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New Year, New Economic Data and Policy Shifts: 3 Things to Watch
Key Takeaways
- The first week of 2026 has been an eventful one. We are watching the geopolitical shifts in Venezuela, the December labour-market data, and the U.S. Supreme Court decision on tariffs.
- Overall, while these events may create headlines, in our view, the outcomes may have a limited impact on the economy or markets in the near term. We believe the Fed remains on track to cut rates one to two times in 2026, while the Bank of Canada likely remains on hold.
- Your financial advisor can help you navigate economic, geopolitical and policy shifts, and help ensure your portfolio remains on track to achieve your personal financial goals.
The first week of 2026 has been an eventful one, from both an economic data lens and a policy and geopolitics perspective. In this short period of time, we have seen U.S. military action in Venezuela, digested a fresh set of U.S. and Canadian labour-market data, and are awaiting a decision from the U.S. Supreme Court on tariff policy.
What are the implications of these actions, and what do investors need to know? We highlight three key takeaways below:
- Venezuela actions may have long-term implications for oil prices
Over the January 3 weekend, the U.S. military executed a mission to capture Venezuelan leader Nicolas Maduro and his wife Cilia Flores. They were flown to New York and charged with narco-terrorism conspiracy and other crimes. Perhaps most notably, the U.S. administration has indicated that the U.S. would now run Venezuela until a safe and judicious transition of power takes place. In addition, the U.S. is planning to rebuild the oil infrastructure in Venezuela, with support from major U.S. energy companies.
What are the implications of these actions? From a macroeconomic perspective, we know Venezuela is a relatively small player. Its economy is less than 1% of global GDP, and it represents less than 1% of global trade*. The country does have about 17% of global oil reserves, but due to failing infrastructure, they deliver just about 1% of global production*. Thus, assuming these tensions remain contained, there is likely limited systemic risk to the broader global economy in the near term.
However, perhaps the broader implication to monitor is the precedent this action may set globally, especially given that the U.S. plans to retain power in Venezuela until a transition of government occurs. It is still early days, but this could be a longer tail risk to watch, particularly given economies such as China and Russia are contemplating their own next steps.
In addition, there may be implications to oil prices if the U.S. and energy companies are successful in rebuilding Venezuelan oil infrastructure. While revitalizing the Venezuelan oil industry will likely take time and investment – estimates call for 10 years and upwards of $100 billion* – there may be a broader issue around whether energy companies would welcome the additional oil supply.
Keep in mind that oil prices are currently near multiyear lows*, and oil markets globally continue to face oversupply issues*. The shift toward trends like electric vehicle adoption in China also can create less demand for traditional oil and energy.
Over time, if additional Venezuelan oil supply creates more downward price pressure, oil companies could face operating at below break-even rates – not favourable for shareholders or profitability. Thus, in the near term, while oil prices could move marginally higher given potential disruption to Venezuelan supply, the longer-term picture may include more oil supply and lower prices, assuming the energy companies remain onboard.