Our reports: Economic Impact

Welcome to Economic Impact. We are June 10th, 2026. Stéfane, so happy to be here with you again today.

Happy to be here with you.

So, I'm going to start hard. I'm going to ask you if we are in the most feared word for an economist. Are we in a recession?

That's a big word.

I know.

Yeah. I think it's important to demystify what's happening there. You know, the fact that people qualify recession as two consecutive quarters in that negative growth is not sufficient nowadays, not in a globalized economy. So, there were special factors that impacted Canadian GDP in the first quarter. But listen, I'm not here to be complacent, Nancy. Clearly, if you look at it from a year-to-year basis, you know, we're at 0, slightly negative. The U.S. is outperforming. Clearly it was not a great quarter, but it does not qualify as a recession.

So, that's a good news. You start with the scary graph, but it's a good news.

Yes. More importantly, what's happening for Q2 and the good news is that employment is rebounding and it's not just any type of jobs, it's full-time employment that is now back to an all time high. And the increase that we saw in May was the biggest increase in Canadian history outside the COVID episode. So, clearly.

Something.

It wasn't great in Q1.

Yeah.

But whatever it was, it wasn't a recession, but things looked much better because that will sustain consumption. Consumption was still positive in Q1, consumer spending. But with this type of job creation, it will remain resilient in the second quarter. So, I have the basically, the biggest component of GDP that is going to show a rebound in Q2. So that's good news.

So that's why Bank of Canada didn't move its rate this morning?

Yes because if they thought we were in a recession, let's be honest, they would have actually cut interest rates, not keep them where they are right now. They recognize that growth is underwhelming, but they will not also at the same time conclude that this is a recession. Not with what's happening on the job market.

That's good. And what about our GDP? How's it going?

Well, GDP, you mean the most important component after consumption.

Trade surplus.

The trade surplus. So, we spoke about it a few weeks ago as Canada normally benefits from higher energy prices. We have the confirmation for Q2, Nancy. New all-time record on net energy exports which brought the trade balance back from deficit into surplus. So, I have the two largest components of GDP in Q2 consumption that's doing better and the export sector. Now all we need is more business investment. We'll see what USMCA later this year, but I have a GDP rebound in the makings for Q2.

That's interesting because we had one scary graph, two good news. But then again, our loonie is the lowest that we've seen in so many times.

Well, it's.

And people are gonna take their summer vacation now, right?

Yeah, well, let's wait a few months. I don't think there's much more downside to the Canadian dollar at this point in time unless USMCA is completely derailed. But the reality is we have the worst performing reserve currency over the past month. So, we're actually back to where we were at the worst of the Hormuz.

Beginning of.

Beginning of the intervention in the Strait of Hormuz. So, this is not good news. This is frustrating for me as an economist. But we had predicted that Q2 might be softer and.

It shouldn't go down, right?

We're happy to stabilize it at this level here unless, as I say, there's a derailment in USMCA negotiations.

Absolutely. And what about gold? I recall one of our first calls of the year, we had called it for $5000 and it did surpass.

So yes, it did. And the reason we're here, Nancy, is because gold prices are not doing very well right now. We started the year at more than $5200. We're back down and we had said that gold will be in a $4000 to $6000 range, probably going to retest 4000, hence serve you that we were more cautious on the Canadian dollar. So, things are unfolding pretty much according to the scenario. And yes, you're absolutely right. What's weighing on the loonie right now is the performance of gold.

And when I was in college and university, I remember that we used to call our Canadian dollar the petro dollar, but it seems that it's not working that way anymore.

Well, we're not a petro dollar right now. We're more of a golden dollar because the correlation, again, intermarket correlations are not stable through time. So, you're absolutely right. Generally speaking, we should be positively correlated with oil, but now it's an inverted correlation. So, what is really, you know, driving the Canadian dollar is the price of bullion followed by the, you know, the interest rate differential with the U.S. But the price of bullion has been very, very important in determining what’s happening with the Canadian dollar. Oil might, you know, become positive in the months ahead. And I mean this can be temporary, but what's happening on gold has more importance on the Canadian dollar than it's ever had in the past. And that speaks to the geopolitical environment, right?

Of course, things are different, as we could say. And what about energy? Electricity?

