Market Factors begins with a list of thematic stock picks from a team that beat the MSCI World index by 27 percentage points in 2025. A bearish view of the loonie is next followed by me singing the praises of my RSS reader.
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Stock picks
The four big investment themes for 2026
I routinely file thematic investing research reports under fiction, but it appears that Morgan Stanley is good at it, to the point where their thematic stock picks outperform benchmarks by a considerable margin. A new update on Morgan Stanley’s favoured themes was published over the weekend.
In 2025 Morgan Stanley’s focused list of thematic stock picks returned 38 per cent on average, outperforming the S&P 500 by 16 percentage points and the MSCI World Index by 27 percentage points. The themes and stocks are chosen during a meeting of senior analysts worldwide each December.
The research team is emphasizing four investment themes for 2026: technology diffusion, the future of energy, multipolar world and societal shifts.
The analysts believe that the capabilities of AI are rising faster than the human ability to implement them and that this lies behind a lot of the recent skepticism behind the investment theme. They expect widespread evidence of AI adoption to emerge by the second half of this year. The companies that do it well will create a sustainable competitive advantage.
The multipolar world investment theme is topical in light of the ongoing meeting of world leaders in Davos. A globally influential speech by Prime Minister Mark Carney and some moronic, incoherent ramblings by the leader of the free world both pointed to a less unified global order of smaller alliances and national self-sufficiency. The logical investments arising from this theme are critical minerals miners and defence stocks.
Morgan Stanley analysts expect energy demand to be a major focus in the years ahead. OECD countries have typically not seen demand growth in recent years but the needs of AI infrastructure are expected to drive U.S. energy consumption, for example, higher by 10 per cent annually in the next decade.
Potential energy shortages will require the development of carbon capture, energy storage, nuclear power, grid efficiencies and other technologies. Political pressure over rising electricity bills will provide further motivation to modernize energy consumption.
The fourth theme, societal shifts, is an extension of the previous longevity theme. This category now also covers the re-education of workers displaced by AI, aging populations, and changing consumer preferences. Diabesity, a term I learned from this research report, and new cancer treatments are part of the theme.
The table below includes Morgan Stanley’s top thematic stock picks trading in the Americas. There is another list of European picks for those (like me) less inclined to invest in the U.S. after Mr. Trump’s threatening appearance at Davos but unfortunately there are few stocks likely to interest Canadian investors. The list includes a lot of banks and local utilities and we have those here. Exceptions that might be of interest are Siemens Energy AG, BAE Systems PLC and ASML Holdings NV.
Currencies
Canada as the U.S.’s biggest geopolitical risk
Citi FX strategist Daniel Tobon headlined the loonie section of his most recent report Is Canada the biggest U.S. geopolitical risk? Which is interesting since there’s a lot of competition for this honour. Mr. Tobon seemed surprised that the White House didn’t express more petulance at the recent Canada-China trade agreement and suggests that clearer signs of a Canadian economic alliance with China would get Mr. Trump’s attention and not in a good way.
Mr. Tobon is bearish on the loonie because of sluggish economic growth and trade negotiation risks. His 12-month forecast is 71.94 cents U.S.
Diversions
I still love my RSS reader
The spoilsports at Google killed the Google Reader more than a decade ago but I still use an RSS reader and wouldn’t be as efficient without one. A recent Lifehacker post praising RSS readers reminded me how grateful I am that the free Feedly app I use is still available.
For the unfamiliar, RSS readers are a single app where news stories pour in from all sites where the user has subscribed. I have it set up to show the headlines and the first paragraph of every story which is enough to tell me whether it’s important enough to read or not.
I follow 37 feeds, but that number is boosted by individual sections of the Financial Times – FT Energy, Global Economy, FT Alphaville, and more – because I have a subscription to keep track of international markets.
My Feedly app is an organizational marvel. I can triage news quickly from around the world, even marking longer stories for reading when I have more time. The reader lets me follow 10 times the number of news sources, investing-oriented and otherwise, than I could without it.
The essentials
Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here to visit our Inside the Market page.
Globe Investor highlights
Do investors have any hope at all for pricing in a multipolar world? Jamie McGeever has some thoughts
Ted Dixon highlights three stocks with strong insider interest that may benefit from renewed Canada-China ties
Count investing professor Dr. George Athanassakos in the camp believing long-term stock returns are going to underwhelm. Here he details just how poor returns may be
ETFs just keep getting more and more popular in Canada, writes David Berman
Quick Hits
The Teranet-National Bank housing price index was flat in December relative to November. Do Canadians still care about housing as an investment? It wasn’t that long ago when housing-related stories generated huge web traffic here but interest has fallen off massively.
Domestic hiring is weak despite an improving business backdrop, which is not the usual pattern. Is AI improving productivity (in terms of output per employee)? Well Fargo published a chart showing clear gains in real revenue per employee for U.S. large cap companies, so maybe it is.
Investors should keep an eye on longer-term bond yields. Japanese 10-year bond yields exceeded 2.25 per cent for the first time since the 1990s this week and the iShares 20+ Treasury Bond ETF is now lower by 5.6 per cent from its October 2025 high. Higher bond yields draw assets from equities, creating volatility.
See our full earnings and economic calendar here