- Markets react to Israel's strikes against Iran - Escalating tensions in the Middle East drove a risk-off sentiment today, with the S&P 500 down 1.1% and the TSX down a more modest 0.5%. Overnight, Israel targeted Iran's nuclear-program sites and military capabilities, and Iran retaliated with drone and missile strikes, sending oil prices 8% higher*. The heightened geopolitical risks in the region are triggering fears over potential supply disruptions, and because of that, investors appear to be gravitating toward safe-haven assets, like gold, which was up 1.5%*. Government bonds were not part of that flight to safety, as the 10-year yield rose modestly to 3.38%, potentially reflecting inflation concerns*. Elsewhere, European and Asian markets were also broadly lower, but the declines were contained, and major indexes are still up year-to-date*.
Stocks have a long history of overcoming geopolitical shocks - Israel's series of airstrikes and Iran's retaliation bring geopolitical risks back to the forefront for investors. A widespread conflict could result in potential supply disruptions in the energy markets, though that is not the case thus far. Nonetheless, investors appear to be adding a risk premium to oil prices, which posted their biggest weekly gain since 2022*. The flight-to-safety and equity market pullback shouldn't be dismissed but require perspective.
Even with today's spike, at around $74, oil is 5% below last year's level and in the middle of its three-year range*. As shown in the table below, past disruptions have resulted in short-term market weakness, but they have not lasted long or triggered a widespread market downturn. Historically, the knee-jerk reaction is for stocks to decline the day of the geopolitical event and for performance to be lackluster over the following week, as investors have a natural aversion to uncertainty. But the impact on returns usually proves temporary, as equities were higher in most cases six months and one year later. The upshot is that history suggests geopolitical risks and the associated shock in confidence tend to be short-lived as markets gravitate toward the more sustainable drivers for returns.
- Volatility may persist in the summer, but fundamentals remain supportive - From geopolitical risks and potential trade developments to evolving fed policy and fiscal debates, the months ahead may test the market's recent momentum. However, we don't think the 20% rally in global equities since the April 8 lows is built on sand. Trade tensions have eased, U.S. policy focus has shifted toward tax cuts, and economic data remain resilient. Also, corporate profits continue to grow at a healthy pace. We think markets are appropriately beginning to look ahead, setting their eyes on the possibility of more stimulative fiscal and monetary policies in 2026. Next week the Fed is expected to keep rates unchanged and remain in wait-and-see mode, supported by the underlying strength in the economy and trade uncertainty. However, policymakers will update their economic and interest-rate projections, which are likely to show a path to gradually cut rates toward neutral over the next 24 months, including one or two rate cuts this year, in our view.
Angelo Kourkafas, CFA
Investment Strategist
*FactSet

Past performance does not guarantee future results. An index is unmanaged, cannot be invested into directly and is not meant to depict an actual investment.

Past performance does not guarantee future results. An index is unmanaged, cannot be invested into directly and is not meant to depict an actual investment.
- Stocks rise on new jobless claims and inflation data – The TSX and U.S. equity markets closed higher on Thursday, as jobless claims held steady and producer price inflation met expectations. Utility and technology stocks posted the largest gains, while the communication and consumer discretionary sectors were laggards. Bond yields extended their pullback over the past week, with the 10-year Government of Canada yield at 3.33% and the 10-year Treasury yield at 4.36%. Today's auction for 30-year U.S. Treasury bonds was met with the strong demand, as total bids were about 243% of those accepted, known as the bid-to-cover ratio.** In international markets, Asia finished mostly lower, as investors assessed the reported agreement between the U.S. and China to relax export controls on technology and rare-earth minerals. Europe also declined, led by the leisure and travel sector to the downside following the Air India plane crash this morning*. The U.S. dollar declined against major international currencies. In commodity markets, WTI oil was little changed as markets monitored tensions between Israel and Iran*.
- Jobless claims hold steady – U.S. initial jobless claims were roughly unchanged at 248,000 this past week, slightly above estimates pointing to 244,000*. Insured unemployment, which measures the total number of people receiving benefits, rose to 1.95 million from 1.9 million the prior week*. The broader trend for jobless claims has been higher this year, indicating the labour market remains healthy but is cooling from a position of strength, in our view. The unemployment rate remains low at 4.2%, and 7.4 million job openings still exceed unemployment of 7.2 million*. Wage gains should remain above inflation, providing positive real wages to support consumer spending and the economy, in our view.
