Sid Mokhtari, chief market technician at CIBC Capital Markets.Supplied
Although North American equity markets are hovering near record levels, technical indicators suggest a potential market correction may occur in the first half of 2026, according to CIBC’s chief market technician Sid Mokhtari.
Mr. Mokhtari believes equity markets could decline between nine and 13 per cent sometime in the first six months of the year. However, he argues that such a drawdown would represent a buying opportunity by easing overbought technical conditions and creating a reset environment for a secular bull market that remains intact.
Last year, he forecast the S&P/TSX Composite Index and the S&P 500 would both post low double-digit returns in 2025. His market outlooks were directionally correct but too conservative given the strong and sustained market momentum.
Mr. Mokhtari’s portfolio of stock selections delivered spectacular returns in 2025. Each month, he publishes a report with his top 10 stock ideas and his disciplined process outperformed the broader index for a fourth consecutive year. In 2025, his portfolio of stock selections rallied 51.3 per cent, compared to a 28.3 per cent price return for the S&P/TSX Composite Index. His stock selections also outperformed the TSX Index in 2024, 2023 and 2022 by 5.8 percentage points, 6.3 percentage points and 2.7 percentage points, respectively.
Earlier this month, we published his top picks for January. His diversified basket of stock selections includes 10 new stocks across six sectors. In the materials sector, he added three stocks to his basket of top picks – CCL Industries (CCL-B-T), Ivanhoe Mines (IVN-T) and Nutrien (NTR-T). His consumer discretionary stock selections include Dollarama (DOL-T) and Gildan Activewear (GIL-T). In financials, Fairfax Financial Holdings (FFH-T) and Great-West Lifeco (GWO-T) were selected. In consumer staples, Premium Brands Holdings (PBH-T) was included in his basket of top picks. Telecom provider Quebecor (QBR-B-T) was added along with an industrial stock, TFI International (TFII-T).
On Jan. 6, The Globe and Mail spoke with Mr. Mokhtari and discussed his January stock picks, investment opportunities and his outlook for equity markets.
This month, you have a diversified basket of top picks, 10 stocks across six sectors. Could you highlight a few of them?
Historically, this month has mixed returns. We have seen equity markets up 5 per cent or down 5 per cent in January. So, it is very clear to us that we need to be more balanced. We have a good mix of value, dividend yield and cyclical beta within our basket of top picks.
We think it will be a cyclically tilted year. We titled our year ahead piece “2026 - More Cyclical Tailwinds” because we’re seeing a lot of positive cyclical rotation within base metals, industrials, copper, packaging, agriculture and fertilizers.
And that’s why we added Ivanhoe Mines (IVN-T), a copper name within our improving quad. In agriculture, we have Nutrien (NTR-T), which is also in our improving quad. In packaging, we have CCL Industries. Combined, that’s 30 per cent materials exposure.
We also added Quebecor. It is ranking well in our quant and technical matrix, scoring high across quality, value and low-volatility factors. It’s currently the top telecom member in our trend-following process. From a seasonal perspective, January has historically been a strong month for the TSX telecom sector providing additional support for Quebecor despite it appearing somewhat overbought.
So, I think there’s a good mix in our basket of top picks.
Can you run through your technical targets for each of these stocks?
Ivanhoe can measure up toward $18.90 to as high as $19 on this leg of the breakout. In time, we think we should be able to retrace the entire move back up and potentially make new highs.
For Nutrien, this is a slow but modular rising uptrending condition. We have a technical target that is closer to $92.50 to as high as $95, in Canadian dollar terms.
CCL Industries regularly comes into our basket. This time, it came in because of its alpha that is being produced on a monthly basis. We have a technical measured move for CCL closer to $95. The stock has broken out in both absolute and relative terms. It doesn’t show any divergences so we do assume the durability of alpha is reasonable. Our fundamental desk that covers this company also likes it.
Quebecor is an extended name but the reason we brought the name into our basket is because of its defensive posturing. The technical upside for Quebecor is estimated around $55.60 with downside support at $49.
