• Stocks close mixed with geopolitical tensions and trade policy in focus – North American equity markets closed mixed on Wednesday, with the TSX modestly higher while the S&P 500 and Nasdaq traded lower, as escalating tensions in the Middle East pushed oil prices higher and weighed on investor sentiment. In addition to the recent U.S. tariff announcements on Canadian imports, the Trump administration also announced plans to impose a 100% tariff on imported generic pharmaceuticals beginning in August 2028, citing efforts to reshore production. Trade policy will remain in focus this week, with the temporary Section 122 tariffs announced in February scheduled to expire on Friday. On the corporate front, investors will be watching for Alphabet’s latest update on AI-related spending when the company reports after the market close. Bond yields finished higher, with the 10-year GoC yield rising to 3.60% and the 10-year U.S. Treasury yield rising to 4.66%.
   
• Geopolitical and tariff uncertainty weighs on sentiment – Middle East tensions remain in focus for investors this week, with oil prices moving higher on Wednesday amid reports of limited progress in diplomatic negotiations between the U.S. and Iran. In addition to ongoing disruptions in the Strait of Hormuz, reports indicated that oil tankers carrying Saudi Arabian crude reversed course following the announcement of a blockade affecting the Bab al-Mandeb Strait. The strait had served as an alternative route for Saudi oil exports seeking to bypass disruptions in the Strait of Hormuz. Geopolitical uncertainty has coincided with several new U.S. tariff announcements. On Monday evening, President Trump announced an additional 50% tariff on roughly $20 billion of Canadian goods. The levies were announced under Section 338 of the Tariff Act of 1930 and are scheduled to take effect on August 19. The U.S. administration also announced plans to implement a 100% tariff on imported generic drugs beginning in August 2028, citing an effort to reshore pharmaceutical production. Meanwhile, the 10% global tariffs announced in February under Section 122 of the Trade Act of 1974—following the Supreme Court’s decision striking down tariffs imposed under the International Emergency Economic Powers Act—are scheduled to expire on Friday. The administration is expected to announce replacement duties under Section 301 of the Trade Act of 1974, which generally requires an investigation and a finding of unfair foreign trade practices. Although these developments have generated significant headlines, the past year illustrates the risks of adjusting investment strategies in response to policy changes. After declining 19% from February through early April 2025, the S&P 500 recovered those losses by the end of June and went on to post a total return of 17.9% for the year. This year, a correction of nearly 10% during the first quarter has been more than recouped, leaving stocks firmly higher year to date. In our view, the fundamental backdrop remains supportive of equity markets, and we advise investors to maintain a disciplined investment strategy rather than react to short-term headlines.
   
• AI spending trends in focus ahead of Alphabet earnings – Investors will receive an update on AI-related spending trends after today’s market close, when Alphabet is scheduled to report. We expect investors to focus closely on capital expenditure guidance to assess whether the robust pace of AI infrastructure spending can continue, as well as management’s commentary on whether these investments are generating tangible returns on capital. For the year, analysts expect Alphabet alone to record nearly $190 billion in capital expenditures. Including the other four major hyperscalers—Oracle, Meta, Microsoft and Amazon—aggregate capital expenditures for the group are expected to approach $750 billion this year. Elevated hyperscaler spending has supported profit growth among companies that supply the hardware needed for the AI buildout, particularly within the information technology sector. Technology earnings are expected to grow approximately 61% year over year in the second quarter. However, strong earnings growth is not expected to be limited to technology. Several large U.S. banks reported solid results last week, and the S&P 500 financials sector is expected to post second-quarter earnings growth of 18%. The materials sector is expected to generate profit growth of nearly 37%, while energy-sector earnings are projected to double, aided by higher energy prices. Additionally, although Canada’s second-quarter reporting season is still in its early stages, earnings for companies in the S&P/TSX Composite Index are expected to grow by more than 29% year over year. In our view, the economic environment should remain supportive of solid profit growth in the coming quarters. Stabilizing labour-market conditions, resurgent manufacturing activity and healthy consumer-spending trends should provide a constructive backdrop for equity markets.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}  

• Markets close higher as technology stocks rebound – The TSX and U.S. equity markets finished higher on Tuesday, led by a rebound in the technology sector. Bond yields were mixed, with the 10-year Government of Canada yield down to 3.56% and the 10-year U.S. Treasury yield up, ending near 4.63%. In international equity markets, Asia finished mixed overnight, while Europe moved broadly higher. In energy markets, WTI oil prices ticked up near $84 per barrel as geopolitical tensions continued to affect key Middle East shipping routes. Meanwhile, the U.S. dollar strengthened against major currencies, consistent with the rise in Treasury yields.
   
