• Stocks close mostly higher despite geopolitical uncertainty — The TSX was little changed, while U.S. markets moved broadly higher on Monday, despite ongoing uncertainty surrounding the path forward for U.S.–Iran negotiations, as well as reports that the U.S. struck Iranian radar and drone sites over the weekend. Despite the geopolitical flare-up, the TSX finished the day roughly flat, supported by strength in the energy and technology sectors. In the U.S., a rally in technology shares—driven by NVIDIA’s unveiling of a new semiconductor chip designed for personal laptops—pushed all three major indices higher. Outside of technology, energy was the only other S&P 500 sector to finish in positive territory on Monday. Overseas, European markets were mostly lower, while Asian equities moved higher overnight, led by South Korea’s KOSPI Index, which gained more than 3% amid continued strength in global technology shares. Oil prices also edged higher, with WTI crude rising to $92 per barrel. Bond yields increased alongside geopolitical uncertainty, with the 10-year GoC yield rising to 3.44% and the 10-year U.S. Treasury yield climbing to 4.46%.
   
• Markets are back at all-time highs. Can the rally continue? — Equity markets have staged an impressive rebound following the March pullback, with the S&P 500 gaining roughly 20%, including dividends, since March 30, while the technology-heavy Nasdaq has advanced nearly 30%. Strong technology earnings and a de-escalation in the war with Iran have been the primary catalysts behind the rally, supporting investor risk appetite over the past two months. Historical seasonality trends suggest the momentum could continue into June. Since 1970, the S&P 500 has generated an average June return of 0.5%, with positive returns occurring 61% of the time.* While those results are not meaningfully stronger than the average month, seasonal trends have been particularly favorable in recent years. Since 2015, the index has gained an average of 1.5% in June, with positive returns in 82% of those years.* That momentum has also tended to carry into July, as the S&P 500 has averaged a 3.2% gain and posted positive returns in every July since 2015.* While there's no promise history will repeat itself this year, we continue to believe the fundamental backdrop for equities remains supportive. Steady economic activity and resilient earnings growth should continue to provide a constructive environment for equity markets, in our view.
   
• May performance recap — Equity markets built on April’s strong momentum in May, with the TSX gaining 2.5% and the S&P 500 gaining 6.5% last month in Canadian dollar terms. Investor sentiment was supported by strong corporate earnings growth and expectations for a diplomatic resolution to the war in Iran, which helped drive oil prices lower during the month. However, strength in equities was not limited to North America. Emerging-market equities gained 11%, led by technology-heavy regions such as Taiwan and Korea, which also continue to benefit from ongoing AI-driven semiconductor spending. Overseas developed large-cap stocks — primarily companies in Europe and Japan — also moved higher, gaining more than 4.4% for the month and benefiting from lower oil prices. Despite the volatility experienced in March and continued geopolitical uncertainty, each of our recommended equity asset classes has returned more than 9% year to date. Given the sharp rebound from the March lows, we believe a period of consolidation would be normal. Even so, the fundamental backdrop for equities remains constructive in our view, supported by strong corporate profit growth and healthy economic activity.

Brock Weimer, CFA;
Investment Strategy

^{Source: FactSet. 
*FactSet, Edward Jones. S&P 500 Price Index.} 

• Stocks add to gains on Middle East ceasefire optimism - Ongoing reports that the U.S. and Iran have reached an agreement to extend their ceasefire by 60 days continue to support investor sentiment. Major equity indexes were slightly higher on Friday and posted their ninth consecutive weekly gain. Oil prices were down about 1.5% today and almost 10% lower for the week, trading near $88 per barrel amid hopes that the Strait of Hormuz will reopen. AI-driven demand continues to support earnings, as illustrated by a 30% jump in shares of Dell Technologies. The company delivered a sales outlook well above consensus estimates, driven by strong demand for AI-related server infrastructure. Tech was a major driver behind the S&P 500's May strength rising 16%. Nonetheless, both the equal-weight S&P 500 and small-cap indexes reached new highs this month, suggesting early signs of broadening market leadership as bond yields retreat. In Canada, government bond yields and the loonie declined today after the economy posted a surprise GDP decline in Q1, the first back-to-back contraction since 2020.
   
• S&P 500 posts a ninth consecutive week of gains - Despite persistent geopolitical headline noise, U.S. equities have continued to move higher, with the S&P 500 logging 22 record highs so far this year. The rally has been largely tech-led and supported by resilient earnings, but the key question is whether it can be sustained. A nine-week winning streak is a rare occurrence historically. Over the past 70 years, this has only happened 12 other times. Notably, these streaks have tended to occur earlier in the bull market cycle, rather than at its end. Forward returns following similar periods have generally been positive. Three- and six-month and one-year returns were positive in most instances *. The key takeaway, in our view, is that while the market may pause in the near term to consolidate gains, this type of strength has not historically signaled that a peak is imminent.
   