This is so important. I mean, the new electricity strategy announced last month, and we spoke to this at the beginning of year. It doesn't matter. You might have all these nice plans for the Canadian economy down the road, reindustrialization, etcetera, but if I don't have access to electricity.

You can't, you can't do anything.

I can't execute. You're absolutely right. So, what happened in May, so yes, Ottawa signed a memorandum of understanding. They actually signed it off with Alberta and people are saying, well, that's just to please Alberta. It was more than that because by tabling the new electricity strategy, which aims to double electricity grid by 2050, they made natural gas or transition fuel. And that was not just to please Alberta, it was critical for the Ontario's electricity grid, which now relies more on natural gas than hydro to generate the electricity. And there's still capacity here on natural gas. So, it's just, we're not abandoning.

No, it's a transition, right?

The transition has been lengthened and that's critical because there's no way that we can participate in the AI revolution if we can't build data centres, if we can't reindustrialize. And the spare capacity that we have on the grid in Canada comes from natural gas. So, we need to be pragmatic. And for the first time in a decade, Ottawa became pragmatic, realizing that our growth potential was being seriously impaired if we did not declare natural gas a transition fuel.

So, that's another good news. So, it should translate in good markets, shouldn't it?

Well, it's— to have been good markets globally so far despite the geopolitical stress. So, but keep in mind this is quarter to date in Q2 and this is as of June 9th, last night, so basically.

39 days.

39 days and you're already up 23% for, you know, emerging markets, the S&P 13%, you know, the S&P TSX. These are performances that you see over the entire year. So, all I'm here to say, Nancy, yes, I respect what's happening in markets, but please do not necessarily expect a repeat performance in Q3 and Q4. A lot of good news is currently embedded in profit expectations and market performance. 

Okay. And what about the impact of the Strait of Hormuz still being closed?

So, hence the challenge of delivering strong markets like we've had so far in Q2. Inflation. It doesn't work when you have too much inflation, which might prod the Central Bank. So in Canada, into action. So, in Canada, we know the Central Bank's on the sideline. In the U.S. the issue that we have right now is that, you know, until recently, people are saying, "Well, the commodities' in short supply, is anything related to AI, nothing's happening elsewhere that would lead us to believe that inflation is going to be an issue in the next few months." But look what's happening in recent months, like for three months now, resins' an issue, aluminum.

Steel.

Steel, a first month now.

Yeah.

So basically, the longer you shut down the Strait of Hormuz, the more impacts you're gonna see on the supply chain. And they're becoming much more apparent in the U.S., hence the inflation numbers that were much stronger than expected this morning.

Absolutely. And it's affecting definitely the supply chain.

To put things in perspective, yes. And if you want to look how bad it is right now, it's the most stressed supply chain in the U.S. that we've seen since the COVID recession. So, it is a big deal. And you know what happened here, inflation actually surged at a higher level than expected. So, keep this in mind. Inflation is not, we're not out of the woods on inflation. So, the Central Bank might surprise us with a rate hike. So, that's the reason why markets will have to tread more carefully in the months ahead.

Okay. And what about the closing of the gap with China? I know you love to have a slide on China so.

Yeah, well, it's the AI stuff. So, there's a lot of excitement about, you know, high profile IPOs that are coming into the market.

This Friday.

Related to AI. And I just want to put things in perspective here, Nancy. I understand it's an industrial revolution. I get that. But unlike 2000, the U.S. doesn't have the monopoly on the new technology. Let me explain. Back in 2023, the U.S. had a comfortable lead about AI model performance. But China is using an open-source model to try to catch up to the U.S. and they've been able to close the gap. More importantly, also, or also China is able to offer these AI models at one seventh of the cost that you have to pay for the U.S. So, I'm just saying here.

There's competition.

There's a competitive environment so don't believe that the Americans, you know, dominate the way they did back in 2000. There are serious considerations to be made here about what's the profit outlook of these U.S. corporations if they have a competitor that's just that good and much cheaper to deploy. So, that will be the important test for markets in the weeks ahead as whether these profit expectations are realistic or not.

And that's why, I mean, our listeners need to talk to their advisors and read the research before deciding to invest because yes, you could be trying to buy the IPO on Friday, but there's also other ways to invest in this trend, in this AI movement without having to actually buy a certain stock.

You're so right. What we do know with conviction is the AI revolution is very energy intensive.

Yes.

