Yann Furic
B.B.A., M. Sc., CFA®
Senior Portfolio Manager, Asset Allocation and Alternative Strategies
Following the events in Venezuela in early 2026, there has been much discussion about the impact of an increase in Venezuelan oil production relative to Canadian output.
Venezuelan oil: a threat to Canadian oil?
First, it must be recognized that not all barrels of oil are equal, nor are all oil refineries. It’s also true that Canadian and Venezuelan oil are both “heavy” oils, but they are not necessarily shipped to the same places.
- Canadian oil fuels U.S. refineries optimized for this type of oil, which are mainly located in the U.S. Midwest and also in the Gulf of Mexico region (approximately 10% of refineries), where Venezuelan oil would also be refined.
- The existing pipeline systems are not designed to transport this heavy oil to the Midwest.
- In addition, low oil prices, political instability in Venezuela, and the collapse of oil infrastructure, which would require more than $100 billion in investment to resume production, are hindering a significant increase in Venezuelan oil on the markets. This complex situation reduces the risk for Canada.
Moreover, during a meeting with the U.S. president, the CEO of oil giant Exxon Mobil, Darren Woods, said that Venezuela is “uninvestable” today.
Canadian and U.S. policy rates: next meetings on January 28, 2026
On Wednesday, December 10, the Bank of Canada (BoC) decided to leave its target rate unchanged at 2.25%. This decision was anticipated by the market, especially since the release of labour market data on Friday, December 5, which showed job creation rather than job losses. Markets are expecting a possible rate cut in December 2026.
South of the border, a new chair will be appointed to the U.S. Federal Reserve (Fed) this year. The candidates currently in the running all share a vision of monetary policy that would be expressed through lower rates, despite persistent inflation. It should be noted that the Fed’s decisions are made by a majority of the 12 members of the Federal Open Market Committee (FOMC), who meet eight times a year to discuss monetary policy and decide on key interest rates. Markets are still anticipating two more rate cuts in 2026.
As for the central banks of Europe, Japan, and Canada, they are on hold or even considering rate increases, especially in Japan. If they continue to widen, these divergences in global monetary policy are likely to weaken the U.S. dollar.
One of the surprises of 2025 was in fact the weakness of the U.S. dollar, especially against the euro. The pressure exerted by the U.S. president on the Fed to lower its key rates, combined with the imposition of tariffs, meant that inflation remained higher than expected, which reduced the value of the greenback and its purchasing power, drove up the price of gold, and made exports less expensive for the U.S. administration.
Employment rebound in Canada
The addition of 8,200 jobs in December exceeded expectations, as a loss of 2,500 workers had been forecast. The positive trend confirmed in November continued, but this time it was mainly full-time jobs that boosted the labour market, whereas the strong growth in November was mainly due to the addition of part-time jobs. Since the labour force grew, the unemployment rate rose to 6.8%, while wage growth remained strong at 3.7%.
Still awaiting a Supreme Court decision on tariffs
During the November 5 hearing on the legality of tariffs imposed by the U.S. administration on a large number of countries, the justices of the U.S. Supreme Court appeared skeptical of the government’s arguments. A ruling will be issued by next summer, but the markets are expecting a decision much sooner, perhaps as early as January.
It should be noted, however, that the market reaction could be weaker than anticipated a few months ago. Markets react to what differs from the consensus. Currently, investors expect the decision to prevent the use of tariffs in part or in full.
The unknown factor that could move the markets is whether the Court will require reimbursement of tariffs already collected.
A decision against the U.S. administration would not necessarily mean the abolition of all tariffs, but it would require a different legal process for imposing them, which would limit the power of government authorities to impose tariffs at will.
OVERVIEW OF GLOBAL EQUITY MARKETSAll percentages are in Canadian dollars. |
||||
|
Country |
Index |
Return |
Change |
Year-to-date return in 2025 |
|
Canada |
S&P/TSX |
0.97% |
|
25.13% |
|
United States |
S&P 500 |
3.06% |
|
14.49% |
|
|
Nasdaq |
5.46% |
|
20.32% |
|
International stock markets |
EAFE |
1.89% |
|
23.35% |
|
Emerging markets |
|
4.91% |
|
29.44% |
|
China |
MSCI China |
-3.14% |
|
32.71% |
The return shown is the total return, which includes the reinvestment of income and capital gains distributions
Source : Morningstar Direct.
