Economic Backdrop

Global equities, as measured by the MSCI ACWI Index, gained ground in January 2026. Optimism regarding relatively strong corporate earnings offset geopolitical concerns and worries about U.S. trade policy. Emerging markets significantly outperformed developed markets for the month.

Latin America was the strongest-performing emerging market in January, led by Colombia and Peru. Emerging Europe benefited from strength in Turkey and Hungary. Conversely, the Association of Southeast Asian Nations (ASEAN) underperformed due to a downturn in Indonesia. The Pacific ex Japan region was the top performer among the developed markets in January due to strength in Australia and New Zealand. The upturn in the Far East region was attributable mainly to rallies in Hong Kong and Japan. The most notable developed-market laggard was North America due to relative weakness in the U.S.

Global fixed-income assets, as represented by the Bloomberg Global Aggregate Bond Index, returned 0.9% (in U.S. dollars) in January. Mortgage-backed securities (MBS) led the U.S. fixed-income market, followed by high-yield bonds, investment-grade corporate bonds, and U.S. Treasury securities. Treasury yields moved modestly higher in all but the 1.5-month segment. (Bond prices move inversely to yields.) Yields on 2-, 3-, 5-, and 10-year Treasury notes rose by corresponding margins of 0.09%, 0.11%, 0.10%, and 0.08%, ending the month at 3.52%, 3.60%, 3.79%, and 4.26%, respectively. The 10-year to 3-month yield curve widened by 8 basis points (0.08%) to +0.59% as of January 31.

Global commodity prices, as measured by the Bloomberg Commodity Index, climbed 10.4% in January. The spot prices for West Texas Intermediate (WTI) and Brent crude oil surged 13.6% and 13.9%, respectively, during the month as Russia and Ukraine conducted drone attacks on energy and industrial facilities and U.S. sanctions on Venezuela’s oil sector, both of which stoked fears of potential supply disruption, as well as U.S. dollar weakness. (Oil prices typically move inversely to the U.S. dollar.) The gold price rose 9.3% for the month as investors sought safe-haven assets amid ongoing geopolitical concerns. The New York Mercantile Exchange (NYMEX) natural gas price skyrocketed 39.1% in January. The rally was attributable mainly to a sharp increase in demand caused by a massive winter storm and unusually cold weather due to a strong Arctic air mass across much of the U.S.

On the geopolitical front, the Trump administration announced on January 3 that U.S. military forces invaded Venezuela and arrested President Nicolás Maduro and his wife, Cilia Flores, on numerous charges, including cocaine importation conspiracy and possession of machine guns. On January 5, Maduro and Flores pleaded not guilty to the charges in U.S. federal court in New York. The administration subsequently revealed that the Venezuelan government agreed to provide the U.S. with between 30 and 50 million barrels of oil. In a social media post, Trump wrote, “This Oil will be sold at its Market Price, and that money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States!”

Greenland, as autonomous territory of Denmark, took the spotlight later in the month. In a social media post on January 17, Trump announced that the U.S. government would impose a 10% tariff on imported goods from several European countries opposing his bid to take control of Greenland, including Denmark, Norway, Sweden, the U.K., France, Germany, the Netherlands, and Finland. The new levies would take effect on February 1, and would rise to 25% in June if a deal were not reached “for the complete and total purchase of Greenland.” His comments raised fears in Europe that the U.S. would attempt to take Greenland by force if Denmark did not agree to a sale, leading to a selloff in global equity markets on January 20. In an address to the World Economic Forum in Davos, Switzerland on January 21, Trump said that the U.S. would seek to acquire Greenland via negotiations, not force, citing national security needs. He criticized European government leaders and the North Atlantic Treaty Organization (NATO), calling Denmark "ungrateful.” Later that day, Trump reversed course, indicating that he would not assess the tariffs because he had reached a “framework of a future deal” with NATO Secretary-General Mark Rutte for Greenland and the “entire Arctic region.” Trump’s comments prompted a relief rally in the U.S. stock market.

Economic Data (unless otherwise noted, data sourced to Bloomberg)

• According to Statistics Canada, consumer prices (as measured by the change in the Consumer Price Index (CPI)) slid 0.2% in December. Year-over-year consumer prices were up 2.4% as the effects of the temporary Goods and Services Tax (GST)/Harmonized Sales Tax (HST) break implemented in December 2024 have now rolled off the annual calculation. Producer prices were mixed in December, as the Industrial Product Price Index (IPPI) declined 0.6%, while the Raw Materials Price Index (RMPI) rose 0.5%. Year-over-year prices increased 4.9% and 6.4%, respectively, for the IPPI and RMPI. Input prices for metals have sharply increased over the past 12 months; meanwhile, crude oil prices were weak. The Canadian labour market contracted by 25,000 jobs in January. Despite the net loss of jobs, the unemployment rate fell 0.3% to 6.5% as fewer Canadians sought employment.
   