As it turns out, there's a lot of energy in Canada and we're actually allowed to deploy it now under the new electricity strategy. So, there's all a bunch of ways that you can play it directly, buying these companies directly, or indirectly. So yes, I do believe it's an AI revolution. But, you know, sometimes, you know, there can be some fraud and yes, there's profit expectations down the road, but we have to play it according to our risk tolerance at this point in time.

Definitely. So, thank you very much Stéfane. I again invite you to talk to your advisors, read the research to make sure that whatever you choose in terms of segments does fit your risk profile. It was amazing doing this little mission today, you and I, and I really appreciate doing this. If you are going on vacation, please take the time to rest and I'll see you in a month.

Thank you.

Thank you.

Hello everyone. Welcome to Economic Impact. We are Tuesday, April 28th, 2026. Stéfane, great to have you here as always.

Likewise, Nancy.

It seems like nothing happened since the last time we spoke a month ago.

Yeah, well, many things happened, but we left a month ago, oil prices were $100. They're back to $100. So, nothing has changed. It's still one of the important oil shocks that we faced since the 1970s when expressed in 2026 dollars. So, it's a considerable oil shock that refuses to go away.

Hmm, something else happened in Canada, right?

Um, yes, we did get a majority government for the first time in over five years. So, that might be something to celebrate to the extent that optimal policies are deployed to bring investment back to our shores. That would be a positive.

That would be. And last time we spoke, now we're day 59 of the Iran War, so what's happening with the Strait of Hormuz?

Nothing happened. It's still closed, unfortunately. And we do monitor this on a regular basis, so I encourage people to go to our website. We have a special product called Monitoring the Iran War and people will be able to stay informed on that one. So unfortunately, still shut down and we are running out of inventories aside from oil. It's a big deal. So, the manufacturing supply chain is still held hostage from the shutting down of the Strait of Hormuz.

So, we're all just out of COVID with this shock and now back to another shock where it's impacting our reality.

Yeah, the last time the supply the manufacturing supply chain was impacted, you're right, you have to go back to COVID. And at this point in time, when you look at the probability by Polymarket of, you know, seeing a reopening of the Strait of Hormuz, you know, roughly 2% for the next, you know, we've only had two days, right.

Not gonna happen.

And then you only have 40%, below 50%. So, it looks like not reopening before June. So, you have another month of depleting inventories. That's going to have an impact on the supply chain. 

Definitely. And there's a lot of things that are going through the Strait of Hormuz.

Yeah.

Not just gas.

No, you're right. And we mentioned it last time where we didn't show it. So, this time around, say roughly 20% of energy flows, whether it's LNG or crude oil goes to the Strait of Hormuz. But look at helium 33%, aluminum production 8%. This has been destroyed. It's not coming back online anytime soon. You wanna do, if you want to grow food, you know, you need fertilizers. That's a big deal. Plastic, we have plastic economies. Well, that's also really important. 20% of NAFTA goes through the Strait of Hormuz. So yes, the supply, the manufacturing supply chain, I would argue is more negatively impacted than when we saw the Ukraine oil shock.

Wow. And fertilizer. So, finally spring is here in Canada so we're going to grow our gardens, vegetables, fruits, probably the prices are going to go higher.

Well, if energy prices go up and fertilizer goes up, I think it's a pretty good chance that food prices will go up. So yes, Ottawa said we're going to give you a rebate on GST. But, you know, reopening the Strait of Hormuz will have a greater impact in the short term, you know, GST rebates. So unfortunately, yes, food prices are going to be increasing in the coming weeks.

And even though this is all happening, we have the best market, equity market ever.

A new record high as of yesterday. It's a little bit tougher today. So, new all time high. There are no precedents going back to 1956 for an oil shock that is accompanied with a new all time high on global equities. It's fascinating, it's unexpected. The market will find, will always find a way to humiliate, you know, people that say, well, you know, I thought it was going to be more negative. The market has found a way. And it's not just, you know, global equities that are up, Nancy, it's even more than that. Every asset class is up here today. Bonds, you would think more inflation not good for bonds, but everything is up.

This was negative the last call we did and now it's back up.

It's back up. So, you did have a, I'll give you that. Yes, you're right. We did have a drawdown of roughly 8%, but 8% is very small considering that in every prior oil shock, you were down at least 20% on U.S. equity. So being down only 8% was quite the achievement when you think about it. And now we're back up 5%. It's a good point, Nancy. There was a market drawdown, but it was very short-lived and people said, no, this thing is going to reopen with no impact on the medium-term economic outlook.

