Kim Shannon, Founder and Co-Chief Investment Officer of Sionna Investment Managers, returned to Amber Kanwar's In the Money1 with the same thesis she laid out a year ago and with the numbers to back it up. The TSX has outperformed the S&P 500 by roughly eight percentage points since her last appearance. Her Canadian funds are up between 27% and 31% over the same period. Shannon is not declaring victory. She is doubling down.
The Inflation Clock Is Still Running
The core argument is built on a long cycle, not a quarterly trade. Shannon frames the current environment as the fifth year of a new inflationary regime, the successor to a 40-year disinflationary cycle. History, she notes, suggests the cycle could run a minimum of 20 years.
"These inflation/disinflation cycles can last as short as 20 years, so we've got at least 15 more to go, but possibly longer."
The historical record, in her reading, is unambiguous: when inflation runs north of 2.5%, value outperforms growth by 11% annualized. When it crosses 4%, Canada's structural advantages compound that edge. Six inflationary periods since 1970 produced average Canadian outperformance of approximately 8% over the US market. The mechanism is the commodity sector. Canada carries one of the largest commodity weightings of any developed market, and commodity-producing assets reprice upward in inflationary environments while long-duration growth assets get punished. Shannon is direct about what is obscuring this dynamic in the US: 60% of value stocks in the S&P 500 are already outperforming, but the outsized influence of the Magnificent Seven at the index tail makes the overall market appear driven by growth when the underlying picture is inverted.
Stagflation as the Reference Case
Shannon does not sidestep the bond market's message. With US 10-year yields approaching 5% and four developed-market government curves already above that level, PE multiple compression is the natural consequence. The reference she reaches for is not the post-pandemic normalization or the post-GFC cycle. It is 1965 to 1982: the last extended stagflationary period. In that environment, the broad equity market returned 6% annualized. Value strategies returned 13% and change.
"You could sort of imagine as it went through these dips that the value managers would be outperforming. And you saw these rallies and thought, well, that's the growth guys outperforming. And at the end you would've thought they must've had a tie. But that's not how it worked out."
Canada's structural insulation comes partly from the fact that its own 10-year yield sits at 3.8%, a meaningful spread advantage over the US. But the deeper advantage is in the mortgage market. Canadian mortgages reprice within five years; US mortgages can run 35 years. That distinction determines who absorbs the rate shock. "In Canada, who holds the bag on lending? It's the banks themselves." A point with direct consequences for which balance sheets deserve confidence when the next US bank stress event arrives.
The Portfolio: Where Shannon Is Positioned
Cenovus Energy remains a top-five position, held at approximately 5% of the portfolio. Shannon replaced Canadian Natural Resources with it in search of a larger future expected return, a trade that has since returned the difference in spades. She remains modestly underweight energy overall but describes the current positions as the best names in the basin, supported by structural undersupply globally, record-low reserve replacement, and Canada's improving regulatory posture under the Canada Strong Act and Bill C-45, which are expected to reduce royalties and accelerate project approvals.
Barrick Gold is another conviction name, held despite a 47% gain since Shannon first introduced it on the show. The investment case rests on the Four Mile Mine in Nevada.
"Four Mile is probably the best gold discovery found globally in the last several decades. It is incredible. It has 24 million ounces of gold expected. It's probably got a 25-year mine life overall."
With all-in sustaining costs of $650 to $750 per ounce against a gold price now exceeding $4,000, Barrick is generating record cash flows and trading at only 10 times earnings. The price-to-NAV of 0.8 compares to a decade-long historical average closer to 1.2. Shannon's point is simple: early in her career, gold stocks traded at 25 to 50 times earnings. The compression in the multiple has not been earned by deteriorating fundamentals. It has been earned by a management team that spent a decade losing investor trust. That team has been replaced, and the asset base has quietly become exceptional.
On Canadian banks, Shannon is modestly underweight but not alarmed. She pushes back on 20-year valuation comparisons by noting that virtually all of that history was recorded in a disinflationary environment. Going back to 1955, she counts seven periods when Canadian bank multiples exceeded today's levels, several of them inflationary. The oligopoly structure, conservative capital ratios, and short mortgage duration make Canadian banks structurally more resilient than US peers in a prolonged inflationary environment. The opportunity is in being positioned to add on US-driven weakness, not in aggressively overweighting today.
CGI Inc. represents the technology allocation, grounded in the observation that the company's client base, including hospitals, government agencies, and financial institutions, is too risk-averse to adopt unproven AI agents for mission-critical software. Concerns about US government contract losses that weighed on the stock have largely dissipated following recent contract renewals. Shannon's view is that CGI can recover from current levels near $100 toward its pre-selloff range, driven by clients who "really want that so-called mission critical software" and will not accept error risk at any price.
Algonquin Power completes the pro picks: a utility trading below book at 0.9 times, offering a nearly 5% dividend yield after clearing out a failed diversification strategy. The new management team has refocused on regulated assets and re-applied to regulatory boards for ROE re-rating. Shannon's price target of $12, from approximately $7 today, requires only that the stock return to industry peer valuation. "It's like being, when you fall out of a basement window, you can't fall far." In an environment where PE multiples are under pressure from rising yields, a stock already priced well below its peers offers asymmetric positioning.
The Bigger Picture
The thesis is not simply that Canada is cheap. It is that the conditions sustaining the outperformance are structural: sticky inflation, commodity scarcity, long-cycle supply deficits, and a regulatory environment increasingly oriented toward resource development. Shannon is not calling the top of the current run. She is describing a regime that, by historical precedent, has years to unfold. Value investors are, as she acknowledges, not supposed to produce their best results in a single year. The fact that the performance has been this front-loaded is confirmation that the thesis is correct, not a reason to reduce exposure. When the facts point in the same direction for multiple years, the discipline is staying in the trade, not rotating out of it.
5 Key Takeaways for Advisors and Investors
- The inflationary regime is young, not mature. Shannon places the current cycle at roughly year five of what history suggests could be a 20-plus-year arc. The structural drivers favoring value over growth and Canada over the US are not late-cycle phenomena. Rotating out of Canadian equities on the basis of recent outperformance mistakes a multi-year trend for a trade.
- The commodity sector is the mechanism, not a bet on price. Canada's outperformance in high-inflation periods reflects the commodity sector's structural weight in the benchmark and the repricing of real assets. Underweighting resources in this environment is not a conservative posture; it is an active decision to fade inflation persistence.
- Stagflation, not the GFC, is the right reference frame. The 1965-1982 period demonstrated that value strategies can generate meaningful excess returns even in sideways, high-yield markets. That precedent argues for defensive positioning in quality names with strong balance sheets, not a flight to cash or US growth.
- Canadian banks offer selective, not wholesale, value. The oligopoly structure, conservative capital ratios, and short mortgage duration make Canadian banks more resilient than US peers in a prolonged inflationary environment. But valuations are not cheap enough for conviction overweights. The opportunity is in being positioned to add on US bank-driven weakness.
- Balance sheet discipline is the primary defense against value traps. Shannon identifies financial risk, specifically the cost of refinancing debt in a rising-rate environment, as the primary mechanism through which cheap stocks become expensive mistakes. Any value entry point must be paired with confidence that the capital structure can absorb higher funding costs over an extended period, particularly in cyclical sectors.
Footnote:
- Kim Shannon, In the Money with Amber Kanwar, October 2026. Watch on YouTube ↩︎
