Volatility returned to the markets this week as another major export channel for middle eastern oil was threatened. Equities sold off and bond yields rose as the spectre of higher inflation put traders on the defensive. Oil spiked with Brent trading over $100 on Thursday.
| Index | Close July 16th 2026 | Close July 16th 2026 |
| S&P500 | 7,526 | 7,413 |
| TSX60 | 35,340 | 35,163 |
| Canada 10 yr. Bond Yield | 3.53% | 3.65% |
| US 10 yr. Treasury Yield | 4.56% | 4.70% |
| USD/CAD | $1.40376 | $1.40809 |
| Brent Crude | $84.85 | $100.48 |
| Gold | $3,969 | $4,050 |
| Bitcoin | $64,114 | $65,102 |
Source: Trading Economics
Canada’s inflation report for June came in better than expected. CPI dropped from May’s 3.2% to 2.8%. The drop in gasoline prices was responsible for most of the drop but grocery inflation also slowed. June’s numbers should allow the Bank of Canada to hold rates steady. The caveat of course is the end of the “ceasefire” in the middle east and jump in oil prices this week.
The European Central Bank (ECB) opted to hold rates steady, in line with their global peers. Inflation was not that much different than Canada’s. Employment is decent but there were some signs of weakness as hiring slowed. One comment of note in the release was the ECB urging the governments to accelerate the energy transition to ameliorate the roller coaster ride of oil & gas prices.
The middle east conflict has taken a new turn as the Houthi regime in Yemen has decided to close the Bab el-Mandeb Strait at the southern end of the Red Sea. About 8% of the world’s oil passes though the strait. Saudi Arabia has been using this route to by-pass the Strait of Hormuz and volumes have averaged 6.2 million barrels per day over the past month. While oil can be re-routed north to the Suez Canal, there are capacity constraints and it more than doubles the transit time to Asian markets.
Here is where we need to separate the signal from the noise. The noise is the rhetoric, actual kinetic fighting, and seemingly futile diplomatic efforts. The signal that we need to pay attention to is the reaction of the bond market where rates are starting to climb. Higher rates will change the discount rates and multiples used to price other assets (whether equities, real estate, commodities, or infrastructure). The 30 yr. US Treasury has hit 5.17%, its highest point in over 10 years.
Donald Trump must really hate the American consumer. On top of a war that has driven up gas prices and the cost of borrowing, he has now decided that they need to pay more tariffs on imported goods. This week he announced new tariffs of up to 50% on a range of Canadian goods. The list is interesting for what it includes (wine to whey to wigs) as for what it excludes, oil, gas, & potash. And as a double whammy to the beleaguered consumer, he also announced a 100% tariff on generic drugs beginning in 2028 escalating to 200% in 2029.
Larry the Cat has just welcomed his 7th Prime Minister to No. 10 Downing Street in the past 15 years. Following the resignation of Sir Keir Starmer, Andy Burnham has taken control of the Labour Party and government. A former Cabinet Minister and more recently Mayor of Manchester, Burnham will have his work cut out for him. Affordability, increasing defense needs, inflation, and fiscal constraints will not make his job easy.
If you think UK politics is chaotic, it has nothing on our household right now. The Montreal crew is still here with boys 5yrs & 14 months and the Toronto crew with girls 6 and 3 have just arrived. So, I will cut it short to help tend to the turmoil and leave you with this from R.E.M.
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
