For most of the last two years, markets have had to fight two headwinds: stubborn inflation and fragile growth. That backdrop is quietly changing.

First, economic momentum is improving. Economic data in the U.S. and globally show growth running a bit stronger than analysts expected. That’s leading to upward revisions in global growth and corporate earnings forecasts. In other words, the engine is running better than most thought.

Second, inflation risks are softening. Recent U.S. CPI data has surprised to the downside, and if this trend continues, more countries could see inflation drift back toward central bank targets over the next 9-12 months. The inflation risk premium embedded in markets is coming down.

Source: Charlie Bilello, Creative Planning. Data as of Jan 13, 2026

Stronger growth plus moderating inflation is a constructive mix. It has reinforced the rotation into more economically sensitive areas of the market that we’ve discussed in prior notes. Emerging Markets have caught a bid, and cyclical sectors like Energy, Materials and Industrials have been broadening out. Even within fixed income, the total return spread favoring higher-yielding bonds has widened since last October.

When inflation comes down but the economy keeps moving, leadership tends to rotate, not retreat. Our models are positioned accordingly

I have also included a piece from our CIBC Economics team entitled “Is the BOC standing on guard for thee?”

As always, if you have any questions, please feel free to give us a call at any time.

     Have a great weekend.

    Milan