• Canada GDP contracts in Q1 but Q2 posed for a rebound - Canada’s economy slipped into a technical recession in the first quarter, with real GDP falling 0.1% annualized following a 1.0% contraction in Q4. While volatile trade dynamics played a large role, including a surge in gold imports and weaker auto exports tied to tariffs and seasonal shutdowns, underlying domestic activity was also soft. Business investment declined for a fifth consecutive quarter and consumer spending slowed but remained modestly positive at 1.5%. Preliminary data point to a rebound, with GDP up 0.4% in April and tracking toward roughly 2% growth in Q2, supported by stronger energy and manufacturing activity. Overall, while the economy softened at the start of the year amid trade headwinds and tighter conditions, the downturn may prove to be short-lived. We expect the BoC to stand pat while trade negotiations with the U.S. ramp up.

Angelo Kourkafas, CFA;
Investment Strategy

^{*Bloomberg, Edward Jones; Source for all data not cited: Bloomberg, FactSet.} 

• Stocks gain with U.S. inflation in focus – Equity markets closed higher on Thursday after the April U.S. personal consumption expenditures, or PCE, inflation report came in largely in line with expectations. Additionally, U.S. initial jobless claims remained contained at 215,000 last week, while U.S. first-quarter real GDP was revised lower to 1.6% amid downward revisions to investment and consumer spending. On the corporate front, bank earnings were in focus today with TD Bank, Royal Bank of Canada and CIBC all announcing first-quarter results and exceeding analyst earnings estimates. The TSX logged a 0.3% gain for the day, while the S&P 500 outperformed, gaining 0.6%, supported by strength in the technology sector. Bond yields finished slightly lower, with the 10-year GoC yield falling to 3.43% and the 10-year U.S. Treasury yield at 4.45%. Oil prices ended only modestly higher, at around $89 per barrel, reversing larger gains from earlier in the day following reports that U.S. and Iranian negotiators reached a memorandum of understanding to extend the ceasefire and begin further negotiations on Iran’s nuclear program.
   
• U.S. inflation data in line with expectations – U.S. inflation was in focus on Thursday, with April personal consumption expenditures (PCE) inflation released this morning. Headline PCE rose 0.4% for the month, driven in part by a 5.5% increase in gasoline prices, and was up 3.8% from a year ago. Core PCE, which excludes food and energy, rose 0.24% for the month and 3.3% on an annual basis. The April reading brought the three-month annualized rate of core PCE to 3.8%, underscoring that near-term inflation pressures remain above the Federal Reserve’s 2% target. In our view, today’s data reinforces the likelihood that the Fed will remain on hold in the near term. That said, we believe the bar for rate hikes remains high, especially as labour-market conditions have come into better balance and annual wage growth has slowed from nearly 6% in 2022 to around 3.5% in April. Taken together, these conditions support a patient approach from the Fed, and in our view, policymakers are likely to hold interest rates steady this year.
   
• Tech-led rally has markets back to all-time highs. Where to from here? – After a volatile close to the first quarter, when the S&P 500 fell 9% from its prior all-time high, equities have staged an impressive rebound since April. The S&P 500 has gained more than 18% since March 30, while the technology-heavy Nasdaq has risen 28%. The rally has been even more pronounced in semiconductors, with the PHLX Semiconductor Index up 80% over the same period, supported by continued AI-related capital spending. While we would not characterize markets as cheap, valuations have not expanded meaningfully during this rally. In fact, both the S&P 500 and Nasdaq are trading at forward price-to-earnings multiples below where they began the year, while the PHLX Semiconductor Index’s forward multiple is little changed. This suggests that the recent move higher has been driven by strong corporate profit growth as opposed to expanding valuations. First-quarter S&P 500 earnings per share rose nearly 27% from a year ago, helped by strength in technology and AI-exposed areas of the market. Importantly, earnings growth has not been limited to tech. Cyclical sectors such as financials, industrials and materials also posted earnings growth of more than 20%, pointing to broader strength in corporate fundamentals. After such a sharp move higher, a period of consolidation would not be surprising. However, we believe the broader backdrop for equities remains supportive, underpinned by solid profit growth, steady economic activity and resilient labor-market conditions.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data not cited: FactSet.} 

• Markets close mixed, Dow leads the way - U.S. stocks were modestly higher today, while the Canadian TSX was lower by about 0.7%. The Dow Jones outperformed both the S&P 500 and the technology-heavy Nasdaq. Overall, the S&P 500 is up about 10% this year and closed at another all-time high on Wednesday. Investor sentiment appears to be supported by lower oil prices, with WTI crude oil down about 4.5%, and optimism that tensions in the Middle East could ease, although weakness in some cybersecurity names kept the broader market from moving decisively higher. In the bond market, U.S. Treasury yields were modestly lower, as the 10-year Treasury yield dipped back below 4.5%. The VIX volatility index, also known as the Wall Street fear gauge, is back below 17, near the lows of the year. Overall, the data looks reasonably constructive as solid economic and earnings fundamentals continue to support equities, but after a strong rally in markets, some near-term consolidation would not be surprising to us – however, we continue to view pullbacks as opportunities for long-term investors.
   