• Trump administration announces 50% tariffs on select Canadian goods – The Trump administration announced additional 50% tariffs on nearly US$20 billion of Canadian goods focused primarily on the automotive, alcohol and dairy industries. The measures are in response to alleged Canadian trade discrimination against certain U.S. exports. The levies, which represent the maximum permitted under the rarely-used Section 338 of the Tariff Act of 1930, are scheduled to take effect on August 19. They would apply even to qualifying goods covered by the Canada-U.S.-Mexico Agreement (CUSMA). Oil, natural gas, potash, critical minerals and certain other products are excluded. While this announcement marks an escalation in Canada-U.S. trade tensions, the exemptions limit the impact to about 5% of the US$382 billion in Canadian imports in 2025. The 30-day implementation period also leaves room for negotiations before the measures take effect. In the meantime, businesses in the affected industries may face greater uncertainty, higher input costs and potential supply-chain disruptions.
   
• Alphabet and Tesla headline busy week of earnings – Investors face a busy earnings calendar this week, headlined by Alphabet (Google) and Tesla, which are scheduled to report after Wednesday's market close. In addition to earnings results, investors will likely focus on Alphabet's capital-spending outlook and progress in monetizing AI investments. More broadly, estimates point to a strong earnings season, with S&P 500 earnings forecast to increase 23% from a year earlier. Energy companies are expected to post the strongest growth — supported by higher oil prices — 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 make the market's advance more durable by reducing its reliance on a small group of mega-cap companies. It could also create a more favorable backdrop for diversified portfolios, including value-oriented and cyclical allocations.

Brian Therien, CFA;
Investment Strategy

^{Source for all data: FactSet.}  

• Stocks close mostly lower with earnings and geopolitical tensions in focus – North American equity markets closed mostly lower on Monday as investors assessed an escalation in military activity between the U.S. and Iran over the weekend. Reports indicating that both sides remain open to negotiations toward a diplomatic solution helped limit the market impact, with the TSX and S&P 500 logging modest declines while oil prices closed only slightly higher. Looking ahead, investors face a busy earnings calendar this week, headlined by Alphabet and Tesla, which are scheduled to report on Wednesday. On the economic front, Canadian headline CPI increased 2.8% year-over-year in June, down from 3.2% in May, with the deceleration driven in part by lower gasoline prices during the month. From a market-leadership perspective, energy was among the top-performing sectors, supported by heightened geopolitical uncertainty. Meanwhile, the communication services sector of the S&P 500 received a lift from Alphabet shares, which rose following reports that the company is developing a new semiconductor designed to improve the efficiency of its Gemini models. Government bond yields finished the day higher, with the 10-year GoC yield rising to 3.57% and the 10-year U.S. Treasury yield rising to 4.59%.
   
• Contained inflation likely to keep the Bank of Canada on hold – Domestic Consumer Price Index (CPI) inflation rose 2.8% year-over-year in June, down from a 3.2% annual increase in May. Gasoline prices fell 10.2% month-over-month, with lower prices at the pump contributing to the deceleration in headline inflation. Encouragingly, the measures of core inflation closely monitored by the Bank of Canada (BoC) also showed evidence of disinflation. CPI-median increased 1.9% year-over-year, while CPI-trim rose 1.8%, marking the lowest annual readings for both measures since the second half of 2020. While renewed geopolitical tensions have pushed oil prices higher in July—likely placing upward pressure on gasoline prices in the July inflation report—prices remain well below their peaks from earlier this year. With core inflation measures running below 2% annually and domestic economic activity still sluggish, albeit showing signs of improvement, we believe the Bank of Canada is likely to remain on hold in the near term.
   
