Gung Hei Fat Choy and Welcome to the Year of the Horse,
It was a mixed week on the markets with the S&P500 essentially flat, the TSX moving ahead and a small drop in bond yields. The space to watch over the next week is oil, which jumped, as tensions rise in the Middle East. Gold continues to hover around $5,000 with the prospect of more conflict helping the bid.
| Index | Close Feb 12th 2026 | Close Feb 19th 2026 |
| S&P500 | 6,833 | 6,866 |
| TSX60 | 32,484 | 33,595 |
| Canada 10 yr. Bond Yield | 3.29% | 3.24% |
| US 10 yr. Treasury Yield | 4.10% | 4.08% |
| USD/CAD | $1.36102 | $1.37011 |
| Brent Crude | $67.60 | $71.92 |
| Gold | $4,921 | $4,999 |
| Bitcoin | $66,259 | $67,037 |
Source: Trading Economics & Factset
The minutes from the last US Federal Reserve FOMC meeting were released this week. What took observers by surprise was some members leaning towards interest rate hikes. There were a range of views in the meeting from cutting rates now, standing pat, to the possibility of future hikes. While recent inflation and employment numbers will most likely keep the Fed on pause, the hawks are still out there.
US inflation dropped to 2.4% in January from December’s 2.7% reading. Helpfully core inflation also dropped from 2.6% in December to 2.5% in January. Parsing the numbers a bit closer, food and energy services (home heating) keep rising while the price of gasoline dropped. Shelter costs (rents) were up as well. There is probably not enough here to get the Fed to move rates in either direction.
Canadian inflation also edged down last month. In this case from 2.4% to 2.3%. Core inflation dropped as well. Looking a bit deeper, we got the same relief on gasoline prices. Shelter costs continue their disinflationary trend, while grocery prices have been rising steadily. Once again, there is not enough here to prompt the Bank of Canada to move in either direction.
What will not help the price at the pumps is the potential for another major conflict in the Middle East. The US has deployed a second carrier group to the eastern Mediterranean complementing the carrier group positioned off the Oman coast. This is in addition to an increase in air assets deployed to various bases in Jordan and the UAE. The question is whether this is negotiating pressure on the Iran/US nuclear talks happening in Geneva or the start of an attempt to change the Iranian regime. Just to make things a bit more interesting, Russia is currently doing naval exercises with Iran in the Gulf of Oman.
Canada released a new Defence Industrial Strategy this week. In simple terms the strategy is to build as much as possible in Canada. That which we can’t build ourselves (e.g. submarines), partner with other countries to build/acquire the needed capabilities. And if neither is an option, buy off the shelf. Each option must have economic benefits to Canada. The purpose is to rebuild our defence industry, making us less reliant on others for key needs of the military. It is ambitious and the execution will be hard. It will also require the private sector to step up.
The BC Budget was table in the legislature this week and it is bleeding red ink. The expected provincial deficit will climb to $13.3 billion. This despite a planned downsizing of 15,000 civil servants and range of tax hikes. Several capital projects are being delayed including one at UVic. The provincial sales tax (PST) is being expanded to formerly exempt goods and services, the tax rate on the first tax bracket is going up by 0.5%, and new enrollment to the $10 per day child-care program is being paused for 3 years. Total provincial debt is set to hit $183 billion in 2026-27.
With government red ink in mind, we’ll close with this piece from Donna Summers, to remind those in charge, we all work hard for our money….. Have a great weekend
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
