Why Carney’s trip to India matters

How should investors interpret Canada’s growing engagement with middle-power economies beyond North America?

Market recap

• Equity markets had another choppy week, desperately trying to figure out what the AI buildout actually means for the economy and the market going forward.
• One thing is for sure: When the market reacts aggressively to one individual fantasy scenario, you know it’s desperately searching for any answers.
• All told, the S&P 500 dipped 0.4%, with defensives, dividends names and low-beta again outperforming.

Trade

As I’ve previously written, ¹global trade relationships are evolving as countries seek to diversify economic partnerships amid ongoing policy uncertainty in the United States. Canada is no exception. Prime Minister Mark Carney’s just-ended visit to India — the first leg of a 10-day Asia-Pacific tour and his first international trip since his headline-making Davos speech calling for greater cooperation among “middle powers” — seems to align with this shift. In our view, the timing is notable. As uncertainty persists around upcoming United States-Mexico-Canada Agreement (USMCA) negotiations, Canada appears to be actively developing alternative trade pathways rather than waiting for outcomes to unfold. In practice, this reflects a recognition that trade diversification is no longer optional. For Canadian consumers, investors and companies operating domestically, this should be viewed as a constructive development. Stronger ties with India and other Asia-Pacific partners may improve supply chain resilience and broaden sourcing opportunities, while industries such as gold could see incremental support as economic links deepen. Agreements negotiated under Carney’s leadership are also likely to be viewed as stable and predictable, offering a contrast to the more uncertain trade environment seen in the United States.

Bottom line: Expanding trade relationships beyond North America could strengthen Canada’s economic resilience, even as U.S. negotiations continue to shape the near-term outlook.

Tech

Recent weakness in chip stocks has renewed debate around whether technology sector leadership is losing momentum. In our view, the artificial intelligence (A.I.) theme remains intact, but that does not necessarily mean every stock still has room to run. Much of the enthusiasm surrounding A.I. is already reflected in valuations, leaving some of the largest names due for a period of consolidation. One factor contributing to the recent rotation is growing sensitivity to how A.I. investment is being funded. As capital expenditures increasingly rely on debt, investors are becoming more selective, focusing less on who builds the fastest models and more on which companies can translate A.I. adoption into productivity gains and margins expansion. At the same time, expectations have risen significantly, and with the bar set higher, even solid earnings results may struggle to exceed elevated forecasts in the near term. While leading technology companies are still likely to remain long-term winners, we believe diversification across sectors is becoming increasingly prudent. Importantly, this does not signal a broad exit from technology equities. Rather, capital appears to be rotating gradually at the margin toward areas with improving earnings visibility and less demanding valuations. Should volatility increase or other sectors begin to show stronger upside momentum, this rotation could accelerate into the second half of the year.

Bottom line: While the A.I. theme remains intact, expectations have simply moved ahead of fundamentals, and investors are beginning to diversify beyond the sector’s biggest winners.

Bank earnings

Recent earnings from Canadian banks have reinforced what has already been a strong story for the sector this year. Several institutions reported record results, supported by healthy dividend levels and increasingly diversified revenue streams. Credit conditions have also improved at the margin. Provisions for credit losses have generally declined, but not for all banks, and loan performance has stabilized, suggesting earlier concerns about credit deterioration may have been slightly overstated. However, there was still caution regarding employment and uncertainty around the USMCA. Wealth management businesses have remained a key contributor as well, benefiting from resilient markets and steady client activity. Taken together, these trends point to a fundamentally healthy operating backdrop for the sector. However, the market has now already rewarded much of this progress, which raises the question of how much incremental upside remains. In our view, there is still room for certain institutions to expand margins and grow earnings, which helps explain why investor sentiment remains constructive. That said, as improvements are delivered, the pace of incremental gains is likely to slow.

Bottom line: Bank earnings remain healthy, credit conditions are stabilizing, and upside persists even as the sector moves closer to a cyclical peak.

Positioning

For a detailed breakdown of our portfolio positioning, check out the latest BMO GAM House View Report, titled ‘Strapping in—not tapping out: Markets grind higher despite volatility ’.

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Originally Posted March 2, 2026 – Why Carney’s trip to India matters

Source

¹https://bmogam.com/ca-en/insights/weekly-commentary-february-23-supreme-court-struck-down-trump-tariffs-now-what/ 

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