• Markets close modestly lower – Canadian and U.S. equities moved modestly lower on Thursday, with the tech-heavy Nasdaq lagging the TSX and S&P 500. Globally, the Korean Kospi fell over 6%, weighed down by semiconductor stocks. Oil price markets declined, with WTI oil at $79, well above recent lows of around $68. Meanwhile, bond yields also ticked higher, with 10-year Government of Canada yield at 3.54% and the 10-year U.S. Treasury yield at 4.56%. Overall, we continue to see rotations underneath broader markets, with parts of technology giving back some gains after sharp moves higher. We see the theme of broadening of market leadership to continue, especially as the broader economy remains resilient, supporting both cyclical and tech parts of the market.
   
• Bank of Canada holds policy rate steady – The Bank of Canada held its policy rate steady at 2.25% yesterday, marking the sixth consecutive meeting in which rates have remained unchanged. In its accompanying statement, the Governing Council noted that while uncertainty remains elevated, current policy is well positioned, and that it stands ready to adjust monetary policy as needed as the outlook for inflation and growth evolves. In our view, the Bank of Canada is likely to remain on hold in the near term. Closely watched measures of core inflation—CPI-Median and CPI-Trim—remain near 2%, despite a recent increase in headline inflation driven largely by higher energy prices. Additionally, despite some improvement over the past two months, job creation has been lackluster in 2026, with employment declining by an average of 1,000 jobs per month through June. With core inflation contained and labour-market activity showing sluggish, albeit improving, job creation, we believe the Bank of Canada can take a patient approach to further policy adjustments and will likely remain on hold in the near term.
   
• Earnings season in full swing – S&P 500 earnings season began in earnest this week, with large banks reporting earnings. Banks like J.P. Morgan, Citibank, and Goldman Sachs all beat expectations, and most are seeing upside from investment banking and trading activity. More broadly, the expectation for second quarter earnings is for growth of 23% year-over-year, up from about 14% at the start of the year. The upward revisions have largely been driven by energy and technology sectors, both of which will report earnings in the weeks ahead. Next week on July 22, investors will hear from Alphabet and Tesla, followed by Meta, Microsoft, Amazon, and Apple the following week. In our view, the key factors to listen for are what the pace of capex spending will be in the year ahead, and whether the firms are seeing a return on AI investments. As we are entering year 4 of a tech-lead bull market, we believe it is prudent to have exposure to a diverse set of investments, across tech and non-tech parts of the market.

Mona Mahajan;
Investment Strategy

^{Source for all data: Bloomberg.} 

• Stocks close higher after BoC holds rates steady – North American equity markets closed higher on Wednesday following the Bank of Canada’s decision to leave its policy rate unchanged at 2.25% at today’s meeting. South of the border, a lower-than-expected producer price index (PPI) inflation report for June provided support to markets and likely helped ease concerns that the Federal Reserve may need to tighten policy to combat inflation in the near term. The TSX posted a 0.3% gain for the day while the S&P 500 rose by 0.4%. Overseas, Asian markets closed higher overnight, led by a rebound in South Korea’s KOSPI Index, while European markets were little changed. Bond yields in Canada closed slightly lower, with the 10-year GoC yield finishing around 3.53%, while the 10-year U.S. Treasury yield declined to 4.55%, likely in response to the softer inflation data. In commodity markets, oil prices edged higher as investors continue to monitor renewed tensions in the Middle East.
   
• Bank of Canada holds policy rate steady – The Bank of Canada held its policy rate steady at 2.25% this morning, marking the sixth consecutive meeting in which rates have remained unchanged. In its accompanying statement, the Governing Council noted that while uncertainty remains elevated, current policy is well positioned, and that it stands ready to adjust monetary policy as needed as the outlook for inflation and growth evolves. In our view, the Bank of Canada is likely to remain on hold in the near term. Closely watched measures of core inflation—CPI-Median and CPI-Trim—remain near 2%, despite a recent increase in headline inflation driven largely by higher energy prices. Additionally, despite some improvement over the past two months, job creation has been lackluster in 2026, with employment declining by an average of 1,000 jobs per month through June. With core inflation contained and labour-market activity showing sluggish, albeit improving, job creation, we believe the Bank of Canada can take a patient approach to further policy adjustments and will likely remain on hold in the near term.
   