And look at this emerging market.

Up 15. We're not bad, we're the second best. So, good news on that one. Yeah.

So, Asia has a very interesting emerging market. And I guess that's what's contributing to this amazing number.

And they're not supposed to be up because they're theoretically the most negatively impacted by the shutting down of the Strait of Hormuz because you impact global manufacturing, which is mostly located in Asia. But Emerging Asia is saying the best upward earnings revisions since the Asian crisis, which was a massive disturbance to the economy 1997-1998. So, this is unprecedented. And again, it's also global. So, these earnings revisions reflect not just the fact that, yes, Samsung, semiconductors, Korea seeing a big revival.

Artificial intelligence, all of that.

True, but there's pricing power also returning to Chinese producers because they control 32% of global manufacturing. So, if you shut down the ability to get inventories from the Strait of Hormuz and if I control 32% of global manufacturing, Nancy, I will raise prices.

Of course.

And that's exactly what's happening right now.

Of course. And if we look at your predictions or the earnings per share.

Not mine, not mine.

Not yours.

They're not mine.

The ones that you're showing.

This is company guidance. So, we started the year and we said, oh, my God, these profit expectations are ambitious, 15%, that would have been 50% higher than last year. That's a big deal. You know where we are now, 22%.

53.6.

For Emerging Asia, emerging countries generally speaking, yes, 53%. Aside from Japan, everybody's seeing an acceleration earnings. As I said, we flagged this a few months ago and said no, that's quite ambitious. Now it's even more ambitious because people are saying, well, companies will be able to raise prices and therefore protect profit margins. But I don't know again that I can promise you that everyone's going to be better off if you shut down the Strait of Hormuz for another month.

Definitely. But those are very impressive numbers.

And if you do, there's going to be higher inflation. If there's higher inflation, what do you think central banks are going to do?

They're going to raise interest rates again. U.S. dollars in all of these circumstances, what's happening? 

It's risk on.

Risk on.

Risk on means U.S. dollar down so we're back to the cyclical low. Back to square 1.

So, there's no refuge anymore in the U.S. dollar.

No, people are not fearing the outlook. So, they're saying we're not taking refuge into it. It's not the safe haven that I need at this point in time. It's a reflation trade. It's a steepening of the yield curve. So, people are saying the worst is behind us. I just can't promise you this right now, Nancy, because we don't know the full dynamic of shutting down the Strait of Hormuz for another month. Will I disappoint on the earnings front? And you better not disappoint me if I'm expecting 22% PPS.

Of course. And I know on this you and I don't agree, but even though the U.S. dollar is going down or back to what it was at the beginning of the year, for us Canadians wanting to go on vacation because it's May very soon, we don't really see.

That's the frustration of somebody traveling to the Eurozone because the Canadian dollar's at 1.60 against the Euro. And I agree with you, our fundamentals are better than the Eurozone. So, I will tell you we should have an appreciation of the Canadian dollar, but not in time for your vacation. But I do believe that with what's happening in commodity markets, we are likely to be noticed from foreign investors, and I think that could be positive for the Canadian dollar.

That's great. And Canadian, Canada, it's not just oil.

So, listen to this, a cheaper U.S. dollar normally means higher commodity prices. That's exactly where we are. So, energy, which accounts for 52% of our commodity exports from Canada, is at a very high level. But there's not just energy. There's metals which is 23% of commodity exports. Near, at a record high. Agricultural products, yes, I know higher food prices, but some provinces will benefit from that. So, aside from the forestry sector, which is being pummeled by.

The tariffs and.

Oh my God, prohibitive tariff structure from the U.S., the rest is doing okay. And that leads to a situation where governments can afford to be a little bit more generous than they had assumed before the Strait of Hormuz.

And there's something special this afternoon.

