Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Data Softens
BMO Canadian rates and macro strategist Benjamin Reitzes titles his weekend column Sour Start to 2026 for Canada,
“A mere two weeks into the New Year and any chatter about rate hikes is quickly fading as the data point to a soft end to the year for the economy … The December jobs report was the first sign that the strong data run wasn’t sustainable. Employment growth moderated sharply in the month following a 180k surge in the three months to November. The unemployment rate unwound half the decline over those months as well. At 6.8 per cent, the jobless rate continues to signal that the economy is running with excess capacity. The Bank of Canada interprets the latter as putting downward pressure on inflation, which is keeping rate cut hopes alive for those who are dovishly inclined. Slowing population growth should help dampen any upward pressure on unemployment as well … Looking back to 2025, one of the bigger surprises is how well the Canadian economy held up amid severe pressure from tariffs and trade uncertainty … Interestingly, domestic demand growth was strong in Q2 before flatlining in Q3, with rate cuts no doubt providing support. The uneven performance is expected to continue. This week’s November data points suggest GDP would do well to eke out any growth at all in the month .. Fortunately, net exports look like they might be strong enough to drive a small positive. The next Bank of Canada meeting is in a few weeks … We continue to assert that the bigger near-term risk remains skewed to a rate cut, though our base case has not changed from the BoC holding policy steady through 2026”
“Sour Start to 2026 for Canada” – BMO Economics (Weekly Focus report)
Supreme Court and Trump’s Tariff Power
Evercore ISI chief strategist of international political affairs Sarah Bianchi expects the Greenland-related headlines to get worse before they get better,
“The EU is a very large/systemic trading partner on par with Canada/Mexico and China, so as with those trading partners, we do not expect that President Trump wants a protracted trade war … investors should be prepared for the likelihood that we are still on the way up in the “escalate to de-escalate” cycle, and that the headlines could get worse before they get better. If implemented, these tariffs would violate the U.S.-EU and U.S.-UK trade deals struck earlier this year, sending a worrisome signal not just to those trading partners but to any other that has made or is contemplating a trade deal with Trump … Trump has continued to take actions that rely on IEEPA, and we do not expect the Justices are likely to dramatically change their thinking based on Trump’s continued use of tariffs for geopolitical reasons. As we have written (link and link), we still think it’s likely the court will rule against the Administration – potentially providing another way to defuse this crisis”.
Rental Apartment Construction Soars
National Bank economists Daren King and Matthieu Arsenau noted a record year for rental apartment construction,
Data released this morning by CMHC on housing starts in December show an increase to 282,400, well above economists’ consensus of 260,000. For the year as a whole, housing starts reached 259,000 units, up 5.6 per cent from 2024. While this figure is well below the federal government’s ambitious, even unrealistic, goal of reaching 500,000 housing starts per year within 10 years, it is still the third-best year on record. As today’s Hot Chart shows, for the first time, more than 50 per cent of units were intended for the rental market, leading to record construction in this segment. This helped ease the market, as evidenced by the record increase in the vacancy rate, which returned to its historical average. This is good news because, even though asking rents are currently falling, rents as a whole continue to rise at a faster rate than average wages (4.7 per cent year-over-year in November). For affordability to improve, construction projects must remain profitable in order to get off the ground, despite high interest rates and exorbitant construction costs. Already, a significant portion of rental construction benefits from a government program through CMHC (88 per cent in 2024), and policymakers will need to ensure that these programs continue to support activity.”
Bluesky post of the day
To paraphrase J. Paul Getty, if the US owed China $100, that would be a US problem. But when the US owes China ~$680 billion, that represents ~2.1% of total Treasuries outstanding, and there’s no alternative to US markets, it’s China’s problem.
— Karl Schamotta (@karl-schamotta.bsky.social) January 18, 2026 at 4:01 PMDiversion
Diversion: “Why do so many celebrities have Lyme disease?” – CBC