Personal Note

Hey everyone.  This week’s issue is a little shorter than usual since I’m in Toronto for the Blossom Social event and writing on the move.  And I’ll admit; the technical challenges of trying to put this together on the road and away from my trusty desktop are not immaterial for a verified Boomer.  I don’t know how the millennial road warriors do it.  So, I’ve trimmed this edition down just a tad, but I’m still covering the most important economic stories of the week.

Speaking of travel, I’ll be away the next three weekends on a European holiday, so the newsletter will take a short pause and return later in October. Thank you, as always, to the loyal readers who keep coming back; I truly appreciate your support.

Now, on with the show. See you in a few weeks.  Marc

The Week in Review

Weekly Market Recap: U.S. and Canada

It was another very strong week, with the major indices rallying after central bank rate cuts gave investors confidence that monetary policy will lean more supportive. It’s clear that both central banks fuelled the rebound, with new hopes that growth support is back in a material way.

The Nasdaq 100 topped the pack, adding +2.22%, while the TSX climbed +1.62%. The S&P 500 also had a solid showing, up +1.22%, and the Dow Jones lagged slightly but still managed a +1.05% gain.

Major Economic Stories

Recap of the Week

It was center stage for the central banks this week as inflation trends and growth concerns are still at the forefront. As pretty much everyone anticipated, both the Bank of Canada and the Federal Reserve resumed rate cuts.

Here are the details.

Canada Inflation Stays Below Target

Canada’s inflation picked up slightly in August but stayed under 2%.

Gasoline prices fell less sharply, and that lifted headline inflation just a bit. Core inflation held steady, confirming that broad price pressures haven’t gone away. Food prices, especially meat, continued pushing costs higher, but shelter inflation eased, giving some relief to households. Overall, inflation stayed tame enough to keep monetary policy focused on growth. A more in-depth report on that story below.

• Energy remains a key driver of monthly CPI changes

• Food inflation could weigh more heavily on households this fall

• Shelter costs eased as mortgage and rent growth slowed

• BoC likely to keep prioritizing growth over inflation risks

Bank of Canada Resumes Rate Cuts

The BoC cut rates 25bps to 2.5% in September.

As expected, weak exports and shrinking GDP pushed policymakers to act. Labour market losses added to the urgency for easier policy. Housing and consumption are firm, but trade tensions are still clouding the outlook. With inflation below 2% though, gave the bank more flexibility to cut.

• Canadian GDP contracted 1.6% in Q2

• U.S. tariffs weighed heavily on exports

• Employment losses may drag on consumer demand

• Markets see more BoC cuts if weakness continues

Fed Cuts Rates, Signals More Easing Ahead

The Fed lowered its policy rate by 25bps in September.

The Fed range is now 4.00% - 4.25% and projections showed more cuts are coming in 2025 and early 2026. Inflation forecasts were nudged higher for 2026, which raises questions on persistence. Growth expectations improved, hinting at a “soft landing” scenario. One dissent called for a deeper cut.

• Fed expects 75bps of cuts by end of 2026

• Inflation forecasts revised higher for 2026

• Growth outlook modestly upgraded across next three years

• Debate remains on pace and size of easing

Top 3 Insights

The BoC is Shifting Its Focus to Growth

I believe the Bank of Canada’s move is a clear signal that policymakers are more worried about economic weakness than inflation right now. With exports plunging and GDP shrinking, the risks are tilting toward slower growth and higher unemployment. Even though housing and consumer spending are still holding up, the central bank doesn’t want to wait until things look worse before easing conditions.

For markets, this could mean a softer Canadian dollar and more support for rate-sensitive sectors like housing. The real question is how much room the BoC has to cut if the U.S. economy holds up better and trade tensions persist. I’m watching to see if another cut comes before year-end, and I’m expecting the answer to be yes.

Fed Balances Growth and Inflation Risks

In the U.S., the Fed’s decision shows the careful balancing act of cutting rates while acknowledging inflation might stick around longer than expected. I think this “two steps forward, one step back” approach emphasizes how tricky policy is in this environment. Growth looks a little better, but inflation is still above comfort levels.

The path of Fed cuts matters more than the move itself. Markets now see at least two more cuts ahead, and that could support equities but pressure the dollar. A risk is that if inflation proves sticky, the Fed might not deliver the easing markets are already pricing in. That’s not an unrealistic possibility.

Inflation’s Decline Gives Policymakers Breathing Room

What stands out to me is that headline inflation in both Canada and the U.S. remains below or around targets, so central banks have space to cut without losing credibility. In Canada, headline inflation under 2% is helping justify BoC easing. In the U.S., inflation hasn’t improved much, but it also hasn’t worsened enough to stop the Fed.

This could mean 2025 shapes up as the year where policy really turns from fighting inflation to stabilizing growth. But it also sets up a risk: if inflation flares again, central banks may find themselves reversing course quickly. For now, though, markets are likely to cheer the return of rate cuts.

THIS WEEK’S POLL QUESTION
(Results in Next Week’s Newsletter)

Normally, I base this poll on the lead story, but I’m going a little off-script this week. Instead, I just want to get a general sense: with everything going on, how are you feeling about the outlook right now? Simple, Straightforward, Important. Hope you’re all well, and I’ll report back in the next edition.

