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Over the past year, the Growth Portfolio gained 20.6%, the Income Portfolio declined 2.1%, and the American Growth Portfolio advanced 30.2%.
While the U.S. headline indices have barely moved since late October, this apparent calm has masked a far more fragile market beneath the surface. Option driven flows, not improving fundamentals, have shouldered much of the recent support, leaving equities more vulnerable to sudden breaks. We first highlighted these fault lines in the fall, and the past several months have only reinforced that concern.
Since November, market leadership has steadily deteriorated. Early pressure on the mega caps forced investors to unwind the most crowded positions. By January, the same de risking had spread into high quality companies—most visibly across software—where systematic models found their next major pockets of exposure. The pullback in software reflects not deteriorating fundamentals but heavy ownership and mechanical de risking across institutional portfolios. Meanwhile, what looked like a rotation into small and mid caps was mostly an illusion created by institutional degrossing: large cap holdings were reduced while smaller cap shorts were covered. Retail investors then chased the headlines, but short term flows cannot sustain higher prices without real improvements in cash flow. With the major indices flat for three months, the message is clear to us: major institutions have been reducing risk while most investors remain unaware.
The same flow driven dynamics are now visible in the macro data. Headline GDP has appeared firm, but much of the strength is superficial. A sharp drop in imports has mechanically boosted GDP even though falling imports, in this context, signal weakening forward consumption. Port volumes are projected to decline as much as 10% year over year heading into spring 2026, reducing the flow of goods into an economy built on consumption. Retail data confirms the pressure: holiday spending held up only because prices stayed high, while unit volumes continued to fall. Consumers are stretching to maintain spending, but the reality is they are buying fewer goods. Inflation adjusted imports fell 2.9% in Q3 2025, a contraction that has historically aligned with recessionary periods going back to 1970. Households are tightening before the headline economy shows it.
At the same time, the fiscal engine that powered much of the post pandemic expansion is losing momentum. In a regime where nominal growth depends heavily on government outlays, any slowdown in fiscal spending weakens incomes and quickly feeds into softer investment flows. This vulnerability is intensifying because the long promised artificial intelligence (AI) capex boom is running into significant financial and physical constraints: tighter funding conditions, higher hurdle rates, hardware shortages, and real limits on energy capacity. These pressures are emerging as private non residential investment continues to slide lower from its 2021 peak. Without ongoing investment, there can be no sustained AI driven productivity lift.
The fiscal implications are substantial. Much of the projected deficit path from 2026 onward assumes firms will claim investment linked tax incentives embedded in the 2025 One Big Beautiful Bill Act. But firms must invest to access those incentives. If capex stalls, the expected tax relief disappears, tax receipts come in higher than forecast, and the deficit contracts at precisely the wrong moment. Instead of stimulating the economy, fiscal policy inadvertently tightens conditions by pulling cash out of the private sector just as liquidity is already deteriorating. Should fiscal support weaken further, passive equity flows could decline before earnings reflect the slowdown, removing the stock market’s marginal buyer in a way that feels sudden even though the process is entirely mechanical.
Internationally, the picture is consistent. China’s surge in iron ore inventories, combined with weakening steel production and slowing domestic consumption, signals the early stages of a global disinflationary wave likely to weigh on commodity exporters such as Canada and Australia. Without sustained Chinese demand, the commodity based reflation narrative breaks down, suggesting many commodities outside energy have already peaked. With U.S. goods demand cooling and China’s industrial momentum fading, the global growth impulse is weakening in tandem.
In response to slowing growth and broadening disinflation, and despite lingering stickiness in energy components, we expect the U.S. Federal Reserve to continue lowering policy rates. Whether rate cuts are the ideal tool for what is ultimately a supply and flow driven slowdown is secondary; the pressure to ease will grow. As this develops, Treasury yields should drift lower while the U.S. dollar strengthens on tightening global liquidity and rising safe haven demand.
Against this backdrop, we believe equity market risks are being underestimated. Our base case continues to point to a decline of roughly 15% to 35% from current levels at some point in 2026, driven less by collapsing earnings than by flows, positioning, and liquidity withdrawal. The best opportunities tend to emerge when these flows unwind and volatility forces a reset. Patience in these periods is not simply prudent; it is often the difference between preserving capital now and compounding it meaningfully on the other side of the cycle.
Model Portfolio Highlights
Growth Portfolio: We continue to hold equal portions of short-term U.S. Treasury bonds and U.S. Treasury Inflation-Protected Securities, plus a relatively small position in Dollarama.
