Global Asset Allocation Team Market Update – January 2026

Global equity markets (+0.9%) edged higher in December. The S&P 500 (-0.1%) lost some of its lustre, with technology stocks struggling as AI-related momentum stalled towards year-end. The Nasdaq was down -0.7%. The S&P/TSX (+1.1%) pushed higher thanks to solid performance in the heavyweight financials and materials sectors. Elsewhere, the MSCI EAFE (+2.9%) breached a new record – while the MSCI gauge of emerging market stocks (+2.7%) rallied after President Xi Jinping declared China is set to meet its 5% growth target for 2025.

By contrast, fixed income markets generated negative results. While the Federal Reserve cut rates by 25 basis points at the final gathering of 2025, signs of economic resilience saw traders push out their wagers for additional rate cuts to late 2026. The yield curve steepened. While the policy-sensitive two-year treasury yield was little changed at 3.47% – the ten-year yield jumped to 4.17% as lingering inflation risks pushed longer-term yields higher. In Canada, the combination of labor market strength and sticky core inflation cemented the case for the Bank of Canada to hit the sidelines. Consequently, the two-year government bond yield rose 17 basis points to 2.59% – while the ten-year yield jumped 29 basis points to 3.43%. For the month, the Bloomberg US Aggregate Bond Index declined -0.2%, while the FTSE Canada Bond Universe shed -1.3%.

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