• Markets close mixed - U.S. and Canadian equities were mixed on Tuesday, with the Dow Jones and Canadian TSX modestly higher, while the S&P 500 and Nasdaq were lower, indicating some broadening of returns beyond technology and growth-oriented names. Market performance is being driven by investor focus on the start of the Federal Reserve’s policy meeting alongside building hope around the U.S.–Iran ceasefire, with falling oil prices helping provide a supportive backdrop. U.S. Treasury yields are edging lower ahead of the Fed decision, reflecting a repricing around the outlook for inflation and interest rates. Overall, markets continue to navigate a transition from geopolitical-driven volatility toward policy-driven direction, with resilient economic data reinforcing a higher-for-longer rate backdrop, in our view. Looking ahead, easing geopolitical tensions and a stable economic foundation could support further broader market participation, though near-term performance will likely be driven by Fed guidance and the path of inflation.
   
• Reduced geopolitical risk may support a broadening of leadership – An agreement to reopen the Strait of Hormuz should help contain oil prices and normalize energy flows, although shipping activity will likely take time to return to pre-war levels. The deal aligns with expectations that had been signaled for several days, suggesting much of the news may already have been priced in, with markets now trading above pre-conflict levels. However, the rally since the March market low has been narrow, led predominantly by technology. We believe easing geopolitical tensions could help alleviate inflation pressures and help reduce bond yields, potentially driving a rotation into cyclical sectors and previously lagging areas of the market. As a result, we favor a broadening of leadership, including cyclicals, U.S. mid-caps, and equal-weight exposure. While the U.S. economy continues to show the strongest momentum, lower oil prices are likely to provide relief for energy-sensitive regions, with international developed value stocks likely to benefit most, in our view.
   
• Fed in focus this holiday-shortened week - Beyond geopolitics, the next key catalyst for markets comes Wednesday, when the Federal Reserve, led by new Chair Kevin Warsh, is set to announce its policy decision and release updated projections for rates, growth and inflation. Following recent improvements in employment data and signs of accelerating inflation, we expect the Fed to remove its easing bias from both the policy statement and the 2026 median dot, which previously indicated one rate cut this year. Updated projections are likely to reflect higher inflation, lower unemployment, and no cuts in 2026. That said, if the Iran agreement leads to a durable resolution, the associated decline in oil prices suggests inflation may have peaked this quarter and could ease over the remainder of the year. In this context, a prolonged pause appears to be the most likely outcome, in our view. For markets, a “higher-for-longer” rate backdrop, rather than a renewed tightening cycle, can remain supportive of valuations, in our view, particularly if it reflects resilient economic growth alongside gradually moderating inflation pressures.

Mona Mahajan;
Investment Strategy

^{Source for all data: Bloomberg}

• Markets jump on Iran deal to end war - Global equity and bond markets ended higher to start the week after the U.S. and Iran agreed over the weekend to a 60-day deal to reopen the Strait of Hormuz and halt the conflict. Both sides have confirmed the agreement, which is expected to be formally signed on June 19 in Switzerland. In response, oil prices fell sharply, down 4% and briefly dropped below $80 per barrel for the first time since March, helping provide relief to both equities and fixed income. Tech, materials and small-caps led the gains, while the traditional defensive sectors and energy fell. Treasury yields and the dollar also declined, lending support to precious metals prices.
   
• Reduced geopolitical risk may support a broadening of leadership - The agreement to reopen the Strait of Hormuz should help contain oil prices and normalize energy flows, although shipping activity will likely take time to return to pre-war levels. The deal aligns with expectations that had been signaled for several days, suggesting much of the news may already have been priced in, with markets now trading above pre-conflict levels. However, the rally since the March market low has been narrow, led predominantly by technology. We believe easing geopolitical tensions could help alleviate inflation pressures and help reduce bond yields, potentially driving a rotation into cyclical sectors and previously lagging areas of the market. As a result, we favour a broadening of leadership, including cyclicals, U.S. mid-caps, and equal-weight exposure. While the U.S. economy continues to show the strongest momentum, lower oil prices are likely to provide relief for energy-sensitive regions, with overseas developed value stocks likely to benefit most, in our view.
   
• Fed in focus this week - Beyond geopolitics, the next key catalyst for markets comes Wednesday, when the Federal Reserve, led by Chair Kevin Warsh, is set to announce its policy decision and release updated projections for rates, growth and inflation. Following recent improvements in employment data and signs of accelerating inflation, we expect the Fed to remove its easing bias from both the policy statement and the 2026 median dot, which previously indicated one rate cut this year. Updated projections are likely to reflect higher inflation, lower unemployment, and no cuts in 2026. That said, if the Iran agreement leads to a durable resolution, the associated decline in oil prices suggests inflation may have peaked this quarter and could ease over the remainder of the year. In this context, a prolonged pause appears to be the most likely outcome, in our view. For markets, a “higher-for-longer” rate backdrop, rather than a renewed tightening cycle, can remain supportive of valuations, in our view, particularly if it reflects resilient economic growth alongside gradually moderating inflation pressures.

