Monday Market Minute | Jan 05, 2026

2026 opens with cautious optimism — rates stable, but trade policy clouds the horizon

What Moved

Canadian private markets opened 2026 on solid footing. The Bank of Canada's easing cycle — 175 basis points of cuts from June 2024 through October 2025 — left the overnight rate at 2.25%, a level that had already filtered through to improved deal economics across private credit, real estate, and PE. Institutional allocators returned from the holiday break with full deployment mandates, and private credit origination desks reported healthy pipelines of mid-market corporate and real estate bridge lending. The domestic backdrop was constructive: inflation near target, employment stable, and consumer spending resilient. But the optimism came with an asterisk. The new Trump administration's trade policy priorities were taking shape, and early signals pointed toward an aggressive tariff posture on Canadian goods — a risk that hadn't yet been priced into forward projections.

Why It Matters

For private markets allocators, the 2026 setup offered a rare combination: a stable rate environment, proven asset class resilience from 2025, and institutional demand that continued to grow. Private credit spreads remained attractive relative to public fixed income, and PE sponsors had dry powder to deploy. The key question was whether trade policy friction would disrupt the deployment window or remain a negotiating posture. Allocators who had positioned through the 2025 tariff episode had earned conviction — but complacency was the new risk.

Signal to Watch

Watch for early January rhetoric from the incoming US Trade Representative on Section 232 tariffs and Canadian energy exports — the first concrete policy signals would set the tone for Q1 deal activity.

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