Yes, we have a fiscal update. And just because of what's happening to commodity prices, I think the federal government will need to upgrade its forecast for revenue growth from 3% to 5%, providing them with the ability to, if you want, experiment with new ways of attracting investment to Canada, such as the sovereign fund mentioned by the Prime Minister not too long ago. But notice for some provinces such as Alberta, which was tabling for only 1.9% revenue growth to looking at 7%, So a $9 billion deficit might turn out to be a $20 billion surplus. For Saskatchewan, you're talking about, you know, close to 10% because the price of fertilizer's moving up and down the potash. Yeah. So that's a big deal. So, all in all, every region is benefiting from higher commodity prices, but it's most apparent at the federal level and in Alberta and Saskatchewan. So, that's see, that's the positive wealth effect that comes from higher commodity prices. And that's the reason I think the Canadian dollar could appreciate in the coming months, provided that, you know, foreigners are saying, wow, Canada's for real. This fiscal update to be tabled this afternoon will entice us to invest more in Canada and we're starting to see it in the energy sector, right.

So, I know what you're doing this afternoon.

Yes, I have to monitor what Ottawa's doing and I'll be debriefing you. It's going to be on our website if you want, and we'll see what happens next month. But yes, the message today again is like, I don't know what happens if another month of shut down the Strait of Hormuz. I can't promise to deliver all these profits.

So, thank you, Stéfane. Always interesting as usual. I guess it's important to repeat that every research that you do and the graphs for the war in Iran, you can follow. You're gonna have the link to our website. So, definitely mark this up and go and see every day, every other day so that we can benefit from your knowledge and the one from your team. And for all of us listening to this, there's a lot of volatility. There's a lot of expectations. So, I guess the best thing to do is talk to your advisor, stick to your plans. It's not because the markets are moving that I will change my date of travel or retirement. So, stick to your plans. Go and see your advisors. And again, Stéfane, always a pleasure to be with you. 

May I say, make sure your jet has jet fuel on the way back, right?

On the way back. To go it's okay, on the way back I might have to stay two days extra, but we'll see. So, thank you everyone, and we'll see you next month.

Welcome to Economic Impact. We are March 18, 2026. Stéfane, thank you for being here today.

Nice being here.

Yes. So, before we start, I think it's important to note that the last time we spoke, which was a couple of weeks ago, the events in Venezuela had just occurred. And today, we are faced with a conflict in the Middle East that is also impacting the discussions we're going to have today. So, first and foremost, I want to say that our feelings are with those populations that are touched by this conflict. But also, it's important for us to understand what will it mean for our Canadian investors who are listening to this podcast today.

Yeah, we forget how lucky we are being far from.

Absolutely.

Armed conflicts, right? It's a human tragedy. But to put things in perspective, we're going to speak to an oil price shock. It is the first one, almost day-to-day since the one that was incurred in 2022.

Yeah it was February.

February 2022, Ukraine invasion. So, right now as we speak now today, because I don't know what we'll end today, so we're at about $100 a barrel. 2022, we went as high as $130 a barrel. Again, this is expressed in 2026 dollars Nancy.

So, we can actually compare.

Yeah, so if you want to put some perspective on what the oil shock of the 1970s looked like, it was $160. However, this oil shock emanating from the Middle East is the first one since 1990-91, and it's impacting the Strait of Hormuz. We don't fully understand how the global supply chain will be impacted. All I can say at this point in time, $100 may not be recessionary, but it will have an impact on growth in the coming quarters and earnings expectations.

Absolutely. And it's important also to put that in context because we're not always starting from the same base, right? So, help us understand. So, you're right, when economists say "I know for sure what the impact". No, it depends where you are in the cycle. So, back in 2022 when the oil price hit, inflation was already at 8.5%. So, the Fed had no choice. They had to react to this by starting a monetary tightening campaign that took us all the way through 2023.

We all remember.

Long-term rates also increased. The good news from a cyclical perspective is that this oil shock is hitting when inflation is around 2.5%. So, I don't foresee an aggressive tightening cycle because of it. But it remains to be seen what type of pasture, how long the war will last and the impact that we'll see also on financial markets. So, but so far.

So good. And we saw this morning that Bank of Canada did not move the rates. We're waiting to see for the United States this afternoon. But, you're fairly confident that they won't move.

Oh, they won't, they're not going to move out because back in 2022, job creation in the U.S. was averaging roughly 400,000 people a month. Right now, 0, Nancy, for the past six months. The unemployment is at 3.4%, now it's at 4.4%. The Fed has a dual mandate. They're not going to hike at least in the first half of this year. We'll see the second half because don't forget, we don't fully understand the potential pass through from previous tariffs that were announced by the White House. And they're still in the protectionist agenda emanating from the White House, so we have to see on inflation. The U.S. is more uncertain.

