Market Recap* – January, 2026

1. What happened in the markets?

Canadian equities finished January higher, with the S&P/TSX Composite up 0.84%. Early in the month, markets were supported by steady Canadian economic conditions and stable consumer activity. Volatility increased toward the end of January as commodity prices declined, particularly in precious metals, which weighed on resource-heavy sectors of the market. Canadian stocks were also adected by spillover from U.S. market volatility tied to political and policy uncertainty. Despite these late-month pressures, gains earlier in January allowed Canadian equities to close the month in positive territory.

U.S. equities also ended the month higher, with the S&P 500 gaining 1.45% in January despite increased volatility late in the month. Markets reacted to mixed U.S. economic data, as steady economic growth and consumer spending contrasted with uneven progress on inflation and a still-tight labor market. Political uncertainty also weighed on sentiment, particularly around fiscal policy and future economic leadership, which led investors to reassess expectations for interest rate cuts. Despite these pressures, U.S. equities showed resilience and closed January with gains.

Canadian fixed income posted positive returns in January. The Canada Universe Bond Index rose 0.58%, supported by stable inflation readings and expectations that the Bank of Canada would maintain a cautious approach to interest rates. As equity market volatility increased later in the month, bonds benefited from renewed demand for defensive assets.

Money market investments continued to provide steady returns. The 91-day Treasury bill returned 0.18% in January, reflecting stable short-term interest rates and ongoing demand for low-risk cash investments amid market uncertainty.

The Canadian dollar appreciated by approximately 1.3% against the U.S. dollar during January. The move reflected a combination of U.S. dollar weakness and relative stability in Canadian economic conditions. In the United States, mixed economic data and political uncertainty led investors to reassess the outlook for fiscal policy and interest rate cuts, which weighed on the U.S. dollar toward month-end. At the same time, Canada benefited from steady domestic data and reduced pressure for aggressive monetary easing, helping support the Canadian dollar.

Overall, January delivered positive returns across equities, fixed income, and cash investments. While markets became more volatile toward the end of the month due to economic and political developments, diversified portfolios continued to benefit from balanced exposure across asset classes.

2. What does it mean for Embark Funds?

Asset class	Change	Impact on cohorts
Canadian Equities	↑	Positive for younger cohorts with higher equity exposure. Canadian equities posted modest gains, supported by steady domestic conditions, despite increased volatility late in the month.
U.S. Equities	↑	Positive for younger, growth-oriented cohorts. U.S. equities finished the month higher despite volatility driven by mixed economic data and policy uncertainty.
Bonds	↑	Benefited older and more conservative cohorts. Bond prices rose modestly as investors sought stability amid late-month equity volatility.
Money Market	↑	Continued to support older cohorts and capital-preservation strategies. Money market investments delivered steady returns and remained edective for cash management.
Canadian Dollar	↑CAD	The stronger Canadian dollar slightly reduced returns on foreign assets, modestly weighing on growth-oriented portfolios with U.S. exposure.