Weekly market wrap

New Year, New Economic Data and Policy Shifts: 3 Things to Watch

Key Takeaways

• The first week of 2026 has been an eventful one. We are watching the geopolitical shifts in Venezuela, the December labour-market data, and the U.S. Supreme Court decision on tariffs.
• Overall, while these events may create headlines, in our view, the outcomes may have a limited impact on the economy or markets in the near term. We believe the Fed remains on track to cut rates one to two times in 2026, while the Bank of Canada likely remains on hold.
• Your financial advisor can help you navigate economic, geopolitical and policy shifts, and help ensure your portfolio remains on track to achieve your personal financial goals.

The first week of 2026 has been an eventful one, from both an economic data lens and a policy and geopolitics perspective. In this short period of time, we have seen U.S. military action in Venezuela, digested a fresh set of U.S. and Canadian labour-market data, and are awaiting a decision from the U.S. Supreme Court on tariff policy.

What are the implications of these actions, and what do investors need to know? We highlight three key takeaways below:

1. Venezuela actions may have long-term implications for oil prices

Over the January 3 weekend, the U.S. military executed a mission to capture Venezuelan leader Nicolas Maduro and his wife Cilia Flores. They were flown to New York and charged with narco-terrorism conspiracy and other crimes. Perhaps most notably, the U.S. administration has indicated that the U.S. would now run Venezuela until a safe and judicious transition of power takes place. In addition, the U.S. is planning to rebuild the oil infrastructure in Venezuela, with support from major U.S. energy companies.

What are the implications of these actions? From a macroeconomic perspective, we know Venezuela is a relatively small player. Its economy is less than 1% of global GDP, and it represents less than 1% of global trade*. The country does have about 17% of global oil reserves, but due to failing infrastructure, they deliver just about 1% of global production*. Thus, assuming these tensions remain contained, there is likely limited systemic risk to the broader global economy in the near term.

However, perhaps the broader implication to monitor is the precedent this action may set globally, especially given that the U.S. plans to retain power in Venezuela until a transition of government occurs. It is still early days, but this could be a longer tail risk to watch, particularly given economies such as China and Russia are contemplating their own next steps.

In addition, there may be implications to oil prices if the U.S. and energy companies are successful in rebuilding Venezuelan oil infrastructure. While revitalizing the Venezuelan oil industry will likely take time and investment – estimates call for 10 years and upwards of $100 billion* – there may be a broader issue around whether energy companies would welcome the additional oil supply.

Keep in mind that oil prices are currently near multiyear lows*, and oil markets globally continue to face oversupply issues*. The shift toward trends like electric vehicle adoption in China also can create less demand for traditional oil and energy.

Over time, if additional Venezuelan oil supply creates more downward price pressure, oil companies could face operating at below break-even rates – not favourable for shareholders or profitability. Thus, in the near term, while oil prices could move marginally higher given potential disruption to Venezuelan supply, the longer-term picture may include more oil supply and lower prices, assuming the energy companies remain onboard.

2. The labour-market data is mixed in Canada and the U.S.

The first week of the new year also brought new labour-market data, including the first clean U.S. nonfarm-jobs report since the U.S. government shutdown. 

Overall, the U.S. labour market seems to be painting the same sluggish picture we saw for much of last year. The jobs-growth figure for December came in at 50,000, below estimates of 70,000*. Notably, the prior two months of jobs figures were revised lower by 76,000, bringing the three-month average to -22,333 in monthly job gains*. More broadly, the 2025 average monthly job gains figure was just 49,000, well below the 2024 average of 168,000*.

While we are seeing a clear slowdown in job growth in the U.S., perhaps the silver lining is that the unemployment rate remains steady, coming in at 4.4% in December versus forecasts of 4.5%*. This has been driven by marginal growth in the U.S. labour force, which has helped keep unemployment rates contained*.