• The U.S. Department of Labor reported that the consumer-price index (CPI) rose 0.3% in December. (The government did not provide month-over-month inflation numbers for November for comparison purposes as the Bureau of Labor Statistics was unable to collect the data due to the 43-day government shutdown that ended in mid-November.) Costs for energy and food rose 1.0% and 0.7%, respectively, in December, while used car and truck prices fell 1.1%. The CPI advanced 2.7% year-over-year in December—unchanged from the previous month and slightly below expectations. Costs for utility gas service climbed 10.8% over the previous 12-month period, while electricity prices were up 6.7%. In contrast, gasoline prices declined 3.4% year-over-year. Core inflation, as measured by the CPI for all items less food and energy, posted a lower-than-expected rise of 2.6%, matching the annual upturn in November. Medical services and housing costs saw corresponding increases of 3.5% and 3.2% over the previous 12 months. According to the revised estimate from the Department of Commerce, U.S. gross domestic product (GDP) expanded at an annual rate of 4.4% in the third quarter of 2025—marginally higher than the government’s initial estimate of 4.3% and up from the 3.8% gain in the second quarter. The upturn in the economy for the third quarter was attributable primarily to increases in consumer spending, exports, and government spending. Conversely, there was a decline in residential fixed investment (purchases of private residential structures and residential equipment that property owners use for rentals). The upward adjustment in third-quarter GDP from the initial estimate resulted from increases in exports and private inventory investment (a measure of the changes in values of inventories from one time period to the next), partially offset by a downward revision to consumer spending.
   
• According to the Office for National Statistics (ONS), inflation in the U.K., as measured by the CPI, rose 0.4% in December. Costs for transportation, furniture and household goods, and alcohol and tobacco posted the largest gains for the month, while recreation and culture saw a small decline. The CPI advanced at an annual rate of 3.4% for the month, up from the 3.2% year-over-year upturn in November. Prices for education, alcohol and tobacco, and housing and household services rose 7.6%, 5.2%, and 4.9%, respectively, over the previous 12-month period. Conversely, costs for furniture and household goods were down 0.6% year-over-year. Core inflation, as represented by the CPI excluding energy, food, alcohol, and tobacco, was up 3.2% over the previous 12 months, matching the annual increase in November.3 The ONS also announced that U.K. GDP ticked up 0.1% for the three-month period ending in November 2025 (the most recent reporting period), matching the growth rate for previous three months. Output in the services sector increased 0.2% for the most recent three-month period, while the construction and production sectors declined 1.1% and 0.1%, respectively.
   
• Eurostat pegged inflation for the eurozone at 1.9% for the 12-month period ending in December, modestly lower than the 2.1% annual increase in November. Costs in the services sector rose 3.4% year-over-year in December, down marginally from the 12-month advance of 3.5% in November. Prices for food, alcohol and tobacco increased 2.5% year-over-year in December versus the 2.4% annual upturn for the previous month, while energy prices declined 1.9% over the previous 12-month period. Core inflation, which excludes volatile energy, food, and alcohol and tobacco prices, increased at an annual rate of 2.3% in December, slightly lower than the 2.4% year-over-year rise in November.5 According to Eurostat’s initial estimate, eurozone GDP rose 0.3% in the fourth quarter of 2025—unchanged from the growth rate for the third quarter of this year—and increased 1.3% over the previous 12-month period, down marginally from the 1.4% year-over-year increase in the third quarter. The economies of Lithuania, Spain, and Portugal were the strongest performers for the fourth quarter, expanding 1.7%, 0.8%, and 0.8%, respectively. In contrast, GDP for Ireland contracted by 0.6% during the quarter.
   

Index Data (January 2026)

• The S&P/TSX Composite Index gained 0.84%.
• The FTSE Canada Universe Bond Index was up 0.58%.
• The S&P 500 Index, which measures the performance of U.S. equities, inched up 0.22%.
• The MSCI ACWI (Net) Index, used to gauge global equity performance, gained 1.72%.
• The ICE BofA U.S. High Yield Constrained Index, representing U.S. high-yield bond markets, returned 0.34% (currency hedged) and -0.74% (unhedged).
• The Chicago Board Options Exchange Volatility Index (VIX)—which tracks implied volatility in the S&P 500 Index and is often referred to as the “fear index”—ended January at 17.44, higher than its December close of 14.95.
• The WTI Cushing crude oil price—a key indicator of movements in the oil market—increased from US$57.42 to US$65.21 a barrel during January.
• The Canadian dollar strengthened to C$1.35 per U.S. dollar. The U.S. dollar was mostly weaker against the world’s other major currencies, ending January at US$1.19 versus the euro, US$1.37 against sterling, and at 154.26 yen.

Glossary and index definitions

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