July in review
North American markets finished July broadly flat but this surface-level calm masked intense underlying volatility as markets navigated rising tensions in the Middle East, renewed trade uncertainty across North America, and a pivotal corporate earnings season. In energy markets, re-escalation in the Middle East conflict contributed to rising oil prices, reigniting inflation concerns, and complicating the outlook for the Federal Reserve which ultimately held rates steady at 3.50%–3.75% in a split 9–3 vote at their July meeting. Meanwhile, Q2 earnings reports prompted a sharp pivot in investor sentiment regarding artificial intelligence. Rather than rewarding AI hype, investors demanded concrete proof of return on investment, leading to some market rotation and a broadening of market participation. Ultimately, July demonstrated that surface level stability can be deceptive, highlighting the critical importance of active management and diversification in a shifting macroeconomic landscape.
Here are some of July's most notable events:
Trade uncertainty returns as the U.S. forces CUSMA reassessment. North American trade relations deteriorated sharply in July as the U.S. declined to renew the Canada-United States-Mexico Agreement (CUSMA) agreement in its current form on July 1, prompting renewed discussion about the long-term framework governing North American free trade. The situation escalated dramatically on July 20, when President Trump invoked Section 338 of the Tariff Act of 1930—marking its first use in over 70 years—to impose an additional 50% tariff on nearly USD 20 billion of Canadian imports effective August 19. Crucially, these tariffs bypass CUSMA protections and target key sectors including motor vehicles, dairy, and alcoholic beverages, alongside secondary goods like cement and plywood. While Canada’s backward-looking export data remained stable throughout the period, the developments increased uncertainty around future trade flows and their potential impact on economic growth.
Middle East tensions put energy markets back in focus. The month began with the collapse of the fragile June ceasefire, as renewed hostilities severely disrupted shipping routes through the Strait of Hormuz, a critical corridor for global energy supplies. Although a brief pause in fighting was brokered over the weekend of July 25, tensions persisted for much of the month. Disruptions to maritime traffic briefly pushed Brent crude oil back above US$100 per barrel, although prices later retreated to about US$90 per barrel as comments from Iranian officials pointed to progress in negotiations to restore shipping traffic following President Trump's decision to call off a major attack on Iran. From a market and investment standpoint, these developments contributed to higher oil prices and supported strong performance across energy-related sectors.
| Index† | Change (%) | Index Level | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Treasury Bill (FTSE Canada 60 Day T-Bill) | 0.20 | 1.30 | 2.40 | 193.36 |
| Canadian Bonds (FTSE Canada Universe Bond) | -1.55 | 0.66 | 2.61 | 1,207.69 |
| Canadian Equities (S&P/TSX Composite) | 1.22 | 12.56 | 32.31 | 35,226.14 |
| U.S. Bonds (Bloomberg U.S. Aggregate Bond, US$) | -1.30 | -0.69 | 2.71 | 2,332.59 |
| U.S. Equities (S&P 500, US$) | -0.06 | 10.12 | 19.53 | 7,489.72 |
| Global Equities (MSCI World, US$) | 0.53 | 10.54 | 20.91 | 4,847.88 |
| Emerging Markets (MSCI Emerging Markets, US$) | -3.03 | 20.25 | 37.04 | 1,665.89 |
| Currencies† | Change (%) | Exchange Rate | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| C$/US ($) | 1.25 | -2.11 | -1.18 | 0.7132 |
| C$/Euro (€) | 0.34 | -0.26 | -2.14 | 0.6188 |
| C$/Pound (£) | -0.38 | -2.15 | -3.18 | 0.5292 |
| C$/Yen (¥) | -1.93 | -1.72 | 3.20 | 112.295 |
| Commodities (US$)† | Change (%) | Price | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Gold Spot ($/oz) | -3.09 | -10.04 | 50.78 | 307.90 |
| Oil WTI ($/barrel) | 22.23 | 48.52 | 31.41 | 84.67 |
| Natural Gas ($/MMBtu) | -13.99 | -26.06 | -30.30 | 2.75 |
†Total Return, as at July 31, 2026. Indices are quoted in their local currency.
Source: Bloomberg
Indices are not managed, and it is not possible to invest directly in an index.
Strong earnings support markets as AI spending faces scrutiny. Second quarter earnings season provided investors with valuable insight into the health of businesses and the broader economy. In the U.S., results generally exceeded expectations, with 86% of reporting S&P 500 companies surpassing earnings forecasts, well above the long-term average. At the same time, investors increasingly questioned whether large technology companies could generate sufficient returns from rising artificial intelligence (A.I.) investments, leading to a reassessment of valuations and a roughly $890 billion decline in the market value of the Magnificent Seven during a single trading session. In Canada, investors monitored earnings for signs of how companies were managing higher borrowing costs, evolving trade conditions, and slower economic growth. From a market and investment standpoint, strong earnings helped support equity markets, while concerns around A.I. spending contributed to increased volatility within large-cap technology stocks.
Did you know?
In July, the federal government and the Province of Alberta announced plans to advance discussions on the Pathways initiative, a proposed carbon capture and storage project led by Canada's largest oil sands producers. The project aims to capture carbon dioxide emissions and store them underground, helping reduce emissions while supporting the long-term competitiveness of Canada's energy sector. Supporters believe Pathways could encourage investment, support jobs, strengthen energy exports, and contribute to economic growth, making it one of the most closely watched infrastructure proposals in Canada.
Insights from our Portfolio Managers
Markets continue to demonstrate resilience despite a challenging macroeconomic backdrop as detailed in this edition of the Monthly Investment Monitor. To navigate these conditions, the Multi-Asset Management team maintains a modest equity overweight, with an emphasis on diversification beyond U.S. mega-cap stocks, selective exposure to emerging markets, and high-quality fixed income as a source of portfolio stability and income.
Recent tariff escalation and geopolitical tensions remind investors that uncertainty can emerge quickly, even during periods of strong market performance. We believe maintaining diversification, focusing on quality assets, and staying disciplined through volatility remains the best approach for navigating an environment where growth opportunities and risks coexist.
— Craig Maddock, VP & Senior Portfolio Manager, Head of Multi-Asset Management
