While not uneventful, equity and bond markets were essentially flat week over week. Oil was higher on continued disruption of middle east supplies and the probability of renewed conflict between the US and Iran. The Canuck Buck also strengthened with the rise in the Bank of Canada interest rate. More on that below.
| Index | Close Oct. 22nd 2026 | Close Oct. 29th 2026 |
| S&P500 | 7,663 | 7,681 |
| TSX60 | 35,973 | 36,249 |
| Canada 10 yr. Bond Yield | 3.79% | 3.80% |
| US 10 yr. Treasury Yield | 4.96% | 4.94% |
| USD/CAD | $1.40101 | $1.39875 |
| Brent Crude | $113.17 | $115.61 |
| Gold | $4,025 | $4,024 |
| Bitcoin | $81,302 | $79,360 |
Source: Trading Economics
As expected, the Bank of Canada raised its overnight rate by 25-bps this week. In its press release, the Bank cited broadening inflation and the need to stay pro-active rather than reactive to inflationary pressures. I think they were a bit early in their move with core inflation still below 2% but acknowledge that energy inflation is impacting a broader range of prices.
In the US, it was a wait and see approach with the Federal Reserve opting to hold rates steady. This despite the fact inflation is running higher than the Fed’s targets by all measures. Also noteworthy is the lack of colour in the Fed’s post decision statement. No surprise here as Kevin Warsh has been clear he does not believe in forward guidance or divulging the inner workings and debate within the Fed or FOMC. What was curious was the decision to reduce the number of rate setting meetings going forward.
While the US Fed’s decision to hold rates steady was widely expected, they do risk being late to raise rates. Personal Consumption Expenditures (PCE) price index rose again to 3.6% (3.1% core), well above the Fed’s 2% target. Related but on the positive side of the ledger was a sharp rise in real GDP to 3.4%. With inflation running a bit hot and strong economic growth, markets are pricing in a December rate hike.
Overseas, the European Central Bank (ECB) also opted to hold rates steady. In this case it is a balancing act between energy driven inflationary pressure and downside risks to growth (thanks to higher energy prices). ECB President, Christine Lagarde also announced her resignation effective February 7th. The Bank of Japan will announce its latest rate decision on Friday and is expected to hold.
Last week I had the pleasure to be part of a panel on the bond markets at a Markets Group forum in Vancouver. In our back and forth, the impact of AI related borrowing was a major theme. While not imminent, there will come a point that lenders will no longer have the capacity or willingness to lend to the sector. This is not necessarily that capital is not available but that the risk models of banks and insurance companies will restrict the amount of debt issued to one sector. We are seeing the effects of the demand for capital in the form of higher rates on AI related bonds and a sharp rise in the cost of Credit Default Swaps (CDS) which protect a lender if the loan or bond defaults.
Staying with tech and AI, Alphabet (Google) and Microsoft both released their latest earnings this week. Both are big players in AI with strong cash flowing legacy businesses. The difference is the spend rate on AI and its impact on free cashflow. Microsoft managed to maintain positive free cashflow (FCF) of $18.63 billion which was down 27% year over year. Alphabet posted negative FCF of $9.1 billion. Even in the world of AI, business fundamentals count and the market reacted appropriately.
In Canada both Wealthsimple, a fintech rival to the banks and Cohere, Canada’s answer to OpenAI and Anthropic, had successful financings this week. Wealthsimple raised $425 million giving the company a $13.8 billion valuation. Investors included the Canada Pension Plan, Power Corp., and the Singapore sovereign wealth fund. Cohere is raising up to $7 billion which will value the company at $36 billion. Lead investors include the Canadian Government ($1.6 billion), Germany’s Schwarz Group, BCE, and Nvidia.
There is a Canada / EU summit in Montreal this week where Canada and the EU will work towards closer ties in trade, defence, finance, energy, and tech. While there is noise around the term “Associate Membership”, the summit will be about building on the existing Canada Europe Trade Agreement (CETA). An announcement on digital trade is expected on Friday.
We’ll close off here as we head into Halloween with this classic from Warren Zevon…. Happy trick or treating
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
