Desjardins’ chief economist on why the TSX is set to outperform U.S. stocks in this ‘year of chaos’

The market is still pricing a fast normalization path that requires both energy dislocation and earnings resilience to stay benign at the same time. That is a fragile combination: if input costs remain elevated for several quarters, the first-order hit is margins, but the second-order hit is guidance credibility — especially for cyclicals and software businesses that need cheap power and stable capex assumptions. In that setup, the rally’s biggest risk is not an immediate macro recession; it is a sequence of small earnings resets that compress multiples before analysts fully mark down estimates.

The more interesting implication is that this is becoming a physical-capital cycle rather than a pure duration/AI-duration trade. The winners are not “AI” in the abstract, but businesses that sit on scarce inputs: electricity, transmission, grid equipment, minerals, and balance-sheet capacity to finance buildout. That shifts relative performance away from asset-light software and toward upstream enablers; if power remains a bottleneck, the market will start rewarding reliability and low-cost energy access over narrative exposure.

Canada screens as a structural beneficiary because it offers a mix of power, commodities, and regulated cash flows that can absorb inflation better than long-duration growth sectors. The underappreciated risk is that this advantage only matters if capital actually follows; if investors crowd into the same few Canadian “safe” exposures, the trade becomes crowded quickly and returns will likely come from stock selection rather than index beta. The contrarian take is that the current optimism around rapid AI monetization is still too aggressive: productivity gains usually show up after adoption pain, not before, so the near-term winners are likely the picks-and-shovels names, not the application-layer beneficiaries.