Canada does not need CUSMA to collapse for trade risk to matter. A less dramatic outcome may be enough. Over the past several weeks, investors have been focused on the conflict between the U.S. and Iran. That was understandable. Energy prices, inflation expectations, and geopolitical risk moved back to the centre of the market conversation. That conflict has now subsided, at least for the moment, after the U.S. and Iran signed an interim agreement outlining terms to end the war and reopen the Strait of Hormuz, with negotiations set to continue over the next 60 days. Market attention may now shift quickly to another deadline that matters for Canada: the July 1 CUSMA review. This is not a side issue for Canadian investors. It goes directly to the reason we remain underweight Canadian equities. The July 1 review was supposed to be a checkpoint. It now looks more like the start of a recurring negotiation. If the agreement is not extended by the deadline, it does not disappear. It remains in force. But the review process shifts into annual negotiations until a 16-year extension is eventually agreed, or until the agreement reaches the end of its original term in 2036. There is no immediate cliff edge. There is, however, a new layer of uncertainty. For investors, that may be the more important point. Trade agreements are not just about the tariff rate on today’s exports. They shape investment decisions. They influence where companies build capacity, where supply chains are located, and where foreign capital decides it has enough visibility to commit for the next decade. Rolling annual reviews do not break North American trade. They tax it. That tax belongs in the risk premium for Canadian assets.
Long-term government bond yields have risen across many major markets to levels not seen in decades (1). Investors are increasingly demanding compensation for long term risk, inflation uncertainty, elevated borrowing needs, and reduced central bank support. Together, these forces reflect a significant shift from the low-yield, quantitative easing-driven environment that prevailed for much of the past decade. This is about more than just the bond market. Long-term bond yields play a central role in the global financial system, influencing borrowing costs, capital allocation decisions, and asset valuations. Their impact extends from corporate financing and real estate prices to equity discount rates. However, the rise in yields has been concentrated at the longer end of the curve and, on its own, does not necessarily indicate a meaningful deterioration in economic fundamentals (2). Investors also appear skeptical of central bank measures intended to stabilize bond markets, as bond yields continue to rise even after these measures are announced. While initiatives such as bond buyback programs may improve market liquidity, they do little to address the underlying challenge of growing debt issuance. Hyperscalers such as Meta, Oracle, and Amazon are issuing unprecedented volumes of long-term debt (3) to finance data centre expansion and artificial intelligence investments. This is increasing competition for investor capital at the long end of the yield curve, alongside elevated government borrowing needs to fund fiscal programs. The Canadian story is not materially different. While Canada has generally maintained stronger fiscal metrics than many G7 peers, long-term Government of Canada bond yields (4) have moved higher alongside global markets as investors reassess inflation risk, debt supply, and term premiums.
On August 22 nd the United States imposed a 50% tariff on close to $20 billion of Canadian goods, representing about 5% of Canadian annual exports to the U.S. [i] The tariffs cover motor vehicles, alcohol, and dairy, plus smaller sectors such as furniture, cement, clothing, and fishing and hockey equipment. Potash, energy, and critical minerals were generally excluded from the new proclamations. Canada has responded with dollar-for-dollar retaliation, effective September 8 th , on U.S. steel, dairy, agricultural equipment and more.
Semiconductor stocks have fallen sharply, but the broader equity market has largely held its ground. The weakness has been concentrated among the companies that benefited most directly from enthusiasm surrounding artificial intelligence. Other parts of the market have performed considerably better. The equal-weighted S&P 500 recently reached a record high, while software companies and several non-technology sectors have helped offset the decline in chipmakers. This is not yet a broad market breakdown. Investors are still allocating capital to equities, but they have become more selective about where the benefits of AI will accrue and how much they are willing to pay for them. The AI investment theme is not disappearing. It is entering a more demanding phase.
Long-term government bond yields have risen across many major markets to levels not seen in decades (1). Investors are increasingly demanding compensation for long term risk, inflation uncertainty, elevated borrowing needs, and reduced central bank support. Together, these forces reflect a significant shift from the low-yield, quantitative easing-driven environment that prevailed for much of the past decade. This is about more than just the bond market. Long-term bond yields play a central role in the global financial system, influencing borrowing costs, capital allocation decisions, and asset valuations. Their impact extends from corporate financing and real estate prices to equity discount rates. However, the rise in yields has been concentrated at the longer end of the curve and, on its own, does not necessarily indicate a meaningful deterioration in economic fundamentals (2). Investors also appear skeptical of central bank measures intended to stabilize bond markets, as bond yields continue to rise even after these measures are announced. While initiatives such as bond buyback programs may improve market liquidity, they do little to address the underlying challenge of growing debt issuance. Hyperscalers such as Meta, Oracle, and Amazon are issuing unprecedented volumes of long-term debt (3) to finance data centre expansion and artificial intelligence investments. This is increasing competition for investor capital at the long end of the yield curve, alongside elevated government borrowing needs to fund fiscal programs. The Canadian story is not materially different. While Canada has generally maintained stronger fiscal metrics than many G7 peers, long-term Government of Canada bond yields (4) have moved higher alongside global markets as investors reassess inflation risk, debt supply, and term premiums.