RETURN ON CANADIAN BONDS |
|
| Index | Return from January 1 to December 31, 2025 |
| FTSE Canada Universe Bond Index | 0.69% |
Source : Morningstar Direct
Data influencing the markets
CANADA |
UNITED STATES |
Recession Indicator |
|
Moderate |
Moderate |
Policy Rates |
|
2.25% |
3.50% – 3.75% |
|
No change was announced on December 10, 2025. No cut is planned for the meeting on January 28. According to the BoC, GDP growth is expected to remain positive in 2026. |
The U.S. Federal Reserve cut its key interest rates on December 10, 2025. The lack of data during the government shutdown complicates the Fed’s job. Uncertainty surrounding inflation and employment persists. Possibility of two further rate cuts in 2026, but nothing is certain. |
Employment Situation |
|
|
Jobs added: 8,200 Expectations: loss of 2,500 |
Jobs added: 50,000 Expectations: addition of 55,000 |
|
Wage growth: 3.7% Expectations: 4.0% |
Wage growth: 3.8% Expectations: 3.6% |
|
Unemployment rate: 6.8% Increase: 0.4% |
Unemployment rate: 4.4% Decrease: 0.1% |
| Most jobs added were full time. |
|
Inflation |
|
|
December: 2.4% Change: 0.0% |
December: 2.7% Change: 0.0% |
Overall, what are the economic indicators telling us?
Benchmark rates (Canada, Europe and the United States) 
- The Federal Reserve lowered its rates in December, but the minutes of their meeting reveal some reluctance to reduce them aggressively. The market is anticipating two more cuts in 2026. In Canada, multiple cuts are not expected over the next year.
- Europe is on hold and will react to future economic data. Inflation is lower there and the real impact of tariffs is yet to come.
- The U.S. Supreme Court’s decision on tariffs could have an impact on inflation, economic growth, and monetary policies around the world.
Global Purchasing Managers’ Index
- Manufacturing segment: stable, with close to half of the 30 countries in this segment posting a reading above 50 (expansion).
- Services segment: continues to hold steady and remains robust.
Inflation rate
Overall: stable, continuing to move in the right direction.
Factors to watch
- Deregulation in various industries in the United States: this should help maintain economic growth and encourage investment. Other countries, such as Canada, will have to follow suit or risk losing competitiveness.
- Introduction of populist policies in the United States: these could undermine deregulation efforts. Limiting credit card interest rates, preventing institutional investors from owning homes, and allowing government entities to purchase mortgage products could create distortions and reduce economic growth.
- Trade tensions: supported by the indiscriminate use of tariffs, they could cause an economic slowdown and increase inflation. This situation could lead to an episode of stagflation, the most negative economic scenario. The trade agreement between Canada, Mexico, and the United States will have to be renegotiated in 2026.
- Inflationary scenarios: if they result in keeping yields on five-to-ten-year maturities at high levels, they should be avoided at all costs, as they would slow business investment and the reshoring of production lines to the United States.
- Geopolitical uncertainty: Russia-Ukraine war, regional conflicts in the Middle East, tensions between the U.S. and China, possible annexation of Taiwan by the Chinese government, return of the Monroe Doctrine in the United States.
fdp tactical views – December 2025
- We maintained the weighting of equities in the tactical allocation strategy.
- Economies are slowing but are still growing. Large U.S. companies are posting solid earnings, which is keeping the stock markets in positive territory.
- In the United States, we maintained our equity
- We maintained our positioning in Europe and Japan.
- We reduced our exposure to emerging market equities and increased the weighting of quality U.S. small caps. Lower interest rates in the United States, new quantitative easing measures, and a stable economy all argue in favour of a position in small caps.
- In the fixed income component, we increased the weighting of high-yield bonds and foreign bonds. We reduced our position in Canadian bonds. We hold various types of debt through U.S. and emerging market government issues.
We continue to favour stocks in developed countries and focus on risk management.
To learn how our funds performed:
Senior Manager, Asset Allocation and Alternative Strategies
Data source : Bloomberg
The opinions expressed here and on the next page do not necessarily represent the views of Professionals’ Financial. The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. Please consult your Wealth Management Advisor.