• Geopolitical tensions in focus – This weekend brought another escalation in military activity between the U.S. and Iran. The U.S. expanded its strikes on Iranian targets, while Iran responded with attacks on U.S. forces and military assets across the region. Despite the increase in military activity, oil prices were only slightly higher on Monday, as reports that a diplomatic solution between the two countries remains on the table limited market impact. While geopolitical uncertainty is likely to persist in the coming weeks, the resilience markets have demonstrated over the past several months offers a valuable reminder of the importance of maintaining a disciplined investment approach during periods of uncertainty. After a 9% pullback in the first quarter, the S&P 500 has rallied more than 15% from its March low, despite ongoing geopolitical uncertainty. Additionally, economic activity has remained resilient despite higher oil prices. U.S. retail sales data released last week pointed to solid spending trends through June, while June inflation data has provided welcome evidence of disinflation in core prices in both Canada and the U.S. In our view, geopolitical uncertainty could lead to bouts of market volatility. However, we believe the fundamental backdrop remains supportive of equity markets, underpinned by healthy economic activity and strong profit growth.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data: FactSet.}  

• Global stocks pull back on tech weakness - Global markets were on the defensive today as the semiconductor pullback that began in Asia overnight spread to the U.S. The Philadelphia Semiconductor Index finished down 10% for the week, the Korean index is down 25% from its June peak, and Taiwanese equities have entered correction territory. The TSX and European stocks held up better given their lower tech exposure. Renewed Middle East escalation also weighed on sentiment, as the U.S. and Iran have intensified attacks, driving oil prices 4% higher today, with WTI at $81. The energy sector outperformed, while technology and communication services led to the downside in both Canada and the U.S.
   
• Concerns over AI spending drives profit taking - After gaining 88% in the second quarter, its best on record, the U.S. semiconductor index has led a broader tech pullback in July. The latest development is competition from open-source models in China, which are reportedly rivaling the performance of leading offerings from Anthropic and OpenAI, raising fresh concerns about the heavy pace of technology spending. More broadly, AI-related stocks have become more volatile as investors increasingly question both the pace and payoff of investments. We are seeing signs of fatigue, with end-user demand for AI becoming more price sensitive and the market starting to penalize companies that are ramping spending too aggressively. However, corporate earnings have not yet shown any slowdown in demand or spending. We view this volatility as a signal that the AI theme is likely maturing rather than breaking, which is a healthy part of how transformative investment cycles evolve. That said, after the sharp moves in many AI-related stocks, concentration risk has increased, and the technology sector now carries an outsized weight in the broader index. In our view, investors should maintain exposure to the AI theme but complement it with more diversified and differentiated sources of return, including cyclical sectors, value-style investments, and overseas stocks.
   
• Macro resilience and earnings strength provide support - This week’s U.S. data releases reinforced the theme of economic and earnings resilience, providing, in our view, useful perspective as investors assess the tech-driven pullback. 1) Both consumer (CPI) and producer inflation data (PPI) came in cooler than expected, providing, in our view, breathing room for the Fed to remain on hold when it meets later in the month; 2) retail sales grew at a solid pace, showcasing the consumer’s resilience; and 3) the banks kicked off earnings season by reporting stronger-than-expected results. Renewed geopolitical uncertainty and valuation pressures in technology introduce some risks, but we think solid profit trends provide support. S&P 500 earnings are expected to grow 23% year-over-year, which would mark the second consecutive quarter of earnings growth above 20%. Revenue growth is expected to reach 12%, and earnings estimates have been revised higher during the quarter, an unusual development given that estimates are typically reduced as reporting season approaches. Technology and energy have been the two primary drivers of these upward revisions. Technology is expected to deliver the highest revenue growth of all 11 S&P 500 sectors and the second-highest earnings growth rate, at 63%. Energy is also expected to contribute meaningfully, helped by higher oil prices during the quarter. Together, the two sectors are expected to drive roughly 80% of total S&P 500 earnings growth. Next week, about 10% of the S&P 500’s market capitalization is expected to report earnings, including Alphabet and Tesla.

Angelo Kourkafas, CFA;
Investment Strategy

^{Source for all data: Bloomberg.} 

• 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.}