• 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.} 

• 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.}