Similarly, in Canada, job growth in the December employment report was weaker than the prior month, coming in at 8,200, although above forecasts of -2,500 jobs*. The unemployment rate rose to 6.8% from 6.5%, but driven largely by a rise in those looking for work, rather than a rise in layoffs*. Overall, in our view, the labour market is steadying in Canada but monthly data may be choppy. 

What are the implications for central-bank policy? While the December jobs reports were mixed, we believe the overall takeaway for both the Fed and the Bank of Canada will be to stay the course, for now.

The Fed faces a similar outlook to last year: The U.S. job market is cooling, and caution is warranted. In our view, the Fed remains on pace for one to two more cuts in 2026.

We believe that the Bank of Canada (BoC), however, will remain on hold at 2.25% in the near term. Steady Canadian economic growth and labour market, combined with in-line inflation, likely keeps the BoC in a holding pattern through the January rate decision.

3. Supreme Court decision on tariffs may be imminent

While investors did not get a decision by the U.S. Supreme Court around tariffs last week, there may be one imminent in the weeks ahead. At the heart of the decision is whether the president and U.S. administration has the authority to impose tariffs as expansively as it has done under the IEEPA (International Emergency Economic Powers Act).

What are the implications if tariffs are deemed illegal by the court? Overall, if the Supreme Court does strike down the tariffs under IEEPA, in our view the implications to markets and investors may be limited for a few reasons.

First, the U.S. administration has alternative methods of implementing tariffs that it could pursue, including statutes like Section 232 (national security) and Section 301 (unfair trade practices)*. Notably though, these are more complex and we think could take time to implement. For Canada, the review of the USMCA in mid-July will be a key set of negotiations around the Canadian tariff regime.

Second, while there has been speculation that the U.S. may have to issue refunds to companies impacted if tariffs are struck down – upwards of $150 billion – there is no clear mechanism to issue these refunds*. Again, this process may take time and get mired in the courts, and the administration could potentially find ways to implement tariffs again in the interim.

And third, if the refunds are issued to impacted companies, the roughly $150 billion remains somewhat negligible relative to both the $38 trillion U.S. federal debt and the roughly $30 trillion U.S. GDP figure in 2025. While more money into the system may create some inflationary tension, it could also help bolster economic activity and help support ongoing GDP and earnings growth.

Overall, while it has been an eventful first few days of 2026 – from a geopolitical, economic data, and policy perspective -- we think the good news is that markets remain focused on key drivers. 

U.S. and Canadian earnings growth are expected to rise in 2026, to about 14.7% in the U.S. and 15.5% year-over-year in Canada, driven by a broad set of sectors*. And economic growth should continue to be positive, with the U.S. first-quarter GDP growth forecast to be 2.5% annualized, and Canadian GDP growth expected to be about 1.4%, according to Bloomberg. As a result, the S&P 500 is up about 1.9% in 2026 thus far, while the Canadian TSX is up about 2.8% (CAD)*. 

In our view, given where we are in this cycle, the case for diversification in equity markets is compelling in 2026. We favour U.S. large-cap stocks, which are exposed to the AI theme, alongside U.S. mid-cap stocks, which are more weighted toward cyclical sectors and have scope for catch-up. We also recommend looking globally, for example in emerging-market equities, which can do well when central banks lower rates and offer exposure to a global technology theme. 

Your financial advisor can help you navigate economic, geopolitical and policy shifts, and help ensure your portfolio remains on track to achieve your personal financial goals.

Mona Mahajan
Senior Investment Strategist

^{Sources: *Bloomberg}

Weekly market stats

^{Source: FactSet, 1/9/2026. Bonds represented by the Bloomberg Canada Aggregate Bond Index. Past performance does not guarantee future results. *Morningstar Direct, 1/11/2026.}

The week ahead

Important economic data for the week ahead include manufacturing shipments and housing starts data in Canada, and CPI and PPI inflation, hourly earnings and retail sales in the U.S.