American Growth Portfolio:We continue to hold equal portions of short-term U.S. Treasury bonds and U.S. Treasury Inflation-Protected Securities.
Income Portfolio: We continue to hold equal portions of short-term U.S. Treasury bonds and U.S. Treasury Inflation-Protected Securities.
Our approach targets opportunities with a significant margin of safety with minimal risk of permanent loss. Patience remains essential in realizing long-term gains.
Our clients are typically households with more than $1million in investable assets who value proactive risk management, clear communication, and a disciplined approach to growth. If you know someone who might benefit from this perspective, feel free to forward this note. If you have questions or would like to schedule a conversation, please be in touch.
Thank you for your continued trust.
Yours,
Ben
Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth
Office: 416.369.3024
Email: bwk@wellington-altus.ca
Book time with Ben W. Kizemchuk: Portfolio and Plan Review
Ben Kizemchuk offers full-service wealth management for high-net-worth Canadians including families, business owners, and successful professionals. Ben and his team provide investment advice, financial planning, tax minimization strategies, and retirement planning.
Performance reporting disclaimer: Performance results reflect the returns of each representative model portfolio. Returns are calculated using each model portfolio’s monthly performance, including changes in securities values, and accrued income (i.e., dividend and interest), against its market value at the closing of the last business day of the previous month. Performance results are expressed in the stated strategy’s base currency and are calculated on a net of fees basis. Individual account performance may materially differ from the representative performance history set out in this document, due to factors such as an account’s size, the length of time the strategy has been held, the timing and amount of deposits and withdrawals, the timing and amount of dividends and other income, and fees and other costs. Investors should seek professional financial advice regarding the appropriateness of investing in any investment strategy or security and no financial decisions should be made solely on the basis of the information provided in this document. This is not an official statement from WAPW. Please refer to your official WAPW statement for your specific performance numbers.
Market Commentary
February 2026 Update
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Over the past year, the Growth Portfolio gained 20.6%, the Income Portfolio declined 2.1%, and the American Growth Portfolio advanced 30.2%.
While the U.S. headline indices have barely moved since late October, this apparent calm has masked a far more fragile market beneath the surface. Option driven flows, not improving fundamentals, have shouldered much of the recent support, leaving equities more vulnerable to sudden breaks. We first highlighted these fault lines in the fall, and the past several months have only reinforced that concern.
Since November, market leadership has steadily deteriorated. Early pressure on the mega caps forced investors to unwind the most crowded positions. By January, the same de risking had spread into high quality companies—most visibly across software—where systematic models found their next major pockets of exposure. The pullback in software reflects not deteriorating fundamentals but heavy ownership and mechanical de risking across institutional portfolios. Meanwhile, what looked like a rotation into small and mid caps was mostly an illusion created by institutional degrossing: large cap holdings were reduced while smaller cap shorts were covered. Retail investors then chased the headlines, but short term flows cannot sustain higher prices without real improvements in cash flow. With the major indices flat for three months, the message is clear to us: major institutions have been reducing risk while most investors remain unaware.
The same flow driven dynamics are now visible in the macro data. Headline GDP has appeared firm, but much of the strength is superficial. A sharp drop in imports has mechanically boosted GDP even though falling imports, in this context, signal weakening forward consumption. Port volumes are projected to decline as much as 10% year over year heading into spring 2026, reducing the flow of goods into an economy built on consumption. Retail data confirms the pressure: holiday spending held up only because prices stayed high, while unit volumes continued to fall. Consumers are stretching to maintain spending, but the reality is they are buying fewer goods. Inflation adjusted imports fell 2.9% in Q3 2025, a contraction that has historically aligned with recessionary periods going back to 1970. Households are tightening before the headline economy shows it.
At the same time, the fiscal engine that powered much of the post pandemic expansion is losing momentum. In a regime where nominal growth depends heavily on government outlays, any slowdown in fiscal spending weakens incomes and quickly feeds into softer investment flows. This vulnerability is intensifying because the long promised artificial intelligence (AI) capex boom is running into significant financial and physical constraints: tighter funding conditions, higher hurdle rates, hardware shortages, and real limits on energy capacity. These pressures are emerging as private non residential investment continues to slide lower from its 2021 peak. Without ongoing investment, there can be no sustained AI driven productivity lift.