- Producer price inflation lower than expected – The U.S. producer price index (PPI) rose 0.1% in May, below estimates for a 0.2% increase.* On an annual basis, PPI inflation rose to 2.6%, as expected, up from 2.5% the prior month.* Core PPI inflation, which excludes more-volatile food and energy prices, dropped to 3.0% on a year-over-year basis, from 3.2% in April, narrowing the gap with the headline figure.* We believe these readings, though likely not meaningfully impacted by tariffs, indicate that inflation continues to moderate. We expect tariffs to put some upward pressure on inflation, as higher import costs are at least partially passed along to consumers. However, most of this impact should be near-term price hikes that aren't an ongoing driver of inflation, in our view.
Brian Therien, CFA
Investment Strategy
*FactSet **U.S. Department of the Treasury
- Stocks close mixed following soft U.S. inflation data – The TSX posted a modest gain on Wednesday, supported by higher commodity prices, while U.S. equity markets closed lower despite a lower-than-expected inflation reading for May.* From a leadership perspective, most sectors of the S&P 500 finished the day flat-to-lower with the exception of energy, as rising geopolitical tensions between the U.S. and Iran weighed on sentiment and sent oil prices higher by more than 4% today.* Overseas, markets in Asia were higher overnight, boosted by progress in U.S. – China trade talks, while markets in Europe closed mostly lower.* Canadian bond yields were little changed while U.S. yields traded lower in response to the soft U.S. inflation reading, with the 10-year Treasury yield finishing the day around 4.42%.*
- U.S. inflation data softer than expected for May – U.S. consumer price index (CPI) inflation was lower than expected in May, with headline CPI rising by 0.1% for the month and 2.4% on an annual basis, both below expectations.* Core CPI, which excludes food and energy, was also softer than expected, rising by 0.1% for the month and 2.8% on an annual basis.* Looking into the drivers, core services inflation slowed to a 0.2% monthly gain and rose by 3.6% on an annual basis, matching the April reading for the lowest annual gain since November 2021.* Notably, the May report showed little evidence of tariffs being passed on to consumers in the form of higher prices, with core goods CPI flat for the month and rising by a muted 0.3% on an annual basis.* While the recent downtrend in U.S. inflation has been encouraging, we believe tariffs could put upward pressure on prices in the months ahead. However, with trade tensions de-escalating in recent weeks, businesses could be choosing to absorb higher near-term costs related to tariffs, with the hope that tariff rates will trend lower over time. Under this environment, we expect the Federal Reserve to continue easing monetary policy, but at a measured pace, perhaps delivering one to two interest-rate cuts in the back half of the year.
- U.S. – China trade talks progress – After two days of negotiations in London, U.S. and Chinese policymakers have reached an agreement in principle to bilaterally ease trade restrictions.* While details around the agreed-upon framework remain vague, reports suggest the focus is on the U.S. reducing export controls of technology goods to China in exchange for access to rare-earth minerals.* The official framework will still require approval from U.S. President Donald Trump and Chinese President Xi Jinping before implementation; however, initial reports suggest the U.S. tariff rate on imports from China will be 55%, which is composed of the 30% tariff imposed earlier this year and the existing 25% duties.* While the agreement appears to be focused more on specific products, it fits with the broader trend of de-escalating trade tensions over recent weeks, which has provided a boost to equity markets, with the S&P 500 now roughly 2% off its February 19 all-time high.* In our view, we're likely past peak trade-policy uncertainty, but volatility could resurface over the coming weeks, particularly as we approach the expiration of the U.S. 90-day pause from the April 2 tariff announcement on July 9. However, with peak uncertainty likely behind us, and economic data proving resilient over recent weeks, particularly in the U.S., we believe opportunities remain attractive in equity markets, and we recommend investors consider overweighting equity relative to fixed income, with a focus on U.S. stocks. To view our full suite of opportunistic portfolio guidance, checkout our Monthly Portfolio Brief.