Angelo Kourkafas, CFA;
Investment Strategy

^{Source for all data: Bloomberg}

• Stocks extend rally as hopes for a U.S.-Iran peace deal build – Equity markets rallied to close the week, with the U.S. and Iran both signaling progress toward a peace agreement. News reports suggest that a deal, which would enable a reopening of the Strait of Hormuz, could be signed on the sidelines of the G7 summit in France this weekend. In response, WTI oil prices fell to $84, near the lows seen after the outbreak of conflict in the Middle East, sparking strong gains in European and Asian equity markets. Major U.S. benchmarks were also higher, led by a 0.8% gain in the Russell 2000 index, while the technology-focused Nasdaq index lagged. This helped close a difficult week for stocks, particularly in the technology sector, on a more positive footing. Bond markets were a touch softer despite the dip in oil prices, but yields remain some way off the recent highs. The dollar lost ground against a basket of major currencies as risk sentiment improved.
   
• SpaceX shares jump after record breaking IPO – Shares of SpaceX surged in their first day of trading today following a record breaking $75 billion IPO that was more than four times oversubscribed by institutional and retail investors. The stock climbed as high as 31% above its offering price, before falling back later in the session to close around 18% up over the session. Trading over the day was brisk, with $64 billion worth of SpaceX stock trading over Friday, roughly double the next most actively traded stock, Micron Technology. The well-received SpaceX IPO will set the stage for large offerings from OpenAI and Anthropic potentially later this year. Buying into a newly public company can feel exciting, but we believe it is important for investors to revisit their investment goals and risk tolerance and let those guide their investment decisions. We discuss investing in IPOs in more detail in our recent Market Pulse Report: Don't Let Mega IPO Buzz Cloud Your Judgment.
   
• Fed in focus next week – Market sentiment into next week will be driven by the success, or not, of the latest round of U.S. - Iran peace talks, while we will also be watching the follow through of the SpaceX IPO. Otherwise, the Fed meeting will be the big event, with markets to watch signals from new Chair Warsh for indicators over how he will lead the FOMC in coming years. Pricing for interest-rate hikes has moderated in recent sessions, helped by a decline in oil prices, although short-term money markets still anticipate one 25 basis point (0.25%) increase in the fed funds rate by the start of 2027. Warsh is likely to tread a careful line on the policy outlook, in our view, signaling that that policy is effectively on hold, even if the Fed would be prepared to hike rates if needed. Recent communication from FOMC members suggest that this would be consistent with the view of the majority of the committee, although a few more hawkish members could signal a preference for rate hikes in their updated interest rate forecasts this month. We expect the Fed to stay on hold this year unless we see a longer and larger spike in oil prices, and indications that this inflation is broadening across a broader share of the consumer price index (CPI) basket. This is consistent with our expectations for the Bank of Canada, with weak growth and slack in the labour market to discourage the tightening priced into short-term rates markets.

James McCann;
Investment Strategy

^{Source for all data: Bloomberg}

• Stocks rally on hopes for a U.S.-Iran peace deal – Equity markets rallied on Thursday, with the TSX and S&P 500 up more than 1.5%, with markets supported by comments from U.S. President Trump indicating that the U.S. and Iran have made progress toward a diplomatic resolution to the conflict. These reports followed earlier remarks from the President suggesting the U.S. could escalate military action with the aim of taking control of Iran’s oil infrastructure. On news of potential de-escalation, oil prices declined to around $87 per barrel while equities moved higher. On the economic front, U.S. headline Producer Price Index (PPI) inflation rose 6.5% year-over-year in May—the highest annual reading since 2022—as elevated energy costs continued to push up headline inflation. Bond yields moved lower following the geopolitical developments, with the 10-year Government of Canada yield closing at 3.41% and the 10-year U.S. Treasury yield at 4.45%.
   
• Initial public offerings (IPOs): Three things to know – IPO activity is heating up, with SpaceX shares expected to begin trading on the secondary market tomorrow and reports suggesting strong institutional demand so far. In addition, AI companies OpenAI and Anthropic are also anticipated to go public later this year. While buying into a newly public company can feel exciting, we believe it is important for investors to revisit their goals and let those guide their investment decisions. Below are three key things to know about how IPOs have historically performed in their first year of trading and important considerations for investors. For a more detailed analysis, see our recent Market Pulse Report: Don't Let Mega IPO Buzz Cloud Your Judgment.
   

1. Excitement has historically faded quickly: Among the 30 largest IPOs in the Russell 3000 over the past 20 years, companies have, on average, gained more than 20% on their first day of trading relative to the IPO price (also known as the offer price set by underwriters). However, most individual investors are not allocated shares at the offer price, as those are typically reserved for institutional investors. Instead, retail investors generally buy shares in the secondary market once trading begins. Relative to the opening price in the secondary market, the average stock declined by 1.4% on its first day. While outcomes have varied widely, the average IPO also underperformed the S&P 500 by roughly 15% in its first year of trading.
    
