• Stocks waver with geopolitical tensions back in focus – Equity markets closed lower on Wednesday as a flare-up in geopolitical tensions weighed on investor sentiment. The U.S. launched strikes against Iran overnight in retaliation for Iran’s downing of a U.S. helicopter, adding uncertainty to an already fragile geopolitical backdrop. Sentiment was further pressured after President Trump suggested Wednesday morning that negotiations have been taking too long. The TSX finished lower by 0.7%, while the S&P 500 declined by roughly 1.6%. Despite the geopolitical escalation, oil prices closed only modestly higher, with WTI crude finishing just above $90 per barrel. On the economic front, the Bank of Canada opted to hold its policy rate steady at today's meeting, while U.S. May CPI inflation came in line with expectations. Canadian government bond yields were little changed on Wednesday, with the 10-year Government of Canada yield near 3.49% while the 10-year U.S. Treasury rose modestly to 4.55%.
   
• Bank of Canada remains on hold – The Bank of Canada (BoC) held its policy rate steady at 2.25% on Wednesday, marking the fifth consecutive meeting with no change. Governor Tiff Macklem emphasized that the Governing Council is prepared to look through the war’s near-term impact on inflation, but cautioned that if energy prices remain elevated, policymakers “will not let their effects become broad-based persistent inflation.”* He also acknowledged the difficult policy backdrop created by the combination of weak economic activity and rising inflation, noting that the central bank is prepared to respond in either direction if conditions warrant. We expect the BoC to remain on hold in the near term, particularly with its preferred core inflation measures — CPI-trim and CPI-median — running near a 2% annualized pace in recent months. While May labour-market data improved, employment growth has been sluggish in 2026, averaging a decline of roughly 5,000 jobs per month, and real GDP has contracted for two consecutive quarters. With core inflation pressures appearing contained, economic activity lackluster, and CUSMA-related uncertainty likely to persist in the months ahead, we expect the BoC to keep rates unchanged in the near term.
   
• U.S. inflation data gives the Fed room to remain patient – U.S. headline CPI for May was in line with expectations, rising 0.5% month-over-month and 4.2% year-over-year, marking the strongest annual increase since April 2023. A key driver of the headline increase was a 3.9% monthly rise in energy prices. However, inflation trends looked more encouraging beneath the surface. Core CPI, which excludes food and energy, rose 0.2% in May and 2.9% from a year ago, with the monthly gain coming in below expectations for a 0.3% increase. Additionally, core goods prices posted their first monthly decline since May 2025, while services inflation remained contained, rising 0.3% on the month. From a Fed policy perspective, we expect policymakers to acknowledge that upside risks to inflation have increased in recent months, and they are likely to remove the easing bias from their policy statement at next Wednesday's meeting. However, we believe the bar for a Fed rate hike remains high in the near term, particularly given signs that inflation has not yet broadened meaningfully beyond energy.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data not cited: FactSet.
*Source for data cited: Bank of Canada}
 

• Markets close lower as technology rebound loses momentum – The TSX and U.S. equity markets finished lower on Tuesday as weakness in technology stocks offset gains across most other sectors. Bond yields declined, with the 10-year Government of Canada yield at 3.49% and the 10-year U.S. Treasury yield at 4.52%. Internationally, Asian markets finished mixed overnight, while Europe moved lower. In energy markets, WTI oil prices fell below $90 per barrel, likely reflecting cautious optimism after President Trump suggested that an agreement to reopen the Strait of Hormuz could be reached soon. A sustained decline in oil prices would likely help ease inflation concerns, though geopolitical risks remain a potential source of volatility. Meanwhile, the U.S. dollar weakened against major currencies but has remained broadly rangebound in recent trading.
   
• Employment data point to steady job growth – U.S. private employers added an average of 29,000 jobs per week for the four weeks ending May 23, down modestly from 30,500 in the prior report. This reading appears consistent with other recent indicators showing a labour market characterized by slower hiring but limited layoffs. While the pace of job creation remains subdued by historical standards, it appears sufficient to support near-full employment, particularly as labour-force growth slows due to tighter immigration enforcement and an aging workforce. For the Fed, this backdrop suggests that its maximum-employment mandate is largely being met. With the unemployment rate contained at 4.3%, and 7.6 million job openings exceeding unemployment of 7.3 million, policymakers are likely to remain focused on inflation in the near term.
   
