Markets remain near record highs, with investors showing confidence in continued economic resilience, rich asset valuations and limited near-term downside risks. But beneath the surface, positioning has become increasingly one-sided across equities, currencies and interest-rate expectations.
BNN Bloomberg spoke with Karl Schamotta, chief market strategist at Corpay, about crowded bets against the U.S. dollar, Canada’s trade relationship with China, and why market assumptions around growth, policy and competitiveness could be challenged.
Key Takeaways
- Investor confidence remains strong as markets price in economic resilience, steady growth and limited near-term policy disruption.
- Canada’s trade relationship with China reflects structural realities, with resource exports competing against China’s manufacturing scale and supply chains.
- Investors are heavily positioned against the U.S. dollar, betting on aggressive Fed rate cuts and narrowing global rate differentials.
- Equity valuations are stretched relative to earnings, increasing vulnerability if growth or policy expectations disappoint.
- A more resilient U.S. economy or slower-than-expected rate cuts could unwind consensus trades and revive volatility.
Read the full transcript below:
ANDREW: Markets are near record highs, with Toronto hitting a record yesterday, and asset valuations are pretty rich. Remember, Martin Cobb told us this week that banks in the U.S. are trading at hefty multiples of their book value. Let’s get more from Karl Schamotta, chief market strategist at Corpay. Karl, thanks very much for joining us. I know the stock market is a notoriously inaccurate economic predictor, but investors seem to be feeling pretty good about the outlook right now.
KARL: Yeah, no question there’s enthusiasm out there. It’s interesting — I was reviewing all of the year-ahead outlooks provided by major banks globally in December and early January, and virtually everybody is optimistic about where the global economy is headed, where corporate earnings are headed and where valuations are headed. There’s, of course, some talk about risk, but at the end of the day it does seem as though the resilience of the global economy last year has translated into a much more optimistic view of what might happen in 2026.
ANDREW: I have to get your view on this canola versus electric vehicle story. Last year, Canada’s canola exports were around $15 billion, but our auto exports were well north of $40 billion. It seems a little odd that we’re bringing in a highly value-added, manufactured, high-tech product from China, while exporting canola. Is there something wrong with that picture? It makes us feel a bit like a second-rate economy, just exporting seed oil to China.
KARL: Yeah, it’s interesting when we look back at history. There’s that old idea that the Canadian economy is the hewers of wood and the drawers of water, that we’re extraordinarily focused on commodities. When it comes to China, the reality is you’re talking about a manufacturing superpower that is rapidly moving up the value chain. That means that, when it comes to competitive advantage, Canada probably does have one on the resource side. It’s very difficult for Canadian manufacturers to produce high-tech goods — especially something as complex and international as a vehicle — and export that into China while remaining competitive. On the other side, China has supply chains, scale and capacity that allow it to export competitively. To some extent, I think the Canadian government is focusing on what we can do well and using that lever to improve trade relations and the overall trade balance.
ANDREW: Is it something we should worry about — that we’re just a raw-material exporter? I know there’s some value added in canola processing in this country, but it’s essentially a commodity that trades on price.
KARL: That’s right, and margins are very thin as a result. Unquestionably, Canada should work to improve competitiveness and establish areas of advantage relative to the global economy. One of the challenges in recent years has been a level of groupthink among politicians in Canada and globally. Everybody was doing batteries and electric vehicles at the same time. Everybody was trying to subsidize the same industries. The reality is Canada can’t win at that game, especially against behemoths like Germany, Japan or the United States. Instead, we should be pivoting and looking for areas others aren’t covering well, where we can establish a technological beachhead.
ANDREW: Just thinking about the Dutch — they’ve been pretty smart and have a lock on certain parts of the semiconductor equipment industry. In any case, let’s have a look at the U.S. dollar. You reckon there are a lot of bets being placed against the U.S. currency right now?
KARL: Yeah, and that’s the funny part. It may sound like I’m very optimistic, but the reality is investors are crowded into a number of very simple trades right now. Equity markets are trading near historic highs, especially on price-to-earnings ratios. When we look at the U.S. dollar, virtually every major consensus forecast is bearish going into this year. The concern is: what if the U.S. economy outperforms in the first quarter? What if the data come in stronger than expected? What if we don’t see the restraints on President Trump that markets are expecting? If all of that happens, we could see the U.S. dollar rebound and trigger what we’d call a short squeeze against speculative positions stacked up against it.
ANDREW: Part of that bet against the U.S. dollar is the idea that the Fed might be forced to turn dovish, or that Jerome Powell could be replaced.
KARL: That’s right. The big bet is that, immediately after Powell steps down in May, the Fed starts cutting rates fairly aggressively. That puts downward pressure on U.S. rates and narrows rate differentials with other economies. The expectation is also that other central banks — the Bank of Canada, the ECB, the Bank of England — cut only incrementally or not at all. The challenge is: what if the U.S. economy proves more resilient, or Fed officials don’t simply go along with a new appointee? If cuts come more slowly, a lot of market assumptions downstream of that monetary policy view could be toppled.
ANDREW: Karl, thank you very much. Have a great weekend.
KARL: You as well. Thank you.
ANDREW: Karl Schamotta, chief market strategist at Corpay.
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This BNN Bloomberg summary and transcript of the Jan. 16, 2026 interview with Karl Schamotta 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.