• U.S. wholesale prices moderate in June – U.S. headline producer price index (PPI) inflation slowed to an annual gain of 5.5%, down from a 6.0% annual gain in May, and declined 0.3% on a monthly basis in June. Leading the monthly decline in headline prices was a 1.4% decline in goods prices, driven largely by a fallback in energy prices. Encouragingly, inflationary pressures also eased outside of the energy component, with core PPI rising 0.2% for the month, below expectations for a 0.4% increase. Combined with yesterday’s softer-than-expected consumer price index (CPI) report, we believe the June U.S. inflation data suggest that the pickup in headline inflation since February is not becoming entrenched beyond categories directly affected by higher energy prices. With this data in hand, we expect Fed policymakers to take a patient approach to further policy adjustments in the near term. Bond markets are pricing in a hold at the July 29 meeting, along with roughly even odds of a rate hike versus a hold in September. In our view, if inflation continues to moderate, the bar for an additional rate hike remains high. As a result, our base case calls for the Fed to remain on hold in the near term.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Markets close higher on cooler-than-expected CPI report – The TSX and U.S. equity markets advanced on Tuesday after the June U.S. consumer price index (CPI) report showed inflation cooling more than expected. Bond yields declined in response, with the 10-year Government of Canada yield at 3.57% and the 10-year U.S. Treasury yield near 4.58%, as markets appeared to reassess whether softer inflation may give the Federal Reserve more flexibility to hold interest rates steady in the near term. International equity markets also finished mostly higher across Asia and Europe. In energy markets, WTI oil prices rose to near $80 per barrel amid renewed tensions in the Strait of Hormuz. Meanwhile, the U.S. dollar weakened against major currencies, consistent with lower Treasury yields.
   
• U.S. CPI report shows inflation pressures easing –Headline U.S. CPI inflation slowed to 3.5% year-over-year in June, below forecasts for a more modest decline to 3.9%. The moderation was broad-based, with price pressures easing across several major categories, including shelter, food, energy and transportation. Core CPI, which excludes the more volatile food and energy components, cooled to 2.6% year-over-year, compared with expectations that it would remain unchanged at 2.9%. The breadth of the slowdown is particularly encouraging to us because it suggests that disinflation is extending beyond a narrow range of categories. We believe these readings should help alleviate concerns that elevated inflation is becoming entrenched and give the Fed greater flexibility as it evaluates incoming data. However, a single favourable report is unlikely to change the direction of monetary policy. The Fed will likely look for confirmation in upcoming inflation, employment and wage data. Attention now turns to the June U.S. producer price index (PPI) report – to be released Wednesday - which is expected to show headline wholesale inflation cooling modestly but remaining elevated at 6.4% year-over-year.
   
• Major banks kick off earnings season with solid results – Several major U.S. banks opened second-quarter earnings season this morning with stronger-than-expected results. Bank of America, CitiGroup, Goldman Sachs, J.P. Morgan, and Wells Fargo each exceeded analysts' earnings-per-share and revenue estimates. These results help provide an encouraging start to a season in which S&P 500 companies are forecast to deliver year-over-year earnings growth of 21%. Energy companies are expected to post the strongest growth, benefiting from higher oil prices during the quarter, followed by the technology and materials sectors. Earnings gains are also forecast to be broad-based, with 10 of the 11 sectors expected to report year-over-year increases. If realized, we believe wider participation could help reduce the market's reliance on a small group of mega-cap companies and help reinforce the benefits of portfolio diversification.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Stocks close lower with geopolitical tensions in focus– North American equity markets closed lower on Monday, as escalating tensions between the U.S. and Iran sent oil prices higher and weighed on investor sentiment. Over the weekend, the U.S. carried out additional military strikes against targets in Iran, while Iran responded by launching strikes against U.S. facilities in several Gulf countries. U.S. President Trump also announced Monday that the U.S. would reinstate its blockade on Iranian shipping, contributing to a further rise in oil prices and bond yields as geopolitical tensions re-escalated. The TSX fell 0.3% for the day, while the S&P 500 declined 0.8%, weighed down by weakness in the technology sector—particularly among semiconductor companies. Technology weakness was particularly acute overseas, with South Korea’s KOSPI Index—which is heavily weighted toward semiconductor companies—falling nearly 9% overnight. Looking ahead, investors face a week packed with corporate earnings reports and economic data, with all eyes on U.S. bank earnings and the U.S. consumer price index (CPI) report for June tomorrow.
   