• Attention shifts to inflation – The May U.S. consumer price index (CPI) inflation report will be released Wednesday. Consensus forecasts call for headline inflation to rise to 4.2% year-over-year, up from 3.8% in the prior month. If realized, that would mark the highest reading in three years. Core inflation, which excludes the volatile food and energy categories, is expected to edge higher to 2.9% from 2.8%, which would be the highest reading since September 2025. We believe the composition of the CPI report will be important: a rise driven mainly by energy would likely be viewed as less persistent, while broader pressure in core services could carry more significance for Fed policy. In our view, headline inflation is likely to remain elevated for the next several months, largely reflecting the rise in oil prices. However, we expect inflation to moderate heading into year-end and 2027 if energy prices continue to cool. With inflation remaining above the Fed's 2% target for more than five years and the labour market stable, we expect policymakers to keep interest rates on hold in the near term. We also think the Bank of Canada will hold its policy rate steady at 2.25% at its June meeting tomorrow with core inflation still near its 2% target.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet}

• Markets close mixed after sharp sell-off on Friday- Stock markets in the U.S. and Canada were mixed on Monday after selling off sharply on Friday. The technology-heavy Nasdaq was higher, up over 0.8%, after falling over 4% on Friday. The S&P 500 was up modestly, up around 0.3%, the Canadian TSX was up about 0.16%, while the Dow Jones was lower by around 0.16%. The semiconductor sub-index, which fell by over 10% on Friday, led the rebound on Monday. This comes as Iran announced it was halting its strikes against Israel, although uncertainty around the ceasefire remains elevated. WTI oil prices, which had risen as high as $95 on Monday morning, have settled in the low $91 range, still higher by nearly 60% this year. Meanwhile, U.S. Treasury bond yields rose again modestly, after rising on Friday on the back of a stronger-than-expected U.S. jobs report. Overall, after a strong move higher in the broader markets and especially parts of the technology and semiconductor sectors, we believe some period of consolidation or market volatility may be likely. However, we don't yet see any pullbacks morphing into a deep or prolonged bear market, and thus investors can use volatility to seek opportunities for diversifying portfolios or adding quality investments at better prices, based on their investment objectives and risk tolerance.
   
• Inflation in focus this week – The U.S. consumer price index (CPI) inflation report for May will be out on Wednesday this week. Forecasts are calling for headline inflation of 4.2% year-over-year, above last month's 3.8%. A reading over 4.0% would be the highest since April 2023. Core inflation is expected to be 2.9%, also above last month's 2.8% reading and at the highest level since September 2025. In our view, headline inflation is likely to remain above 4% for the next several months, given the sharp rise in oil prices, but may start to fade heading into year-end and 2027. Nonetheless, from the perspective of the Federal Reserve, higher inflation and a rebounding labour market make the case for a rate cut unlikely. In our view, the Fed remains firmly on hold for the remainder of the year, barring any outsized shocks to the economy.
   
• Market leadership broadens as tech rally goes in reverse - After a strong multi-week run in the technology sector, led by AI-related companies, investors have turned more cautious in recent days. The semiconductor index, which had rallied roughly 50% since April, is now cooling after Broadcom’s chip sales outlook fell short of elevated expectations, triggering profit-taking in the U.S. and global markets. Encouragingly, as tech takes a breather to digest recent gains, other sectors have begun to lead, resulting in broader market participation. Before Friday's drop, both the Dow Jones Industrial Average and the equal-weight S&P 500 reached fresh highs, reflecting this shift. We view this rotation as a healthy development that supports the durability of the current bull market. We expect this trend to continue in the near term, particularly if the consumer and labour market continue to remain resilient, which helps support positive corporate earnings trends, and if progress is made toward reopening the Strait of Hormuz, which could help ease pressure on oil prices and bond yields.

Mona Mahajan;
Investment Strategy

^{Source for all data: Bloomberg.} 

• Markets drop as strong jobs data shift rate expectations - Stocks and bonds moved sharply lower today after stronger-than-expected jobs reports in Canada and the U.S. pushed rate expectations and bond yields higher. Technology weakness from the prior session carried over, with the Nasdaq 100 falling 4% and the semiconductor index declining nearly 9%. Overseas, South Korea’s equity index, which has doubled this year and includes Samsung as a major constituent, closed down 5.5%. Defensive areas of the market held up better, with consumer staples and other defensive sectors finishing higher and providing a partial offset to the tech-led weakness. The Dow was more resilient, posting only a modest weekly loss, while the S&P 500’s historic nine-week winning streak came to an end. Elsewhere, oil prices fell 3% on the day, while the 10-year GoC yield rose to 3.48%.
   
