It was a positive week for equity markets as the much-anticipated rate cut came to fruition. Both the S&P500 and TSX hit all-time record highs. Bond markets were a bit more sanguine, with the 10 yr. US Treasury bouncing off mid-week 4% yields to close Thursday back at 4.11%. Also have a good week were gold, Bitcoin, and the Loonie.
| Index | Close Sept 11th 2025 | Close Sept 18th 2025 |
| S&P500 | 6,588 | 6,643 |
| TSX60 | 29,408 | 29,454 |
| Canada 10 yr. Bond Yield | 3.17% | 3.19% |
| US 10 yr. Treasury Yield | 4.03% | 4.11% |
| USD/CAD | $1.38306 | $1.37963 |
| Brent Crude | $66.30 | $67.53 |
| Gold | $3,637 | $3,644 |
| Bitcoin | $114,589 | $117,675 |
Source: Trading Economics & Factset
Both the Bank of Canada and the US Federal Reserve dropped their overnight rates by 25-bps this week. The Bank of Canada cited economic stress and low inflation. Markets are pricing in another drop in rates this year. In the US the tone was a bit more cautious. In its post-announcement release, the Fed pointed to a softening labour market and moderating economic activity BUT said inflation continued to be elevated. Markets are still pricing in 1 more cut this year for the Fed.
Bucking the North American trend, the Bank of England held rates steady, mimicking their EU neighbours. The Bank pointed to an inflation rate of 3.8% and a need to bring it down to its 2% target. The Bank has reduced its quantitative tightening, dropping bond sales from £100 Billion to £70 Billion per year.
France had its credit rating downgraded from AA- to A+ this week by Fitch Ratings. While the outlook is stable, the country has a high and rising debt level. Sovereign debt is rising from 113.2% of GDP in 2024 to an expected 121% in 2027. Fitch saw little hope of any meaningful efforts to reign in the indebtedness. This month’s political drama, strikes, and street demonstrations point to the difficulty in coming to a national consensus.
There was good news in Canada. Inflation (CPI) despite a small uptick remains below expectations at 1.9%. The core measures that the Bank of Canada watches were down from the previous month. Adding to the good news were signs of recovery in the manufacturing sector. Manufacturing sales rose by 2.5% in July following a 0.3% rise in June. The recovery was boosted by an 8.6% increase in the transportation equipment category. (planes, trains & automobiles)
The review process for CUSMA (Nafta 3.0) has kicked off. All 3 countries have announced the start of domestic consultations in advance of tri-partite negotiations. The original trade pact called for a review after 5 years (2026). The US Ambassador to Canada Pete Hoekstra said the US had hoped for a bigger deal that would cover energy and defense as well as trade but will concentrate its efforts on trade for now. I would suggest to the Ambassador that threatening your trade partner with becoming the 51st state might not set the table for a broader agreement.
PM Carney is in Mexico to meet with President Scheinbaum this week. The trip follows on from a visit by Foreign Affairs Minister Anita Anand and Finance Minister Francois-Philippe Champagne to Mexico in August. It is expected that there will be a strategic agreement signed on this trip covering infrastructure, trade, health, agriculture, emergency preparedness, and security. Overall, a step in the right direction to improving relations that had become a bit testy.
It is one step forward and another back for chip maker Nvidia. After getting clearance from the US administration to resume sales of its H20 chips to China (in return for a kick-back), China has now banned the import of Nvidia’s RTX Pro 6000D chips. The chip had been designed specifically for the China market. The government has directed to companies to support the Chinese semi-conductor industry, which some experts say now has the products and capacity to meet domestic demand. Concurrently Huawei announced a new AI infrastructure they claim is better than Nvidia’s.
At the same time Doanld Trump announced that a deal had been struck to allow Tik Tok to continue operating in the US. The deal involves a syndicate of US tech giants, venture capital funds, and private equity funds taking an 80% stake in Tik Tok’s US operations. The US operation would be run by the syndicate. The deal is expected to be finalized on Friday with a call between Trump and Xi Jinping. We’ll see if the chip wars derail it.
Canada faces off against New Zealand in the Women’s Rugby World cup semi-final on Friday. Our women’s team, ranked #2 in the world, has been on a roll winning every game in the tourney so far. New Zealand is ranked #3 but has fallen to Canada in the last 2 matchups. Go Canada!!
With Friday’s game in mind, we’ll leave you with what has become a World Cup anthem…. Enjoy
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