Brock Weimer, CFA
Investment Strategy
*FactSet
- Stocks close modestly higher – North American equity markets traded higher on Tuesday, with investors eyeing ongoing U.S. - China trade talks in London. Leadership was broad-based, with most sectors of the S&P 500 finishing the day flat-to-higher and led by the energy and consumer discretionary sectors.* On the economic front, the U.S. NFIB small business index ticked higher in May after declining in four consecutive months, signaling an improvement in business sentiment amid the recent easing in trade tensions.* Overseas, European markets were mixed following an improvement in the eurozone Sentix economic index, while markets in Asia were mixed overnight.* Bond yields were mixed, with the 10-year GoC yield inching higher to 3.35% while the 10-year U.S. Treasury yield closed slightly lower at 4.47%.*
- Key U.S. inflation data on the horizon – U.S. inflation will be in focus for investors this week, with consumer price index (CPI) inflation for May out tomorrow. Expectations are for headline CPI to rise by 0.2% for the month and 2.5% on an annual basis, while core CPI is expected to see a monthly gain of 0.3% and rise by 2.9% on an annual basis.* Despite concerns that tariffs would create a short-term boost to prices, there has been little evidence of this happening through April. In fact, the three-month annualized change in U.S. core CPI was 2.1% in April, the lowest reading since July 2024.* Despite the downward trend in inflation in recent months, we believe the impact of tariffs will surface in inflation data over the coming months, primarily through a spike in goods prices. However, we expect tariffs to serve a one-time increase in the level of prices, as opposed to an ongoing source of inflation that would cause long-run inflation expectations to become unanchored. Thus, we believe the Federal Reserve rate-cutting cycle has been delayed, not cancelled, with the Fed likely to deliver another one to two interest-rate cuts in the back half of 2025.
- Trade talks remain in focus – Trade policy remains in focus, with U.S. and Chinese policymakers continuing discussions in London on Tuesday. Reports suggest that talks thus far have been productive, with the initial focus on the U.S. potentially easing technology export controls in exchange for rare-earth minerals, although details remain vague.* With the 90-day pause of the April 2 tariff announcement quickly approaching, the S&P 500 has rallied by more than 20% since the April 8 low and is within striking distance of the February 19 all-time high.* The TSX has seen a similarly strong rally, gaining over 17% since April 8.* In our view, uncertainty on trade policy is likely to remain as we approach the expiration date for the 90-day pause from the April 2 tariff announcement on July 9 and the August 12 expiration date of the 90-day tariff pause between the U.S. and China. However, we believe that peak trade-policy uncertainty is likely behind us, which should help create a more conducive environment for businesses to plan for investment spending and hiring, in our view. From an investment perspective, we continue to recommend investors consider overweighting equities relative to fixed income, with a focus on U.S. stocks. To view our full suite of opportunistic portfolio guidance, checkout our Monthly Portfolio Brief.
Brock Weimer, CFA
Investment Strategy
*FactSet
- Stocks start the week mixed as trade remains in focus – The TSX traded lower while U.S. equity markets rose on Monday as U.S. and China officials met in London. Trade talks focused on easing tensions around technology and rare earth minerals, with additional negotiations scheduled for tomorrow.* Consumer discretionary and materials stocks posted the largest gains, while the utility and financial sectors were laggards. In international markets, Asia was mostly higher, despite China export growth for May missing expectations. China turned to other markets to offset a 34% drop in shipments to the U.S., the largest monthly decline since the COVID-19 pandemic.* Europe was broadly lower*. The U.S. dollar declined against major international currencies. In commodity markets, WTI oil traded higher, extending gains in recent weeks.*
- Bond yields mixed – Bond yields were mixed, with the 10-year Government of Canada yield up to 3.36% and the 10-year U.S. Treasury yield down near 4.48%. Concerns over U.S. government deficits and debt have helped drive bond-market volatility higher in recent months, though yields have pulled back from their late-May peak. Bond markets continue to price in expectations for two Fed interest-rate cuts this year and an additional two next year**, about in line with the Fed's own forecast.*** While the potential for higher inflation over the coming months due to tariffs should keep the Fed on the sidelines a while longer, lower interest rates should help reduce borrowing costs for consumers and businesses, which would be supportive of the economy and corporate profits, in our view.
- Markets await CPI inflation this week – U.S. consumer price index (CPI) inflation for May will be released on Wednesday, with forecasts calling for inflation to rise to 2.5% annualized, up from 2.3% through April.* Core CPI, which excludes more-volatile food and energy prices, is expected to tick up to 2.9%, compared with 2.8% the prior month.* While both measures have declined for three consecutive months, estimates pointing to a reversal likely reflect the early impact of tariffs flowing through the supply chain to consumer prices, in our view. We expect tariffs to put some upward pressure on inflation, as higher import costs are at least partially passed along to consumers. However, most of this impact should be near-term price hikes that aren't an ongoing driver of inflation, in our view. Bond markets are pricing in inflation of about 2.31% over the next 10 years, indicating that long-term inflation expectations appear to remain well anchored.****
Brian Therien, CFA
Investment Strategy
*FactSet **CME Fedwatch ***U.S. Federal Reserve ****Federal Reserve Bank of St. Louis