Juggling Dynamite

Stocks, commodities, junk bonds, precious metals, and crypto assets all leapt together into late 2025; now, Bitcoin, the crypto leader, is down 44% since October, and the broader crypto market has vaporized trillions in notional value while billions flow out of crypto-based Exchange Traded Funds.

US stocks trading at all-time bubble-high valuations (S&P 500 composite of 8 most relevant valuation metrics below since 1900) and making up a near-record weight of the global equity market cap are sporting an even bigger bullseye for implosion. When this bubble bursts, Wall Street et al will insist that no one saw it coming, but that will be just another case of wilful blindness.

U.S. stocks account for approximately 63% of global equity market capitalization, the highest since the 1966 secular bubble top, after which equity markets entered a secular bear period that lasted until 1982 (shown below since 1900).

Forced and panicked liquidation are natural outcomes of extreme prices and extreme leverage (borrowing to buy), which violently revert to the mean. We are seeing this unfold in certain property markets today, and borrowing to buy securities (margin accounts) ended 2025 at levels only seen at prior bubble tops in 2021, 2007, and 2000 (shown below since 1998, courtesy of ISABELNET.com).

Large bounce days and weeks are typical during bear markets, but as liquidation selling spreads, pain tends to be contagious across all risk assets over periods of 9 to 24 months.

Wilful blindness and ignorance can get people into bubbles, but they’re no protection from the losses that inevitably unfold. The question will be: how could you not see the wipeout coming?

There are many lucid observations in the segment below.

Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, warns that gold, silver, and crypto have all peaked, the U.S. stock market is overdue for a significant correction, and U.S. Treasury bonds are the best trade ahead.  Here is a direct video link.

The spring listing wave traditionally starts at the end of February, but supply is already off to a strong start in 2026. Canadian housing inventory rose in January, with listings higher across most regions, as prices declined (home price index for the 5 largest urban centers shown below for December and January). See Supply surge keeps Canadian home prices on a downtrend.

The Bank of Canada expects that 60% of the one million mortgages renewing in 2026 will face higher payments, while falling home prices, slowing sales, and a weak job market are hampering people’s ability to afford those payments; investors are also buffeted by falling rents.

Unsurprisingly, a new Canada Mortgage and Housing Corp. (CMHC) report notes that mortgage delinquencies are on the rise. Major cities such as Toronto and Vancouver are recording the highest delinquency rates, and those who purchased a home during the pandemic are exhibiting the greatest signs of payment stress. Mortgage delinquencies in Toronto have more than quadrupled since 2022. See, Mortgage delinquencies more than quadrupled in this Canadian city with no relief on the horizon.

Fresh job numbers out Friday pegged Ontario’s unemployment rate at 7.3 per cent compared with the national average of 6.5 per cent as the province’s manufacturing sector continues to take blows from tariffs.

We should all work and hope for new trade relationships, new business lines and lots of innovation to bring seen and unforeseen solutions. But in the here and now, Canada is in a complacency-earned rough patch. Eyes wide open.

Canada’s private-sector activity remained soft in January, with the S&P Global Canada Composite PMI coming in at 46.4, slightly below December’s 46.7. Readings below 50 indicate contraction, and this marks the third consecutive month of subdued economic momentum. While the decline from December was modest, the data suggest ongoing weakness in business activity (ongoing cutbacks) and demand (weak new orders, weakness in interest-sensitive sectors such as construction, real estate and consumer services).

Manufacturing stabilized in January, while services fell to 45.8 from 46.5, with the latter the main driver of the downturn. New business volumes declined for a fourteenth consecutive month and continued to weigh on output. Backlogs of work decreased markedly again as firms were easily able to keep on top of workloads.

On the price front, input cost inflation softened to its softest rise since November 2024, while output charge inflation remained solid and little changed compared with December.

Employment contracted for a fifth successive month, as firms pared staff or chose not to replace those who left. Business confidence softened since December and remained well below trend.

Canada’s full-time job creation flattened over the past three months, along with a contracting workweek, and an unemployment rate at 6.8% in December, up from 6.5% in November. The Bank of Canada’s (BoC’s) January Monetary Policy Report (MPR) affirmed a darkening outlook in 2026:

“US trade policy has weakened demand for Canadian exports and led to heightened uncertainty. As a result, some businesses have postponed expansion plans. This is hampering the economy’s ability to grow…GDP growth remains modest at 1.1% in 2026 and 1.5% in 2027…While US tariffs on Canada are limited to specific sectors, such as steel and aluminum, their impact on exports is being felt more broadly. Uncertainty about trade policy is prompting some US customers to delay orders. As well, many Canadian businesses are postponing expansions, and some are approaching new US contracts with caution. Additionally, establishing new trade relationships with customers and suppliers outside the United States will be a lengthy process…Weak demand and trade policy uncertainty continue to weigh on investment plans for both exporting and non-exporting businesses.”

At the same time, talk of the Bank of Canada (BoC) holding the overnight rate steady while the US is expected to ease further, along with parabolic moves in metals’ prices, caused the loonie to appreciate 3% against the US dollar in the last three months. The question is how long can this strength last.

A stronger loonie is disinflationary for import prices, but has little effect on the shelter and services inflation, which are stressing Canadian households. Meanwhile, trade and labour weakness, along with ongoing strife in the deflating property market, increase the likelihood that the BoC will return to lowering the overnight rate in 2026.

David Rosenberg touches on some key trends in the segment below.

David Rosenberg, founder of Rosenberg Research, joins BNN Bloomberg to discuss Canada’s labour market and real GDP. Here is a direct video link.