The fiscal implications are substantial. Much of the projected deficit path from 2026 onward assumes firms will claim investment linked tax incentives embedded in the 2025 One Big Beautiful Bill Act. But firms must invest to access those incentives. If capex stalls, the expected tax relief disappears, tax receipts come in higher than forecast, and the deficit contracts at precisely the wrong moment. Instead of stimulating the economy, fiscal policy inadvertently tightens conditions by pulling cash out of the private sector just as liquidity is already deteriorating. Should fiscal support weaken further, passive equity flows could decline before earnings reflect the slowdown, removing the stock market’s marginal buyer in a way that feels sudden even though the process is entirely mechanical.
Internationally, the picture is consistent. China’s surge in iron ore inventories, combined with weakening steel production and slowing domestic consumption, signals the early stages of a global disinflationary wave likely to weigh on commodity exporters such as Canada and Australia. Without sustained Chinese demand, the commodity based reflation narrative breaks down, suggesting many commodities outside energy have already peaked. With U.S. goods demand cooling and China’s industrial momentum fading, the global growth impulse is weakening in tandem.
In response to slowing growth and broadening disinflation, and despite lingering stickiness in energy components, we expect the U.S. Federal Reserve to continue lowering policy rates. Whether rate cuts are the ideal tool for what is ultimately a supply and flow driven slowdown is secondary; the pressure to ease will grow. As this develops, Treasury yields should drift lower while the U.S. dollar strengthens on tightening global liquidity and rising safe haven demand.
Against this backdrop, we believe equity market risks are being underestimated. Our base case continues to point to a decline of roughly 15% to 35% from current levels at some point in 2026, driven less by collapsing earnings than by flows, positioning, and liquidity withdrawal. The best opportunities tend to emerge when these flows unwind and volatility forces a reset. Patience in these periods is not simply prudent; it is often the difference between preserving capital now and compounding it meaningfully on the other side of the cycle.
Model Portfolio Highlights
Growth Portfolio: We continue to hold equal portions of short-term U.S. Treasury bonds and U.S. Treasury Inflation-Protected Securities, plus a relatively small position in Dollarama.
American Growth Portfolio:We continue to hold equal portions of short-term U.S. Treasury bonds and U.S. Treasury Inflation-Protected Securities.
Income Portfolio: We continue to hold equal portions of short-term U.S. Treasury bonds and U.S. Treasury Inflation-Protected Securities.
Our approach targets opportunities with a significant margin of safety with minimal risk of permanent loss. Patience remains essential in realizing long-term gains.
Our clients are typically households with more than $1million in investable assets who value proactive risk management, clear communication, and a disciplined approach to growth. If you know someone who might benefit from this perspective, feel free to forward this note. If you have questions or would like to schedule a conversation, please be in touch.
Thank you for your continued trust.
Yours,
Ben
Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth
Office: 416.369.3024
Email: bwk@wellington-altus.ca
Book time with Ben W. Kizemchuk: Portfolio and Plan Review
Ben Kizemchuk offers full-service wealth management for high-net-worth Canadians including families, business owners, and successful professionals. Ben and his team provide investment advice, financial planning, tax minimization strategies, and retirement planning.
Performance reporting disclaimer: Performance results reflect the returns of each representative model portfolio. Returns are calculated using each model portfolio’s monthly performance, including changes in securities values, and accrued income (i.e., dividend and interest), against its market value at the closing of the last business day of the previous month. Performance results are expressed in the stated strategy’s base currency and are calculated on a net of fees basis. Individual account performance may materially differ from the representative performance history set out in this document, due to factors such as an account’s size, the length of time the strategy has been held, the timing and amount of deposits and withdrawals, the timing and amount of dividends and other income, and fees and other costs. Investors should seek professional financial advice regarding the appropriateness of investing in any investment strategy or security and no financial decisions should be made solely on the basis of the information provided in this document. This is not an official statement from WAPW. Please refer to your official WAPW statement for your specific performance numbers.
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January 2026 Update
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The opinions contained herein are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Wellington-Altus Private Wealth. Assumptions, opinions and information constitute the author’s judgement as of the date this material and subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. All third party products and services referred to or advertised in this presentation are sold by the company or organization named. While these products or services may serve as valuable aids to the independent investor, WAPW does not specifically endorse any of these products or services. The third party products and services referred to, or advertised in this presentation, are available as a convenience to its customers only, and WAPW is not liable for any claims, losses or damages however arising out of any purchase or use of third party products or services. All insurance products and services are offered by life licensed advisors of Wellington-Altus. Wellington-Altus Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. All trademarks are the property of their respective owners.