2. Volatility has been elevated: IPOs have historically exhibited high volatility during their first year of trading. Within the same group of 30 companies, the average maximum drawdown (peak-to-trough decline) was 48% in year one.* Additionally, volatility—measured by the standard deviation of returns—has been considerably higher than our long-term expectations for the S&P 500.
    
3. Anchor back to your goals: IPOs often generate significant excitement and media attention. While some companies have delivered strong early gains, performance has varied meaningfully. On average, IPOs have underperformed the S&P 500 and experienced higher volatility in their first year. Against this backdrop, it is important to revisit your investment goals, time horizon, and risk tolerance, and to allow these factors to guide your decisions. We believe that maintaining a disciplined approach—rather than reacting to short-term sentiment—can help keep you aligned with your long-term goals.
    

• U.S. producer price inflation rises in May – Higher energy prices continued to feed through to May’s U.S. Producer Price Index (PPI), with headline PPI rising 6.5% year-over-year—slightly above expectations for a 6.4% increase and marking the highest annual reading since November 2022. Energy was a key driver, with the energy sub-index climbing nearly 11% on a monthly basis and approximately 37% year-over-year. Looking beyond energy, underlying inflationary pressures remained evident. PPI excluding food and energy rose 0.4% in May and 4.9% on an annual basis. In our view, the uptick in U.S. inflation, combined with a rebound in job growth, is likely to keep the Fed on hold in the near term. That said, policymakers are likely to remove the easing bias from next week’s policy statement, in our view, reflecting increased upside risks to inflation. While rate hikes remain possible if the inflation outlook deteriorates further, we believe the bar for additional policy tightening is high—particularly after yesterday’s Consumer Price Index report suggested that inflationary pressures outside of energy remained relatively contained in May.

Brock Weimer, CFA;
Investment Strategy

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

• Stocks waver with geopolitical tensions back in focus – Equity markets closed lower on Wednesday as a flare-up in geopolitical tensions weighed on investor sentiment. The U.S. launched strikes against Iran overnight in retaliation for Iran’s downing of a U.S. helicopter, adding uncertainty to an already fragile geopolitical backdrop. Sentiment was further pressured after President Trump suggested Wednesday morning that negotiations have been taking too long. The TSX finished lower by 0.7%, while the S&P 500 declined by roughly 1.6%. Despite the geopolitical escalation, oil prices closed only modestly higher, with WTI crude finishing just above $90 per barrel. On the economic front, the Bank of Canada opted to hold its policy rate steady at today's meeting, while U.S. May CPI inflation came in line with expectations. Canadian government bond yields were little changed on Wednesday, with the 10-year Government of Canada yield near 3.49% while the 10-year U.S. Treasury rose modestly to 4.55%.
   
• Bank of Canada remains on hold – The Bank of Canada (BoC) held its policy rate steady at 2.25% on Wednesday, marking the fifth consecutive meeting with no change. Governor Tiff Macklem emphasized that the Governing Council is prepared to look through the war’s near-term impact on inflation, but cautioned that if energy prices remain elevated, policymakers “will not let their effects become broad-based persistent inflation.”* He also acknowledged the difficult policy backdrop created by the combination of weak economic activity and rising inflation, noting that the central bank is prepared to respond in either direction if conditions warrant. We expect the BoC to remain on hold in the near term, particularly with its preferred core inflation measures — CPI-trim and CPI-median — running near a 2% annualized pace in recent months. While May labour-market data improved, employment growth has been sluggish in 2026, averaging a decline of roughly 5,000 jobs per month, and real GDP has contracted for two consecutive quarters. With core inflation pressures appearing contained, economic activity lackluster, and CUSMA-related uncertainty likely to persist in the months ahead, we expect the BoC to keep rates unchanged in the near term.
   
• U.S. inflation data gives the Fed room to remain patient – U.S. headline CPI for May was in line with expectations, rising 0.5% month-over-month and 4.2% year-over-year, marking the strongest annual increase since April 2023. A key driver of the headline increase was a 3.9% monthly rise in energy prices. However, inflation trends looked more encouraging beneath the surface. Core CPI, which excludes food and energy, rose 0.2% in May and 2.9% from a year ago, with the monthly gain coming in below expectations for a 0.3% increase. Additionally, core goods prices posted their first monthly decline since May 2025, while services inflation remained contained, rising 0.3% on the month. From a Fed policy perspective, we expect policymakers to acknowledge that upside risks to inflation have increased in recent months, and they are likely to remove the easing bias from their policy statement at next Wednesday's meeting. However, we believe the bar for a Fed rate hike remains high in the near term, particularly given signs that inflation has not yet broadened meaningfully beyond energy.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data not cited: FactSet.
*Source for data cited: Bank of Canada}