News and articles

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.