Historically, the technology sector has been a top performer in the S&P/TSX Composite Index as well as the S&P 500 in January. And according to your recent report, the NASDAQ100 has rallied 2 per cent or more, on average, over the past 10 and 30 years. Are you seeing evidence supporting technology leadership in early 2026?
Historically, seasonal influences or positive hit rates (a hit rate is a measure of frequency of observations) tend to decline post January.
We’re very mindful that the group is becoming very bifurcated, which may require a lot more attention than before. We should be very selective about our choices when it comes to the tech space.
Let’s talk about industry ETFs. I noticed the rankings of several bank and financial ETFs moved materially higher. The BMO Equal Weight Banks Index (ZEB-T) is ranked near the top of the list, along with Invesco KWB Bank ETF (KBWB-Q) and iShares Global Financials ETF (IXG-A). Will banks and financials continue to rank well going forward?
We do not see any significant negative divergences that might indicate a shift in the current upward trend cycle. The positive ranking of capital markets and financials in our matrix processes is encouraging from both a value factor and longer-term cyclical rotation perspective. Despite appearing overbought from a mean-reversion standpoint, our factors still support dip-buying strategies.
We’ve also seen positive rotation within our U.S. small-cap models, favouring financials. The State Street SPDR S&P Regional Banking ETF (KRE-A), which holds U.S. regional banks, is a great example. We’ve been vocal about our positive outlook for this sector. The relative strength of U.S. regional banks is emerging positively, supported by M&A [merger and acquisition] sentiment, cheaper valuations, potential rate cuts by the U.S. Federal Reserve, and a steeper yield curve. We wouldn’t be surprised to see regional banks outperforming their larger cap peers. We note that banks and financials relative strength in the U.S. has broken out of a decade-long range pattern, suggesting a favourable leadership rotation. If our views are correct that the market internals and cross sector rotations are beginning to shift towards cyclicals, then financials could take the leadership over and begin outpacing technology.
Additionally, the industrials GICS sector appears to be resuming its uptrend forces. The Global X U.S. Infrastructure Development ETF (PAVE-A) may be the right vehicle for investors seeking exposure to this space.
You have been recommending PAVE for a while but another thematic ETF that has advanced in your rankings is U.S. Global JETS ETF (JETS-A).
Good observation.
It’s not just airlines, it’s also transports, in general. We see participation from truckers. One of the reasons we added TFI International (TFII-T) to our basket was because we’re seeing a big rotation favouring transports and industrials.
With TFI, it’s alpha has now improved into our improving quad, and we’re seeing positive money flow within the sector, in general. We’re measuring closer to $190 on the upside. It may take a while. But it’s rebuilding its base, it’s recovered above its longer-term averages, and it’s part of the cyclical narrative that we have for transports and industrials. And a lot of its comps are also showing better price action. I would not be surprised to see it close the gap that opened up prior to Liberation Day.
Back to JETS, this is year three of a breakout that we’re seeing within the U.S. airlines index for many good reasons. I think again that’s another signature of a cyclical rotation. But, I would also say that jet fuel prices are sharply lower and that has buoyed this sector.
We maintain our technical view that oil and its corresponding indicator charts are likely to remain weak and stagnant at a lower high for longer. This should help keep the price of jet fuel tame and support the airlines index uptrend forces.
Speaking about airlines, what are your thoughts on Air Canada (AC-T)?
Air Canada’s chart looks very good. It has been in a wave of a consolidation for almost the past two years. The stock has broken out of its upper range that should be able to trace a better move closer to $23, if not higher. I think dips are likely to be bought.
In your report published at the beginning of January with your top picks, the very first sentence said, “Internals are supportive for January.” Can you expand on that and tell readers where equity markets may be headed?
We have been talking more about a market that is beginning to show a broadening of its breadth. We have seen more participation within small caps and mid-caps in the U.S., and that’s very positive because they have lagged for quite some time and we are starting to see better group participation. We’re seeing financials, including regional banks, health care, consumer stocks, industrials within small and mid-caps participating.