• U.S. price check ahead – U.S. inflation will be front and center for investors this week, with June consumer price index (CPI) data due tomorrow. Headline CPI is expected to post a modest monthly decline, likely driven by a fall in oil prices, while rising 3.8% on an annual basis. Core CPI, which excludes food and energy, is expected to increase 0.3% for the month and 2.9% from a year ago. The run-up in U.S. inflation over recent months has led investors to recalibrate their expectations for Federal Reserve interest-rate policy. Bond markets are now pricing in one Fed rate hike by the end of this year and an additional hike in 2027. While we acknowledge that upside risks to inflation have increased—particularly amid ongoing uncertainty in the Middle East—we believe the current backdrop warrants a patient approach from the Fed, and we expect it to remain on hold in the near term. U.S. core goods prices posted their lowest reading in more than a year in May, while recent home-price data point to further shelter disinflation ahead. Additionally, U.S. labour-market conditions have come into better balance and, in our view, are no longer a meaningful source of inflationary pressure. The number of job openings is now only slightly higher than the number of unemployed workers, compared with 2022, when job openings were nearly double the number of unemployed workers. Although geopolitical uncertainty remains a risk, our base case is that oil prices will remain well below their March peak of more than $100 per barrel. Against this backdrop, we believe the Fed can remain patient and keep rates on hold in the near term.
   
• Second-quarter earnings preview – In addition to U.S. inflation data, corporate earnings will be in focus for investors, with Bank of America, JPMorgan Chase, Goldman Sachs, Wells Fargo, and Citigroup all scheduled to report results tomorrow, kicking off the second-quarter earnings season. For the quarter, analysts expect the S&P 500 to post year-over-year earnings growth of 22%, driven by strong profit growth in the technology and energy sectors. Canadian corporations will ramp up their second-quarter earnings announcements over the coming weeks. Expectations point to strong profit growth in Canada as well, with analysts forecasting year-over-year earnings growth of more than 30% for the S&P/TSX Composite. For the full year, TSX earnings are expected to rise by 27% while S&P 500 earnings are expected to grow by 24%. We continue to believe the economic environment remains supportive of equities, underpinned by stable labour-market conditions and resurgent manufacturing activity. In our view, these conditions should support solid earnings growth over the coming quarters and provide a favourable environment for equity markets.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.} 

• Stocks edge higher following domestic employment data – North American equity markets closed higher on Friday following the June labour-force survey, which showed domestic employment rose by 18,000 for the month while the unemployment rate fell to 6.5%. The TSX logged a 0.3% gain for the day and rose by roughly 1% for the week, while the S&P 500 rose by 0.4% today, logging a weekly gain of 1.2%. Bond yields were little changed, with the 10-year GoC yield holding steady at around 3.51%, while the 10-year U.S. Treasury yield finished at 4.56%. Geopolitical tensions remain in focus after a re-escalation in military activity between the U.S. and Iran this week. However, with no incremental news flow on the conflict, oil prices were little changed, with WTI crude oil closing just below $72 per barrel.
   
• Labour market holds steady – The June Labour Force Survey showed that domestic employment conditions held steady for the month, with employment rising by 18,000 and the unemployment rate falling to 6.5%. Looking under the surface, employment growth was strongest in wholesale and retail trade, along with accommodation and food services, perhaps reflecting additional hiring related to the FIFA World Cup. Conversely, manufacturing employment contracted by 17,000 for the month and is now lower by 61,000 from its recent January 2025 peak, as the sector continues to adjust to protectionist U.S. trade policy and uncertainty surrounding CUSMA negotiations. Despite softness in manufacturing, as well as potential one-off boosts related to the FIFA World Cup, we view June’s employment data as an encouraging sign of stabilization, particularly following a strong month of job growth in May. We expect the unemployment rate to remain contained through year-end, in part due to slowing population growth stemming from tighter immigration policy, which has reduced the pace of job gains needed to keep the unemployment rate steady. However, a gradual improvement in domestic economic activity through year-end could help limit layoffs and help keep the unemployment rate contained.
   
• Higher interest rates weighing on U.S. housing – After a surge in activity coming out of the pandemic, driven by low borrowing costs and households that were flush with cash, U.S. housing-market activity has stagnated in recent years as households adjust to higher home prices and higher borrowing costs. We saw further evidence of this yesterday, with U.S. existing home sales for June falling by 2.4% for the month, below expectations, albeit modestly higher on a year-over-year basis. Since 2023, monthly existing home sales have run at an annualized rate of roughly 4.1 million, well below the 2015–2019 average of roughly 5.4 million. While this could, in part, reflect low levels of inventory for existing homes in recent years — as existing homeowners have been reluctant to sell homes with below-current-market mortgage rates — U.S. new home sales show a similar pattern, trending roughly sideways since 2023. While we don’t expect borrowing costs to return to 2021 levels, we think there is hope for improvement on the affordability front, particularly as U.S. annual wage growth has outpaced home price growth, as measured by the S&P/Case-Shiller U.S. National Home Price Index, for 15 consecutive months. Should this trend continue over time, it could provide improvement at the margin for U.S. housing-market activity. From an economic standpoint, while housing-market activity could remain subdued this year, the good news, in our view, is that we’ve seen solid trends in other drivers of growth, such as household consumption and business investment, which we believe will be the primary drivers of economic growth over the remainder of the year.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}