While it is often said that "the market is not the economy," the two are certainly related. 2025 was a year dominated by U.S. tariff news and trade turmoil, and many Canadians are now looking ahead with a sense of unease—especially if they’re following the news.

Our latest Quarterly Alberta Economic Outlook highlights significant crosscurrents for 2026, where the momentum from lower interest rates and easing inflation is being countered by ongoing trade uncertainty and lower oil prices. Despite these factors, the positive alignment that propelled financial markets in 2025 is expected to persist.

The result is a disconnect between unsettling geopolitical headlines and the steady resilience shown by global equity markets. To help make sense of this environment, I recently sat down with Steve Xu, Senior Portfolio Manager at ATB Investment Management (ATBIM). We discussed the key takeaways from the inaugural ATBIM Global Market Outlook and why, despite a world that feels increasingly volatile, his team is maintaining a bullish outlook.

The U.S. "earnings machine" vs. the noise

Even amidst the constant drumbeat of trade policy shifts, corporate earnings remain the most powerful driver for investors. Steve notes that the U.S. is still the "earnings capital of the world," with double-digit gains fueled by the artificial intelligence (AI) and data centre boom.

"At the end of the day, the one indicator we focus on above all else is earnings," Steve explained. He said that this “earnings machine” is enabling investors to look past the news cycle, even with persistent uncertainty over tariff policy. ATBIM's base case expects this multi-year rally to be sustained for the foreseeable future.  

Policy pressures

A significant factor for the U.S. market is the anticipated impact of the One Big Beautiful Bill Act (OBBBA). This legislation will inject hundreds of billions in fiscal stimulus through tax refunds, stimulus cheques, and tariff-revenue dividends. Steve views this as a powerful consumer tailwind, though cautioned that too much stimulus too quickly could risk overheating the economy.

When asked about global instability, Steve suggested that, while headlines are jarring, they often reflect strategic shifts rather than imminent market collapse.

The emerging market wake-up call

Perhaps the most significant shift in ATBIM's strategy looking at 2026 is increased optimism toward emerging markets (EM). After more than a decade in a slumber relative to the U.S., Steve sees EM nations as the key drivers of sustained global growth, beginning to compete with developed markets.

"Emerging markets are finally waking up," Steve said, noting that improved governance and a burgeoning middle class are creating levers for global growth. Leading EM nations are moving away from producing low-value goods for the West and pivoting inward to serve their own domestic consumers, creating more opportunities for investors.

Sluggish sentiment in Canada

The outlook for Canadian equities remains neutral. While the S&P/TSX Composite posted strong gains in 2025, those returns were largely fueled by global factors—such as soaring gold prices—rather than internal domestic strength.

Steve highlighted the productivity emergency facing Canada, where a decade of lagging investment and difficulty in attracting capital has created a significant gap compared to the United States. While positive signals have been sent to improve Canada’s performance, including the nation-building projects, progress depends on execution. Until changes are implemented in favour of Canada’s growth, investor sentiment will likely remain subdued.

The bottom line for 2026

The underlying economic story for this year is one of structural transition. As Canada moves beyond headline volatility, economic resilience will depend on the tangible execution of major projects, the narrowing of the productivity gap, and the diversification of export markets.

Recent market volatility serves as a reminder that momentum has been led by an AI-driven productivity surge. To navigate this, the ATBIM team advises a disciplined approach where active asset allocation and a diversified portfolio serve as the cornerstones for managing the risks of an evolving global market. By remaining risk-aware, long-term growth opportunities can continue to be captured while protecting capital against short-term headline pressures.

Looking ahead, the global bull market appears supported by robust profit generation. While trade and geopolitical uncertainty remains a drag on headline GDP growth, under the surface, the global landscape is supported by accelerating U.S. earnings and the structural catch-up in emerging markets.

Answer to the previous trivia question: The Toronto Stock Exchange was created in 1861.

Today’s trivia question: Which two provinces account for over 70% of gold production in Canada (as of 2023)?

ATB Investment Management Inc. is registered as a Portfolio Manager across various Canadian securities commissions with the Alberta Securities Commission (ASC) being its principal regulator. ATB Investment Management Inc. is also registered as an Investment Fund Manager who manages the ATB Funds, Compass Portfolios, ATBIS Pools.  ATBIM is a wholly owned subsidiary of ATB Financial and is a licensed user of the registered trademark ATB Wealth.