LAST WEEK’S POLL RESULTS

Last week’s poll asked whether Prime Minister Carney’s $60B slate of national projects would generate lasting jobs or just short-term construction booms. Results leaned slightly positive, with 53% of readers believing the projects will create sustainable employment, while the rest expressed doubts about their long-term impact.

Reader Comments

Yes

“New markets, more shipping, more pipelines, more support industry.“ — cawley1647

“So happy that Canada finally has some good leadership that understands how we can succeed in the global economy. Nation building projects are long long overdue. Now to build a pipeline across Canada next to the CNR railway.” — ardenb8

No

“Carney will only keep projects that make his investments more money. “ — kodykenway

“I don't believe on of these projects will be built within four or five years bit tons of money will be spent on impact and feasibility studies with ZERO actual results. Liberals have never built anything in Canada.“ — steevengingras1970

“LNG term8nals operate with few people.“ — nathan1siva

“The “climate change” agenda will hamper the current government until they make a 180 degree change in their thinking.” — ba.webb

“The lasting jobs created may only be in the government bureaucracy.” — keenrg

“These projects seem tied to his net zero, carbon credit scheme. This will not benefit Canada in the long run.” — christinejodointwins2

Central Banks Cut Rates to Support Fragile Economics

Because this is a shortened version of the newsletter, I’m just going to focus on the main story of the week: rates. As covered above, both the Bank of Canada and the U.S. Federal Reserve cut interest rates in September, highlighting a shift toward supporting growth as trade tensions and slowing demand weigh on their economies.

Canada Resumes its Cutting Cycle 

The Bank of Canada lowered its policy rate by 25bps to 2.5%, breaking a string of three holds. Bank officials cited weak exports, down 27% in Q2, and a 1.6% GDP contraction as evidence that the economy was losing steam. Consumer spending and housing are still surprisingly resilient, but the Bank acknowledged that a softening labour market and slowing population growth are set to weigh more heavily on demand. Headline inflation eased to 1.9% in August, just below the 2% midpoint, and that seems to have given the policymakers room to pivot back toward growth support.

Fed Balances Growth Against Sticky Inflation

In the U.S., the Federal Reserve also cut its benchmark rate by 25bps, and that takes the target range to 4.00%–4.25%. This was its first reduction since December, and officials signaled more easing ahead. Expectations are 50bps before the end of 2025 and another 25bps in 2026. Updated projections show GDP growth slightly stronger than expected earlier this year, but inflation is expected to remain stubborn at ~3%, above the Fed’s 2% target. One notable dissent from newly installed Governor Stephen Miran favoured a deeper cut, his logic being concern that restrictive policy could do more damage if held too long.

Outlook: Policy Pivot Underway

So, we have both central banks easing again, and I guess the question is: could 2025 mark the turning point from fighting inflation to stabilizing growth? For Canada, the risks are centered on trade and employment; for the U.S., the challenge is inflation that refuses to fall decisively. As we saw in the late market push this week, investors are likely to cheer the shift, but the danger remains that if inflation flares back up, central banks may have to reverse course quickly. For now, though, policy momentum is moving toward accommodation.

Read More about the BoC cut Here
Read More about the Fed cut Here

OTHER NEWS FROM THE PAST WEEK

Trump is wrong. Nixing quarterly reports won’t fix Wall Street’s ‘short-termism’
Calls to scrap quarterly earnings reports overlook deeper problems driving short-termism, like executive compensation, activist pressure, and investor behavior — meaning Trump’s fix wouldn’t change Wall Street’s focus on near-term results.

ABC pulls Jimmy Kimmel show over Charlie Kirk comments
Disney-owned ABC suspended Jimmy Kimmel Live! after on-air remarks about Charlie Kirk, igniting debate over media responsibility, corporate influence, and whether comedy shows should face stricter accountability standards.

Falling interest rates expected to break ‘psychological’ barrier for homebuyers, experts say
Canadian housing experts believe lower borrowing costs may finally shift buyer psychology, with affordability perceptions improving faster than actual rates, potentially sparking renewed demand in an already supply-constrained real estate market.

Bessent made same claims Trump cited to fire Lisa Cook
Hedge fund manager Scott Bessent had previously criticized Fed Governor Lisa Cook on mortgage policy — claims later echoed by Trump in his firing decision, raising concerns over political influence in central banking.

Strip club executives charged with bribing NY official to avoid paying $8M in taxes
Federal prosecutors charged two strip club executives with bribing a New York tax official to escape $8 million in liabilities, exposing a corruption scandal mixing nightlife, politics, and public trust.

Scotch whisky wants a pass on tariffs, but why should Trump care?
Scotch makers are lobbying Washington to ease U.S. tariffs, but analysts doubt Trump’s administration will prioritize foreign spirits over domestic industries, leaving Scotland’s whisky producers vulnerable in the escalating trade landscape.

Market Movers

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The Relative Strength Indicator (RSI) can provide a signal that suggest a stock is either overbought or oversold.
📈A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell.
📉A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.

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