And what's the impact on the markets?

Well, I'll give you a combination of rate hikes with an oil shock like 2022. Not good for markets. After three months, you were down 5.1% back then and after 12 months you're down 18%. There was a lot of volatility. You had to pick where you were going to invest. After three months in 2022, the Canadian market was one of the only ones that were up. Year to date, we're at 3.1%. We're again showing some resilience. The U.S. is down. Again, this is not big correction, but I just want to speak that, you know, even after three months, it was a very small correction, but it got worse because of the combination of higher oil prices, but also a very aggressive tightening campaign. We're not there yet, but we'll see what the impact on the global supply chain will be from shutting down the Strait of Hormuz, which is more than just crude oil, right?

Definitely. And it's. Oh my gosh.

LNG.

There you go. Thank you.

Sulfur.

Sulfur. That's was, that's the real one.

Helium.

Yes. And this did not exist back then, so those are all new importations.

You forgot a key one. Aluminum.

Aluminum, oh.

That's a big deal. That wasn't there back in the 1990s. So, that's the manufacturing supply chain being impacted more significantly than the 2022 oil shocks. So, people that say exactly, they know what's going to happen. We don't know. We don't fully understand. It really depends on how long the Strait of Hormuz is shut down.

And if we go to our traditional total return graph.

Yes.

How do we compare? We're still.

Still true, we're still doing well. This is a Canadian dollar total return. So, emerging markets are still up. We're resilient and the reason we're holding up so well, Nancy, has to do with the nature of our trade balance. And what it shows here is that compared, if you compare the Canadian dollar to the rest of the other reserve currencies, we are the country that runs the highest energy trade surplus.

And our oil production has improved. Put that again in context for us.

So, people will say, "Okay, are we running a higher trade surplus just because prices are increasing?". Of course, some of that is true. But people forget that since 2022, despite the fact that we've added very little infrastructure, there's been some innovation in the pipeline industry that has allowed Canada to go from 4.8 million barrels a day to roughly, where are we here, 2026, almost 6 million barrels a day. So, we've added more than 1,000,000 barrels a day. Again, yes, TMX was opened recently, we went from 300 to 800,000 barrels a day, but.

Still, there's innovation.

Innovation in the existing pipelines going to the U.S. means that we're shipping more. So again, people have the perception maybe it's not such a bad thing to be an energy superpower and being able to have the allies. And I think Ottawa is having, you know, maybe changing its mindset perhaps on that one. We'll see in a second half of this year.

And the last conversation we had, one of the themes was gold. So, can you update us on gold?

Okay. So yes, you're right. S&P TSX resilient because of oil and gas, but gold is important because the market cap of gold stocks, as we showed last month, was just as important as the energy stocks. So, in 2022, I have bad news for you, Nancy. The U.S. dollar shot up because of the Fed tightening and gold prices were down 20%. Now, will history repeat itself in this cycle? I'm not so sure. I'm more confident that the U.S. dollar will not appreciate because I'm sure people are more suspicious about the White House. They're unlikely to buy U.S. Treasuries as aggressively as they did back in 2022. So, year to date, all I can say is gold prices are actually behaving a little bit better than it was in 2022. We'll see in the coming months. But, I still think that the Canadian dollar will be more resilient because less people are inclined to buy U.S. Treasuries, so I don't think we'll have a repetition of what we saw in 2022.

And that's good. And again, last conversation we had, we were looking at our Canadian population, so I don't think fresh from the press, you don't have good news for us.

So, even though we've shown some resilience on the stock market. Well again this year the stock market is doing better than the economy and the primary reason is that our population is contracting. So, this came out this morning by the way. You know, last quarter people said that might be the worst that we'll see contraction of 80,000 people on the quarter. No, this quarter was 100,000 people. So, on a year over year basis, believe it or not, we're down 100,000 people. It's not much because we have 41 million population. It's 0.2%, but yet it's the first annual decline in Canada's population since the Confederation in 1867. Yeah.

And we can understand why. I mean we slowed down the immigration, our population is getting older. So, in the short term it might not be so bad because we had housing problems last year as you know. But definitely we'll have to make sure that we inverse this so that the industry, the entrepreneurs really have what they need to produce.