On August 22 nd the United States imposed a 50% tariff on close to $20 billion of Canadian goods, representing about 5% of Canadian annual exports to the U.S. [i] The tariffs cover motor vehicles, alcohol, and dairy, plus smaller sectors such as furniture, cement, clothing, and fishing and hockey equipment. Potash, energy, and critical minerals were generally excluded from the new proclamations. Canada has responded with dollar-for-dollar retaliation, effective September 8 th , on U.S. steel, dairy, agricultural equipment and more.
Semiconductor stocks have fallen sharply, but the broader equity market has largely held its ground. The weakness has been concentrated among the companies that benefited most directly from enthusiasm surrounding artificial intelligence. Other parts of the market have performed considerably better. The equal-weighted S&P 500 recently reached a record high, while software companies and several non-technology sectors have helped offset the decline in chipmakers. This is not yet a broad market breakdown. Investors are still allocating capital to equities, but they have become more selective about where the benefits of AI will accrue and how much they are willing to pay for them. The AI investment theme is not disappearing. It is entering a more demanding phase.
Markets have become increasingly comfortable with geopolitical risk. That is understandable. Earlier disruptions in the Middle East proved temporary. Energy markets adjusted more quickly than many expected, supply found alternative routes, and the global economy continued to expand. The renewed closure of the Strait of Hormuz is not simply another disruption. It is a reminder that the global energy system has become progressively less resilient. Not because the Strait has suddenly become more important. It has always been one of the world’s most strategically important energy corridors. What has changed is the market’s ability to absorb another disruption. The first shock was cushioned by alternative pipeline capacity, inventory drawdowns and expectations that shipping would eventually resume. Roughly one-third of the crude oil that normally flowed through the Strait was successfully redirected through regional pipeline infrastructure, while commercial inventories were drawn down to fill much of the remaining gap. Months later, much of that cushion has disappeared. Commercial OECD oil inventories now sit at their lowest levels in recent history. In fact, inventory levels this low have historically been associated with oil prices closer to US$120 per barrel, underscoring how dependent today’s market has become on the assumption that supply disruptions remain temporary. The market is no longer deciding whether geopolitical risk exists. It is deciding how much of that risk to price. Today, options markets suggest investors still expect Brent crude to trade around US$75 per barrel three months from now, only modestly above the roughly US$70 expectation at the beginning of the month. What has changed is not the market’s base case. It is the probability investors assign to a much larger price spike if the disruption proves more persistent than expected. That may prove to be the correct assessment. But if it is wrong, the economic and investment consequences would likely be far greater than they were during the initial shock. This is not a prediction. It is a risk management discussion.
In the following five-minute video, Simon Bowers, Private Wealth Portfolio Manager with IPC Securities , discusses the key events that shaped markets during the second quarter and what investors should be watching as the year progresses. Despite geopolitical tensions in the Middle East, including the conflict involving Iran and concerns around oil transportation through the Strait of Hormuz, markets recovered strongly during the quarter. While oil prices briefly surged, they have since returned close to pre-conflict levels, helping support renewed market optimism and pushing equity markets toward new highs. However, Simon notes that strong market performance does not necessarily reflect the broader economy. Investors should remain mindful of several risks, including elevated stock valuations, ongoing inflation pressures, uncertainty surrounding trade policies, and high expectations for AI-related companies. As share prices rise, companies must deliver stronger earnings to justify those valuations, leaving less room for disappointment. One area Simon highlights is the shift away from the concentrated leadership of the so-called "Magnificent Seven" technology stocks. While AI-related businesses continue to attract attention, many investors are increasingly finding opportunities in companies with simpler business models, attractive valuations, and consistent dividend income. This broader participation across the market has been an important contributor to recent returns. Inflation also remains a key theme. Although the oil price spike was temporary, its effects may continue to ripple through the economy over the coming months. Combined with ongoing tariffs and evolving trade relationships, inflation in both Canada and the United States is expected to remain above central bank targets. While this could result in interest rates staying higher for longer, Simon emphasizes that moderate inflation is a normal and necessary part of a healthy economy. Looking ahead, there are still reasons for optimism. New trade agreements, reduced trade barriers, infrastructure investment, and continued innovation all support long-term economic growth. While uncertainty remains a constant feature of investing, Simon believes that investors who stay focused on their long-term plan and remain invested are well positioned to benefit from future opportunities. He encourages investors to continue working closely with their IPC advisor to help navigate changing market conditions and stay on track toward their financial goals.