Breadth in Canada has been in better shape relative to the U.S. for quite some time. Canada’s breadth has been much better because of our exposure to financials. Banks have been very strong. And secondly, I would say that materials and industrials have been very strong here in Canada.
We think the U.S. may be able to put on a better performance as we go into the second half of the year.
Expand on your remark that the U.S. market may outperform in the second half of this year.
Our view is that there are two colliding cycles that are meeting one another. One is year two in the U.S. presidential cycle has historically had a very poor hit rate. So out of the four years of the U.S. presidential cycle, year two is the weakest year, and it also has a very challenging return profile in the first half of the year. Second, it is year four of the bull cycle, assuming 2022 marked the trough, and that also has a backdrop that typically is stronger in the second half. I think these two cycles are colliding with one another in 2026 that should bring about some disruptive price action for the market. Our view is that the first half of the year will be a lot more disruptive than the second half.
History may not repeat itself, but it is likely to rhyme.
I think the January effect that we’re experiencing this month, where historically broadening often occurs, cyclical rotation often takes place, small and mid-caps tend to do well, but we’ve got to be mindful that in the next few months, I’m not sure what may cause it, but at least by cycle work that we do, we believe that disruptive price action may take hold in first half of the year.
What do you mean by disruptive action? Can you quantify it?
Volatility should rise, which we think will be another buying opportunity.
The peak-to-trough drawdown risk for Canada and U.S. can be anywhere between nine to 13 per cent. It may not happen. But, we’re closer to the top end of our measured move for this leg that we’re seeing, and in order to bring down some of these overbought mean reversion factors that we have in our models, in order to bring them to a trough point, we can experience a nine to 13 per cent peak-to-trough decline for equity markets.
For the U.S., we see initial downside risk to be at 6,530, that’s a 5 per cent decline with much stronger support being marked at 6,290, 6,300 - that’s a 9 per cent decline. That’s my measured move downside risk for the U.S. Anything beyond that is a buying opportunity because we still believe we are in a secular bull market.
For Canada, we’re looking at initial downside risk being closer to 30,000, call it roughly 5 to 7 per cent downside risk. Bigger downside support is marked at about 27,500 - that’s 13 per cent downside risk.
Any commodities that you want to highlight for 2026?
I believe the direction of the Fed will be key for gold in 2026. Geopolitical risks, inflation concerns, and sustained central bank demand are likely to support gold’s long-term uptrend, despite overbought conditions and seasonal mean-reversion risks post-January.
Copper and other base metals are looking particularly strong as well. The CRB Spot Raw Industrials Index has broken out, which is effectively a compilation of many industrials base metals commodities and signaling a new upcycle for industrial base metals. This supports the recent re-emerging narrative of a cyclical rotation, benefiting base metals and related mining sectors.
An ETF that is ranking very highly in our work is Global X Copper Miners ETF (COPX-A). That ETF has broken out of a 10-year elongated base relative to the S&P 500.
And there’s a Canadian ETF, BMO Equal Weight Global Base Metals Hedged to CAD Index ETF (ZMT-T).
Can you give readers your technical targets for those ETFs?
Like I said, COPX broke out of a 10-year base. It does measure closer to $88. It does look extended by the measure of mean reversion oscillators, but we think dips within this space should be viewed positively. COPX is not as parabolic as silver or gold, and it’s still in a very early phase of its relative strength emerging condition.
ZMT, we measure this to be closer to $130. It is not as extended as COPX. It has a very notable emerging relative strength condition that is just beginning to accelerate. Here too, any setback should provide a buying opportunity.
Lastly, any interesting observations you want to highlight to readers?
I do want to make sure that we’re fully aware that we are in a year of colliding cycles, and that is likely to bring about disruptive price action and volatility.
While we should remain mindful of potential disruptions and volatility for risk assets in 2026, such movements may ultimately prove to be a cyclical rotation favouring financials, industrials, commodities, and select consumer sectors and help sustain, what we believe to be, a well-defined longer-term secular bull market.
This Q&A has been edited for clarity.