Global stocks hovered near record highs as investors digested renewed scrutiny of the U.S. Federal Reserve, raising questions about central bank independence and the future path of interest rates. While U.S. markets showed volatility, international equities and commodities found renewed support.
BNN Bloomberg spoke with Theresa Shutt, chief investment officer at Harbourfront Wealth Management, about shifting global capital flows, the outlook for energy prices and why trade diversification is becoming more critical for Canada’s economy.
Key Takeaways
- Concerns over political pressure on the Federal Reserve are prompting investors to reassess exposure to U.S. assets.
- Gold and other materials are benefiting as investors seek alternatives to the U.S. dollar during periods of uncertainty.
- Europe and Japan are attracting capital due to lower valuations, structural reforms and sector strength.
- Canada’s equity performance continues to be supported by materials and financials, with energy offering potential upside.
- Diversifying oil and gas exports beyond the United States is increasingly important as global supply remains ample and geopolitical risks persist.
Read the full transcript below:
ROGER: Markets are hovering around record highs this morning. We’ll continue to track that as we turn to news surrounding Fed Chair Jerome Powell, who says the U.S. central bank has been served grand jury subpoenas from the Justice Department, raising the prospect of a criminal indictment. Let’s get more on this and everything else with Theresa Shutt, chief investment officer at Harbourfront Wealth Management. Theresa, thanks, as always, for joining us.
THERESA: Thanks, Roger. Great to be here.
ROGER: Let’s start with what may be the story of the day — or possibly the year — depending on what happens next. The Federal Reserve.
THERESA: With these subpoenas, Powell becomes the latest perceived adversary of the president to face a criminal investigation. What’s notable is that Powell has been very clear about how he views this — as an attempt to influence or pressure the future path of interest rates. That makes this situation quite remarkable.
Markets initially reacted negatively. The Dow Jones Industrial Average was down, the S&P 500 was down and the Nasdaq was also lower. Gold and silver moved higher, with safe-haven assets becoming more attractive relative to the U.S. dollar. We’re also seeing signs of yield-curve steepening, which suggests growing concern about inflation. If investors start to question the Fed’s ability to contain inflation, that concern will increasingly show up in financial markets.
ROGER: Markets have since bounced around a bit, with some indices slightly higher and others still down. The TSX, though, is moving along. Does it feel insulated from what’s happening in the U.S., or is it reacting as well?
THERESA: I think it is reacting, but in a different way. The TSX is heavily influenced by materials. We saw that in 2025, when roughly 30 per cent returns in that sector helped the TSX outperform the S&P 500.
This news has benefited gold and other materials, which are a big part of the Canadian economy. That support should continue, even though broader uncertainty remains. While markets have rebounded, concerns about Fed independence could weigh on sentiment. We’re already seeing a theme of investors reducing exposure to U.S. assets.
Last year, for example, a significant share of inflows into U.S. AI stocks was currency-hedged. Investors wanted exposure to the rally, but not to U.S. political risk. If doubts about Fed independence persist, that trend could continue.
ROGER: Where do you see money moving next?
THERESA: International markets look increasingly attractive. Europe and Japan stand out. Valuations are lower, and we’re seeing strong performance in areas like defence, aerospace and financials in Europe, and corporate reform and profit growth in Japan.
Both regions have outperformed the U.S. so far in 2026. Investors tend to focus heavily on U.S. equities, but there are compelling alternatives. Continued interference with the Fed would likely accelerate capital flows away from the U.S. and put further pressure on the dollar, at least in the near term.
ROGER: What about Canada? Do you expect inflows here as well?
THERESA: I do. Canada is a smaller market, but it has benefited from strength in materials and financials. We could see additional inflows, especially if there’s a rebound in energy.
Expanded pipeline capacity and fast-tracked projects would help attract foreign capital. If the federal government can move those projects forward, that would be a clear positive for the TSX. That said, diversification remains important — investors don’t want all their exposure in one place.
ROGER: How important is it for the prime minister to show tangible results from efforts to diversify trade away from the U.S.?
THERESA: I think the right steps are being taken. The prime minister is travelling to China this week, and while agriculture will likely dominate discussions, energy should be part of the conversation. Without energy exports, Canada’s trade balance is negative.
Re-establishing trade ties with China, which have been strained since 2018, is important. Asia offers significant opportunities for Canadian resource exports. That said, expanding pipeline capacity is critical, and that requires coordination across federal, provincial and municipal governments. We’re still early in the process, but the direction is right. Improving productivity and capital investment remains Canada’s biggest challenge.
ROGER: Finally, on energy — there’s a lot of instability globally, from Russia to Iran and Venezuela. How does that shape the oil outlook?
THERESA: OPEC faces a real dilemma over whether to cut production, as each country weighs its own interests. What’s happening in Venezuela is significant, but rebuilding production capacity there would take billions of dollars and many years.
With oil trading below US$60 a barrel, it’s difficult to incentivize large-scale investment, even given Venezuela’s reserves. There’s still a global supply glut, and while Canada benefits from higher oil prices, uncertainty remains. That only reinforces the importance of Canada finding new export partners for its oil and gas.
ROGER: Theresa, thanks as always for joining us.
THERESA: Thanks, Roger.
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This BNN Bloomberg summary and transcript of the Jan. 12, 2026 interview with Theresa Shutt are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