I think Ottawa needs to optimize its immigration policy. I think this is a bit too aggressive. We'll see in the months ahead. So far it's mostly hitting the student population because permanent immigrants, they were actually up 80,000 on the quarter. So, not so bad for industries, but for some universities etcetera, colleges, it's another story. So, it's not overall bad in every facet of the immigration policy but I still think this is a little bit too aggressive. So. And that's putting downward pressure on the housing market. But, the silver lining is that if your population's not growing, your inflationary pressures are not as bad, right?

Yeah, there's always a balance somewhere. And so, tell us about the inflation.

Below target. We're below 2%. There are only a few countries like that. Imagine that. We're a big energy producer with inflation below 2%. Yes, there were some policy impacts on all of this, but all I'm saying, Nancy, as the central bank attempts to navigate the oil shock, at least in Canada, we have a little bit more leeway to be patient compared to the U.S., which is at 2.4%. Nonetheless, the critical part is to understand what the Strait of Hormuz will mean to the global supply chain. Profit expectations. Remember what we said last month. People are so optimistic.

Double digits everywhere.

I think downward earnings revision is possible. So, be prepared for volatility in the coming weeks and coming months.

Okay, well, thank you so much, Stéfane. And if you are worried about volatility or, you know, what's the impact on this on your portfolio, well you know you have the chance to call your advisor and see what this means in your reality, because emotions and a three-month period are never a good guide. So, I invite you to contact your trusted advisor to have your health check, financial health check. So again, thank you Stéfane. Thank you to all of you and we'll see you next month.

Hello everyone, welcome to Economic Impact. We are Wednesday, February 18th, 2026. Stéfane, great to see you again.

Nice to see you.

What a week and we're only Wednesday.

It's a big week for Canada.

I know it's an amazing week for Canada. So before we start, the last time, I think we're going to do it every call because I love this. So, all the little brackets were on the right side of the line. So, can you tell us what happened in the last not even 4 weeks?

So, we had positive returns when we saw each other last month.

Yeah.

The year is still young, obviously, but it's actually more positive than it was last month. And notice, Nancy, positive for everyone except maybe 1 market, the U.S., which we'll speak to, but notice that, you know, everything related to the reflation trade that we spoke to last month shows positive returns. Emerging markets, the S&P TSX, Europe. So, all in all, it's still this concept that earnings are likely to accelerate this year with higher commodity prices.

And as it was in 2025, it's still very concentrated the investments that are being made. So, you have a slide that's very interesting about AI.

Well, what happened last year and what people said, well, okay, AI, if you look at the hyper scalers, they're investing a formidable amount of money in this. And for 2026, the investment plan is more than $680 billion. That's only four companies Nancy. So that would account for roughly 2.1% of GDP with just four companies.

Wow.

This has never been seen before. If you want to make a historical comparison to other big projects in the U.S., if you go back to 1850-1859 when they built the railroad system in the U.S., they were spending 2.2% of GDP all these companies put together. If people want to compare it now, the AI cycle versus the Internet cycle, well the Internet cycle was consuming 0.8% of GDP annualized. So the 2.1%, these people, are they spending too much? Will this be a fuel, a Dutch disease where the AI sector is taking all the capital and with diminishing returns? So, that's what we're seeing this year a little bit more concerned. So, when I said the US dollar, the S&P 500 was down year to date, it's mostly because of IT, because look at everything related to what we spoke to last month. U.S. reindustrialization, rebuilding the electrical grid, all these sectors are up 16, 21, 12%. So, it's a big sector rotation happening within U.S. equities.

So that means markets are thinking that this reindustrialization will work. That's what we're seeing here.

Yeah. And, and as you said before, and as you've told me before, does that mean the AI cycle is dead? No, but everyone was overweight AI coming into 2026. So, it's a sector rotation given the question marks regarding the profitability that was promised, will they deliver this year?

Yeah. And last time we spoke, we spoke about gold. So, I think it's going to be a subject of this conversation again today.

Oh, we have to because, so anything related to the energy sector, materials, industrials doing good in U.S., Canada, energy is doing well. If you're going to deploy, we spoke about it, you want to deploy AI, it's energy intensive. So, a big increase here. Notice materials however, it's up 18.3% and it's having a formidable impact on both our economy and the perception of what's really happening in the economy is being, I think, biased by gold. Let me explain. A lot of people are saying well Canada is finally diversifying out of the U.S. We have found a formula to diversify. Look at the exports to U.S. down 10%, which has never been seen outside of recession and non-U.S. exports are up 20%.