• Blowout U.S. and Canada job reports push rates higher - Canada’s economy added 87,800 jobs in May, far exceeding expectations of 10,000, while the unemployment rate declined to 6.6% from 6.9%. The strength was driven by a surge in full-time employment and was broad-based, led by gains in construction and information, culture & recreation. In our view, today’s data provides reassurance that, despite two consecutive quarters of contraction, the Canadian economy is not on the verge of a recession. However, we think the decline in unemployment may also strengthen the case for the Bank of Canada to resume rate hikes, particularly if the energy price shock persists.
  
  South of the border, today's data revealed similar trends. The U.S. economy added 172,000 jobs in May, well above expectations of 90,000, while the unemployment rate held steady at 4.3%. Revisions to the prior two months were also positive, adding a combined 93,000 jobs. Job gains were broad-based, led by leisure and hospitality and healthcare. Taken together, today’s report helps reinforce other indicators suggesting the labour market has strengthened this year after a weak 2025. While this acceleration is positive for the economy, it also makes less of a case for the Fed to cut interest rates. Markets reacted accordingly, with stocks extending their pullback and bond yields moving higher as investors increasingly price in the possibility of one additional Fed rate hike by year-end. Encouragingly, there is still no evidence of a wage-price spiral. Average hourly earnings rose 3.4%, in line with expectations and down from the prior month’s 3.6% pace. In our view, the Fed is likely to remove its easing bias at its meeting in two weeks, while maintaining a patient stance as it assesses whether inflation peaks this quarter before responding to any energy-driven price pressures.
   
• Market leadership broadens as tech rally goes in reverse - After a strong multi-week run in the technology sector, led by AI-related companies, investors have turned more cautious over the past two days. The semiconductor index, which had rallied roughly 50% since April, is now pulling back after Broadcom’s chip sales outlook fell short of elevated expectations, triggering profit-taking in the U.S. and global markets. Encouragingly, as tech takes a breather to digest recent gains, other sectors have begun to lead, resulting in broader market participation. Before today's drop, both the Dow Jones Industrial Average and the equal-weight S&P 500 reached fresh highs, reflecting this shift. We view this rotation as a healthy development that supports the durability of the current bull market. We expect this trend to continue in the near term, particularly if progress is made toward reopening the Strait of Hormuz, which could help ease pressure on oil prices and bond yields.

Angelo Kourkafas, CFA;
Investment Strategy

^{Source for all data: Bloomberg.} 

• Markets close higher as sector performance broadens - Equity markets finished higher on Thursday, with the TSX and Dow Jones Industrial Average reaching record highs. Strength in health care, financials and communication services offset weakness in technology stocks, where semiconductor manufacturer Broadcom weighed on the sector. Broadcom shares fell about 13% after the company reported fiscal second-quarter revenue that came in slightly below expectations and left its AI chip outlook unchanged. The disappointment appeared to spill over into other semiconductor and AI-related companies. Bond yields declined, with the 10-year Government of Canada yield at 3.43% and the 10-year U.S. Treasury yield at 4.47%. Internationally, Asian markets finished mostly lower overnight, while Europe advanced. In energy markets, WTI oil prices pulled back, likely reflecting cautious optimism around U.S.-Iran diplomatic talks and the potential for reduced geopolitical risk. Meanwhile, the U.S. dollar was modestly lower against major currencies but has remained largely rangebound recently.
   
• Jobless claims edge higher but remain consistent with a stable labour market – U.S. initial jobless claims rose to 225,000 last week, above the consensus estimate of 211,000. While the increase bears watching, the reading remains low by historical standards and well below the 20-year average of roughly 365,000. Continuing claims, which reflect the total number of people receiving benefits, declined to 1.78 million, suggesting displaced workers are finding new employment. Taken together, the data remain broadly consistent with other recent indicators pointing to a stable labour market. Canada's employment report – to be released tomorrow - should provide additional insight, with consensus estimates pointing to 12,500 jobs added in May and the unemployment rate remaining unchanged at 6.9%. The U.S. jobs report will also be released Friday, expected to show 105,000 job gains in May, enough to keep the unemployment rate steady at 4.3%.
   
• Productivity slows, but labour costs contained – Nonfarm business sector productivity, which measures output per hour worked, was revised down to a 0.3% annualized gain for the first quarter of 2026. This compares to expectations to remain unchanged from the preliminary reading of 0.8%. While productivity slowed in the first quarter, we believe AI adoption could help drive improvements over time. Hourly compensation rose 2.1% year-over-year, providing growing disposable income that should help support consumer spending and the broader economy. Unit labour costs, which measure wage gains adjusted for changes in productivity, increased 1.8% annualized, below expectations for a 2.3% gain. In our view, the softer unit labour cost reading is encouraging from an inflation perspective, as it suggests wage-related cost pressures remain contained.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.}