In the following four minute video, Blair Setford, AVP, Product Management, Canada Life Investment Management Ltd. discusses how global equity markets delivered a strong second quarter, demonstrating resilience despite ongoing geopolitical uncertainty and a complex economic backdrop. Optimism surrounding easing tensions in the Middle East, combined with continued enthusiasm for artificial intelligence (AI) and stronger-than-expected corporate earnings, helped drive one of the strongest second-quarter performances in recent years. Across the U.S., Europe, and Japan, companies broadly exceeded earnings expectations, with technology and semiconductor stocks leading gains. Other cyclical sectors, including industrials, travel and leisure, and basic resources, also contributed positively to market returns. In Canada, economic and earnings growth were more subdued. While higher commodity prices supported results and bank earnings remained relatively strong, the country entered a technical recession following two consecutive quarters of negative growth. However, headline economic data may not reflect the full picture. Adjusted for slowing population growth, some indicators suggest the Canadian economy could be moving toward the early stages of recovery rather than a prolonged downturn. Looking ahead, several challenges remain, including weak business investment, a sluggish real estate sector, elevated living costs, and the impact of U.S. tariffs on certain industries. Rising energy prices and geopolitical risks have also heightened inflation concerns and influenced expectations for central bank policy. Despite near-term uncertainty and the potential for continued market volatility, Canada Life Investment Management’s Portfolio Solutions Group maintains a constructive 12-month outlook for equities. Valuations have become more attractive in certain sectors following recent market pullbacks, particularly in technology and semiconductors. Assuming geopolitical tensions stabilize and economic fundamentals remain supportive, global equity markets could continue to advance. Blair concludes by encouraging investors to remain focused on their long-term objectives and consult with their financial advisor to ensure their portfolios remain aligned with their financial plans.
Long-term government bond yields have risen across many major markets to levels not seen in decades (1). Investors are increasingly demanding compensation for long term risk, inflation uncertainty, elevated borrowing needs, and reduced central bank support. Together, these forces reflect a significant shift from the low-yield, quantitative easing-driven environment that prevailed for much of the past decade. This is about more than just the bond market. Long-term bond yields play a central role in the global financial system, influencing borrowing costs, capital allocation decisions, and asset valuations. Their impact extends from corporate financing and real estate prices to equity discount rates. However, the rise in yields has been concentrated at the longer end of the curve and, on its own, does not necessarily indicate a meaningful deterioration in economic fundamentals (2). Investors also appear skeptical of central bank measures intended to stabilize bond markets, as bond yields continue to rise even after these measures are announced. While initiatives such as bond buyback programs may improve market liquidity, they do little to address the underlying challenge of growing debt issuance. Hyperscalers such as Meta, Oracle, and Amazon are issuing unprecedented volumes of long-term debt (3) to finance data centre expansion and artificial intelligence investments. This is increasing competition for investor capital at the long end of the yield curve, alongside elevated government borrowing needs to fund fiscal programs. The Canadian story is not materially different. While Canada has generally maintained stronger fiscal metrics than many G7 peers, long-term Government of Canada bond yields (4) have moved higher alongside global markets as investors reassess inflation risk, debt supply, and term premiums.
On August 22 nd the United States imposed a 50% tariff on close to $20 billion of Canadian goods, representing about 5% of Canadian annual exports to the U.S. [i] The tariffs cover motor vehicles, alcohol, and dairy, plus smaller sectors such as furniture, cement, clothing, and fishing and hockey equipment. Potash, energy, and critical minerals were generally excluded from the new proclamations. Canada has responded with dollar-for-dollar retaliation, effective September 8 th , on U.S. steel, dairy, agricultural equipment and more.
Semiconductor stocks have fallen sharply, but the broader equity market has largely held its ground. The weakness has been concentrated among the companies that benefited most directly from enthusiasm surrounding artificial intelligence. Other parts of the market have performed considerably better. The equal-weighted S&P 500 recently reached a record high, while software companies and several non-technology sectors have helped offset the decline in chipmakers. This is not yet a broad market breakdown. Investors are still allocating capital to equities, but they have become more selective about where the benefits of AI will accrue and how much they are willing to pay for them. The AI investment theme is not disappearing. It is entering a more demanding phase.
When it comes to planning your estate, there are some decisions you’ll want to consider well in advance. This blog will help prime you for one of the most important decisions you can make when you’re planning an estate: how to choose an executor.
Estate planning is a formalized plan which specifies details regarding the management and transfer of your estate in the event of your incapacitation or death.
Many parents are concerned with the issue of “affluenza.” The concern is that a child who receives great wealth with ease may also inherit a lack of drive and wander through life with a sense of entitlement.
