Market and economic commentary
January 2026

A positive start to 2026

2026 kicked off on an up-note, with both equities and bonds closing January in positive territory. However, it was anything but a smooth ride as markets gave the new Federal Reserve (Fed) Chair Kevin Warsh a tepid welcome late in the month.

Portfolio performance and key benchmarks

All the Compass Portfolios and ATBIS Pools (the Funds)¹ still closed in flat to positive territory. Up-to-date performance data for the Funds can be found here.

Below are index one-month total returns in Canadian dollar (CAD) terms for January:

Constructive fundamentals

As the new year begins, investors appear to be searching for a “market narrative” that can rationalize the recent volatility and shed light on how the rest of the year will take shape.

• Did global markets keep striking new highs over the last few months? ✔ Check. Globally, equities were up +17.1% in 2025, following 28% and 20% in the two prior calendar years (MSCI ACWI in CAD).²
• How about corporate earnings? ✔ Check. Attractive and getting stronger with each quarter.
• Market concentration? ✔ Check. Broadening leadership is our consensus trade.
• Global growth? ✔ Check. No one wants to admit it yet, but the US economy remains robust and is currently tracking at a 4%+ real GDP pace.² And Emerging Markets (EM)? EM is being EM again - growth is back. 

Suffice to say, the macro and fundamental side of investing appears solid. Despite that, uncertainty remains. Concerns around AI valuations, debt overhang, trade policy—the usual suspects—put the markets on edge. Mid-term years are known for speed-bumps and 2026 appears no different. A more interesting overarching narrative to explain why has yet to emerge.

Earnings & volatility

We saw everything sell off sharply late in the month. The timing happened to coincide with the new Fed Chair announcement. Investors splashed cold water on Kevin Warsh’s welcome party by taking profits and de-leveraging some of their equity and commodity positions. Long bond yields continue to inch higher, but that theme is just a continuation from last year. It’s unlikely a new Fed Chair is going to meaningfully change that view. 

As an investor who has perhaps become complacent with consistently strong earnings quarter after quarter, one of the biggest worries is an earnings miss. However, we’re not seeing that, which is reassuring, and provides a sense that whatever is driving the price action will likely pass. 

Today, over half the S&P 500 earnings are attributed to the technology sector. It’s the sector most responsible for driving earnings growth, margin expansion, and let’s just say it, “US exceptionalism”. So the bar for Tech earnings is exceptionally high heading into the year. And yet, even with the latest bout of volatility, it happened during a time when all the tech names that reported have exceeded expectations. Even Microsoft, the latest poster child for the selloff, definitively beat expectations on earnings (MSFT 4.14 Actual vs 3.91 Expected) and revenues (MSFT $81.3b Actual vs $80.3b Expected).³

The policy outlook

When it comes to fixed income, interest policy rates stayed steady across Canada, US, and Europe. Australia was an odd outlier raising rates in the G10 space as others are cutting. With Kevin Warsh not expected to occupy the Fed Chair seat until May, expectations for the Fed are muted. Bank of Canada appears to be holding onto the pause as well. For the next few months, the front end of the rates space is likely anchored.

Compass Portfolios Series F1 - Returns net of fees

ATBIS Pools Series F1 - Returns net of fees

¹ Using F series returns
² Bloomberg
³ MSFT earnings call, Bloomberg, and Yahoo Finance.