It was a buy the dip week on equity markets. After a sharp decline early on, buyers stepped in to bring indices close to flat on the week. Weakening job numbers have bond yields in retreat (prices up) and the prospect of central bank rate cutting back on the table.
| Index | Close July 31st 2025 | Close Aug 7th 2025 |
| S&P500 | 6,343 | 6,350 |
| TSX60 | 27,260 | 27,761 |
| Canada 10 yr. Bond Yield | 3.46% | 3.40% |
| US 10 yr. Treasury Yield | 4.38% | 4.25% |
| USD/CAD | $1.38556 | $1.37450 |
| Brent Crude | $71.90 | $66.37 |
| Gold | $3,293 | $3,395 |
| Bitcoin | $116,608 | $117,489 |
Source: Trading Economics & Factset
The Bank of England cut their overnight rate by 25-bps this week to 4%. The decision to cut was a close one, with 2 rounds of voting needed to get a majority. The Bank is faced with 2 conflicting challenges. Inflation is up from 3.8% to 4% and the job market is weakening.
The US labour market is also showing signs of strain. Late last week, the Bureau of Labour Statistics (BLS) released its report on July’s employment situation. The July numbers came in much weaker than expected with non-farm payrolls up just 73,000. Compounding that was material downward revisions to earlier data. Where this story gets wild, is that Donald Trump fired the Head of the BLS because he didn’t like the report. So far, the markets have shrugged this off, like so many other things that would have seemed outrageous a few short months ago.
This week, more evidence came in of a weakening labour market. Both initial and continuing unemployment claims are up. This will feed into the call for lower rates and this time the Federal Reserve may act. It has a dual mandate of low inflation and strong labour markets.
Tariffs are coming at us fast and furious now. India will be subject to a 25% extra tariff (50% total) to discourage it from buying Russian oil. Although India had not yet secured a trade agreement, it had been seen in a favourable light by the Trump administration. The move signals an evolution in the Administrations thinking on both India and Russia.
Next on the hit list were semi-conductors (computer chips) which could be subject to a 100% tariff. There is a caveat here. Companies that have or are building operations in the US will not be subject to the tariffs. The tariff could raise the price of most electronics and autos.
Most countries are now (as of Aug. 7th) subject to tariffs. Canada & Mexico’s headline rates are misleading as a lot of trade falls under CUSMA bringing the effective tariff below 10%. There is a glimmer of hope that the courts could overturn the tariffs. A case that argues tariffs are the sole discretion of Congress not the Administration is now making its way through the appeal process.
Germany has moved to fast track the approval process for both geothermal projects and carbon capture & storage. Both initiatives have passed cabinet approval and will now be voted on in the Bundestag (parliament). Germany has a net zero target of 2045.
Closer to home, Prime Minister Carney announced a $1.2 billion support package for the Canadian Forest industry. The package includes loan guarantees, grants for new product development, and retraining for forestry workers. The US still accounts for 2/3 of BC’s forestry exports. The sector exported 5.68 billion in 2024, slightly ahead of energy products at 5.58 billion. The softwood lumber trade war has been ongoing for decades and the real answer is to develop new markets.
All this talk of tariffs should remind us that smuggling is an ancient tradition, and the economic incentives of tariffs could see its resurgence. With that in mind, I’ll leave you with this piece for the weekend…
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
