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In this issue:
- Global Equity Market Performance
- Dot-com AI
- Dow Then Dow Now
- January So Far
- Wrapping Up
Global Equity Market Performance
The S&P/TSX 60 extended its winning streak to eight months in a row. It led the pack at plus 1.2%. MSCI Emerging Markets and MSCI EAFE gained 0.5% and 0.4% respectively. The S&P 500 ended its seven-month winning streak and was the sole loser, down just over 0.1%.
2025 was the third year in a row all four indexes were up.
In 2023 and 2024 the S&P 500 was the leader. This year it was dead last. The S&P/TSX 60 outperformed it by 13%.
As of this writing—the second week of January—our systems are indicating positive momentum in all four equity markets.
If you would like to stay current on our measures of trend and momentum in the markets we follow, please click here.
This letter highlights historical similarities in technological developments and revisits last year’s comparison of the early 1900s to the early 2000s, placing the stock market’s recent performance into historical perspective.
Dot-com AI
As the S&P 500 notched repeated all-time highs during a seven-month winning streak, Nvidia made history. On October 29 it became the first company to reach a market capitalization of USD 5 trillion.
For perspective, the total market cap of the S&P/TSX 60—which represents Canada’s 60 largest companies—is just under CAD 4 trillion (about USD 2.8 trillion). Royal Bank is the biggest in Canada, with a market cap of USD 235 billion.
Back in the dot-com era, the prospect of the internet changing the world sparked a speculative frenzy. The poster child of that tech boom was Cisco Systems, the company that built the hardware infrastructure the internet ran on.
In March 2000, the Wall Street Journal reported that Cisco had become the world’s most valuable company. From December 1996 to March 2000 its stock rose almost 10 times. Note the start date: on December 5, 1996, then-Fed Chairman, Alan Greenspan delivered his famous warning about “irrational exuberance”.
Cisco peaked at a closing price of $80.06 on March 27, 2000. On December 10 last year, it closed at $80.25. That’s a long wait for a 19-cent return.
Nvidia is the poster child of today’s tech boom. Like Cisco in the dot-com era, it builds the critical hardware that powers the next big thing—this time AI, and AI is supposed to change the world.
From ChatGPT’s public release in November 2022 to its all-time high, Nvidia’s stock rallied more than 12 times.
History rhymes.
Dow Then Dow Now
History’s rhymes go back further than just thirty years ago. In last year’s January letter, we compared the early 1900s to the 2000s.
At the beginning of the last century, technological development was advancing rapidly. The major technology themes of the era were cars, electricity, radio, and communications.
The world was changing fast. After a market panic in 1907, a world war and pandemic, the Dow Jones Industrial Average broke higher in 1925—the Roaring Twenties were on.
Introduced in the Wall Street Journal in 1896, the Dow was originally composed of 12 companies. In 1928 it was expanded to 30. These were the leading companies of the era, including the latest in tech: Chrysler, General Electric, General Motors, General Railway Signal, International Harvester, Mack Truck, Nash Motors, RCA, Victor Talking Machine, Westinghouse Electric and Wright Aeronautical.
Today’s Dow includes Amazon, Apple, Boeing, Cisco, IBM, Microsoft, Nvidia, Salesforce and Verizon. Notice there are no car companies. But in general, it’s probably not too much of a stretch to consider the two indexes as similar in content for comparison purposes.
Let’s see how the performance of the old Dow and the new Dow compare from the start of two different centuries.
So far, the current Dow is 27% ahead of the 1900s Dow.
Now let’s look at the two twenties.
The 2020s Dow is 15% ahead of the 1920s Dow.
In both timeframes this era’s Dow is ahead of the 1900s Dow.
It’s important to emphasize that we do not manage risk using analogs. This is strictly for context purposes. Markets can keep running, regardless of what anyone thinks.
Both ways.
And the more things seem to change, the more one thing stays the same: human behaviour.
We will check back in a year to see how these charts progress.
Now for more recent news.
January So Far
On Saturday, January 3 President Trump announced that Nicolás Maduro, President of Venezuela, had been captured to: …face criminal court proceedings tied to a 2020 indictment from the U.S. Department of Justice on multiple federal charges, including narco-terrorism and drug trafficking. Canadian energy stocks took a hit the following Monday on fears Venezuelan oil would offer increased competition to producers. The S&P/TSX Capped Energy Index is now, as of January 14, 5.6% higher on the year.
On Sunday night, January 11 Bloomberg reported that Jerome Powell, Chairman of the Federal Reserve: had been served grand jury subpoenas from the Department of Justice (DOJ) threatening a criminal indictment… Not many had that on their 2026 Bingo card but there was little market reaction.
On January 13, Reuters reported: President Trump on Tuesday said the United States-Mexico-Canada trade agreement is not relevant for the U.S. but Canada wants it… The S&P/TSX 60 did not react.
On the same day, in (perhaps) unrelated news, NASA and the U.S. Department of Energy announced they were going to build nuclear reactors on the moon by 2030. What could go wrong?
In further (perhaps) unrelated news, as of January 14, gold and silver continued to hit all-time highs. So far this year, gold is up 7% and silver 30%.
On January 14, PM Carney landed in China to discuss trade and tariffs. It is not clear if elbows will be part of the negotiating process, but canola products and electric vehicles might be on the table.
Wrapping Up
It’s easy to find stories in the financial media worrying the stock market has come too far too fast—that it is overvalued and so on. Maybe it is. But history shows you can’t pick tops. Our research indicates that we can only try to avoid long-term drawdowns.
For now, as has been the case for a while, our systems are telling us to ride the trends. That doesn’t mean we are unaware of history or how this market sits in that context.
There are many sayings in the stock market. Two relevant ones: bull markets climb a wall of worry and bear markets slide down a slope of hope.
Our job is to worry, not rely on hope and stick with the program.
Happy New Year.
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