational damage in a cost-sensitive grocery market.

From Prairie Startup To $1M Backing: A Saskatchewan non-alcoholic winery secured a $1 million Dragons’ Den deal, highlighting how investor capital is flowing toward premium alcohol alternatives and wellness-driven consumer brands.

Who Pays Back The Tariffs?: After a major court ruling, businesses are lining up for tariff refunds, raising the prospect of significant government payouts and new uncertainty for trade policy and fiscal planning.

CRA’s Digital Makeover Gets Its Big Test: This tax season will reveal whether the CRA’s revamped systems can speed up refunds and reduce headaches, or whether growing pains will frustrate filers at a critical moment.

RRSPs Aren’t The Whole Story: Tax deductions are appealing, but long-term RRSP success hinges on smart asset allocation, cost discipline and what actually sits inside the account.

Private Investment Fees Are Climbing: Ultra-wealthy families are facing higher costs and tougher deal terms from private investment firms, signalling a shift in leverage as competition for exclusive opportunities intensifies.

Global Growth Jitters Return: Fresh concerns about slowing global momentum are resurfacing, adding pressure to policymakers and investors already navigating sticky inflation and fragile expansion.

Big Tech’s Legal Bill May Be Rising: Social media companies are confronting escalating legal challenges tied to youth mental health, increasing regulatory exposure and potential long-term financial risk.

New Lawsuits, New Political Headaches: Legal disputes involving federal officials are raising oversight questions, adding reputational risk and potential operational strain within key government agencies.

The Relative Strength Indicator (RSI) can provide a signal that suggest a stock is either overbought or oversold.
📈A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell.
📉A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.

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