So, who's our new friend?

Well people are asking me name countries that are our new friends and I can't find any, Nancy, because it's not a friend, a country friend per se. It's really one commodity that is our best friend right now. It's gold prices at roughly $5000 an ounce. If you go back to 1791 and you price gold in 2025 dollars, that's well above the historical average of $650.

So, there's a funny story about the $650. So, talks about men’s suits. So, you want to tell us about it? 

Well, I can't, you know, I can only speak for men’s suit, unfortunately, on that one. But historically, people have associated the-.

The ounce?

Yeah, the equilibrium value of gold, 1 ounce of gold should be equal to your ability to buy a decent suit if you're a man. So right now, as you can see at $5000, those men at home that have a lot of, you know, some ounces of gold.

A lot of gold can have a very nice suit.

Or they can go shopping for many suits.

Yeah and 650 you can still have a reasonable suit in Canadian dollars today, right?

So, the point is we're well above the historical average. Last time we were there was 20 years ago. You can remain above 650 for quite some time. The geopolitical complex or backdrop is supportive of gold prices, but it stretched. So, our view for the next 12 months or so, it's a target range for gold of four to five, 6000. So, it might be volatile, but we're not collapsing it because we know the central banks are buyers. So, there is still some support and U.S. dollar is still set to depreciate.

And so, without gold, what would we look like?

Well, it really shows that we don't have really good friends right now, new best friends, because the reality is our trade balance is a negative, a deficit of $30 billion right now for Canada. If you were to exclude gold or surplus on gold, which is driven by prices, our trade balance would be a deficit of $80 billion, two and a half times greater. See how important that is? Because that's supporting the currency, it's supporting the stock market and it's supporting our exports.

Yeah. So, gold takes over all the other categories now. It's never seen before?

Well, if you think this is interesting, well, at least the next one, which shows that the market capitalization of gold stocks surpasses energy for the first time ever in Canadian history. So, that speaks to the importance of gold because that's been a key driver of the S&P TSX. So, gold is still popular with investors going into 2026 because a lot of people were not overweight gold. So, there's some catch up there. You have to go back to neutral. So, it is supportive and as I said, the backdrop is supportive, but it's important to tell our clients that this is a stretched.

Rebalancing, diversification. Those are the principles, right?

It's a crowded trade. Doesn't mean that you don't remain crowded for a while, but be wary of how gold is impacting the economy and the stock market.

So, we have a couple of minutes left. Can we talk about the announcement from our Prime Minister, Mr. Carney?

Okay so we need to find new friends, right?

We do.

And one way. So in order to find new friends, we need to reindustrialize and we have spoken to that last month or in previous discussions. And the reality is that was the big news that came yesterday where the federal government is pledging to spend billions of dollars in order to find us new friends. How do we do this? By reindustrializing. And, it's a big deal, Nancy, because it's the first time that I can recall in many years that we're deploying in industrial strategy based on our defence spending with a procurement system that might favor our domestic corporations. And you know what? It's so big. And the money spent, 5% of GDP. We haven't seen this since the Korean War. It might entice people to come from overseas.

And invest.

And invest here in Canada with a transfer of intellectual property to actually build stuff in Canada to benefit, obviously.

Our economy.

And the manufacturing sector, right?

And therefore, if we are investing, all of this will create jobs. We'll create good jobs. How does it look right now?

We need jobs.

We need jobs.

Yeah, well, it depends where you live. But really the reality is Quebec and Ontario, who are mostly or the biggest manufacturing hub in the country, have seen disappointing job markets. So, full time jobs, they're barely up in the territory, they're down in Quebec, but total employment is down in Ontario. So, out West, if you want to look at the four large provinces, in order to simplify the chart, there's a regional divergent so you can see who's being hit with the uncertainty about the manufacturing sector. Hence the importance of this plan that was unveiled yesterday. Finally, we are willing to reindustrialize and that's how we make new friends.

Well, Stéfane, thank you for this great conversation. Looking forward to next month, there's going to be a lot of things happening, I'm sure. Thank you for all of us for attending this little conversation, and we'll see you again next mo

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