• Fed is likely on hold this year: The recent acceleration in the consumer price index (CPI), along with the Fed minutes showing that some officials would consider rate hikes if inflation remains elevated, may bring back uncomfortable memories of 2022. That was the last time the Fed had to respond to high inflation with aggressive rate hikes, a tightening cycle that ultimately contributed to a bear market in stocks. However, we think there are a couple of important differences between today’s inflation backdrop and the one investors faced in 2022. First, monetary policy is not easy. In 2022, the fed funds rate was near zero while headline CPI was moving toward 9%. Today, policy rates are matching inflation, giving the Fed less urgency to respond aggressively to every upside surprise. Second, the labour market is no longer overheated. In 2022, job openings were roughly twice the number of unemployed workers and wage growth was accelerating. Today, unemployment remains low, but hiring has slowed and wage growth is not reaccelerating in a way that would meaningfully push services inflation higher. For these reasons, we think the Fed will remain vigilant but is unlikely to overreact to what may prove to be a temporary, energy-driven inflation spike that is largely outside of the Fed's control. Our base case is that the Fed stays on hold this year. We no longer expect near-term cuts, but we still think the bar for rate hikes is high.
   
• Consumer confidence dips less than expected – The Conference Board's Consumer Confidence Index declined to 93.1 in May, marking its first drop in four months. The drop was smaller than forecasts pointing to a pullback to 91.9. Consumers' assessment of current business and labour-market conditions dropped 3.2 points, partially offset by a modest improvement in the short-term outlook*. Concerns over the economy were driven by inflation, oil and gas prices, and geopolitical risks. Despite the decline, the index remains modestly below its historical average, suggesting that consumer attitudes, while cautious, have not weakened as sharply as some other sentiment measures imply. This contrasts with the University of Michigan Consumer Sentiment Index, which reached a record low in April. Key drivers to the difference include the Conference Board's heavier focus on employment and the labour market, while in the University of Michigan's survey, personal finances carry a more significant weight. Overall, consumer spending has remained resilient despite weak sentiment, supported by a stable labour market and generally healthy household balance sheets.

Mona Mahajan;
Investment Strategy

^{Source for all data not cited: FactSet. Source for data cited: *The Conference Board}

• Markets close mixed as investors monitor U.S.-Iran talks – The TSX was down, while U.S. equity markets closed higher on Tuesday, with the S&P 500 and Nasdaq reaching record highs. Bond yields moved lower, with the 10-year Government of Canada yield at 3.46% and the 10-year U.S. Treasury yield down to 4.49%. International markets were softer, with Asian markets finishing mostly lower overnight and European markets also trading down. In energy markets, WTI oil prices declined, 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.
   
• Bond yields pull back as inflation concerns ease – The 10-year Government of Canada yield is down about 20 basis points (0.20%) from its peak last week, returning to our 3.0%-3.5% expected range for this year. The 10-year U.S. Treasury yield is also down about 20 basis points from its recent peak a week ago, moving back to our 4%-4.5% expected range for this year. A key driver of the move has been a moderation in inflation expectations. Market-implied 10-year inflation expectations, as reflected in Treasury Inflation Protected Securities markets, have eased to about 2.35%, helping reduce pressure on long-term yields. This suggests investors may be gaining some confidence that inflation risks are becoming more contained, even if the path back to the Fed’s 2% target remains uneven. At the front end of the yield curve, markets continue to price in the likelihood that the Fed's next move could be a rate hike rather than a cut, potentially sometime early next year. We expect policymakers to remain on hold in the near term, with the Fed's preferred core Personal Consumption Expenditures (PCE) inflation gauge running at 3.2%, still well above the 2% target. At the same time, we think a steady labour market gives policymakers room to remain patient and assess whether inflation pressures are temporary and when they may begin to ease.
   
• Consumer confidence dips less than expected – The Conference Board's U.S. Consumer Confidence Index declined to 93.1 in May, marking its first drop in four months. The drop was smaller than forecasts pointing to a pullback to 91.9. Consumers' assessment of current business and labor-market conditions dropped 3.2 points, partially offset by a modest improvement in the short-term outlook*. Concerns over the economy were driven by inflation, oil and gas prices, and geopolitical risks. Despite the decline, the index remains modestly below its historical average, suggesting that consumer attitudes, while cautious, have not weakened as sharply as some other sentiment measures imply. This contrasts with the University of Michigan Consumer Sentiment Index, which reached a record low in April. Key drivers to the difference include the Conference Board's heavier focus on employment and the labour market, while in the University of Michigan's survey, personal finances carry a more significant weight. Overall, consumer spending has remained resilient despite weak sentiment, supported by a stable labour market and generally healthy household balance sheets.

Brian Therien, CFA
Investment Strategy

^{Source for all data not cited: FactSet. 
Source for data cited: *The Conference Board}