Monday, 10/19/2026 p.m.

• Stocks close mixed to begin the week with Canadian inflation in focus– The TSX traded lower, while U.S. equity markets were higher on Monday, led by a rebound in technology shares with the Nasdaq Composite gaining over 1%. Overseas, Asian markets finished mixed, while European equities closed lower as political unrest and uncertainty in France weighed on sentiment. On the economic front, Canadian headline consumer price index (CPI) inflation increased to 3.1% year over year in September, up slightly from 3.0% in August. However, underlying inflation remained contained, with CPI-median and CPI-trim easing to 1.9% and 1.8%, respectively. Additionally, the Bank of Canada’s third-quarter Business Outlook Survey showed that business sentiment improved after a decline in the previous quarter. However, many of the survey interviews were conducted before Canadian-U.S. trade negotiations broke down on August 21 and new counter-tariffs were announced. More recent results from the Business Leaders’ Pulse showed that sentiment subsequently weakened, although it remained well above the levels recorded at the height of trade tensions in 2025. Overall, the results suggest that renewed trade uncertainty represents a meaningful but manageable headwind to Canadian economic activity, in our view. Government bond yields moved higher on Monday with the 10-year GoC yield climbing to 3.93% and the 10-year U.S. Treasury yield at 5.15%.
   
• Headline inflationary pressures persist, but core measures remain contained – Canadian headline consumer price inflation rose to 3.1% year over year in September, slightly above the 3.0% reading in August. The acceleration was largely driven by gasoline prices, which increased nearly 28% from a year earlier as crude-oil prices moved higher amid ongoing geopolitical uncertainty. Beneath the headline figure, however, underlying inflation trends were more encouraging. CPI excluding food and energy rose a more modest 2.1% year over year, unchanged from August. In addition, CPI-median and CPI-trim, two measures of underlying inflation closely monitored by the Bank of Canada, eased to 1.9% and 1.8%, respectively. Although markets continue to price a roughly 72% probability of an interest-rate increase, the relatively contained underlying inflation readings could support the case for the Bank of Canada to hold rates steady at its October 28 meeting. Ongoing trade-policy uncertainty and consecutive monthly declines in employment in August and September provide additional reasons for policymakers to proceed cautiously, in our view.
   
• Earnings in focus – Corporate earnings will remain a key focus this week, with Meta and Tesla reporting after the market closes on Wednesday. The reporting season has been encouraging to date, following broadly positive updates from several large U.S. financial services companies last week. Among the roughly 10% of S&P 500 companies that have reported third-quarter results, approximately 85% have exceeded analysts’ earnings expectations, with an average upside surprise of 3.4%. At the index level, S&P 500 third-quarter earnings are expected to increase by roughly 27% year over year, with the energy, technology and communication services sectors expected to make strong contributions. Earnings growth is expected to be strong in Canada as well, with TSX earnings also expected to grow by 27% in the third quarter. While elevated oil prices and tightening U.S. monetary policy pose risks to the economic and earnings outlook, underlying activity has remained resilient. Consumer spending remains solid, and manufacturing activity has improved after a multiyear period of stagnation. In this environment, we continue to view equities as more attractive than fixed income, favoring Canadian small- and mid-cap stocks along with U.S. large-cap stocks. Within overseas stocks, we prefer emerging-market stocks relative to developed overseas equities. Investors should be sure to evaluate these opportunities in the context of their financial goals and risk tolerance.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet}