The Week in Review

Weekly Market Recap: U.S. and Canada

It was a pretty strong week for the markets, with the major indices pushing higher, even though we did see a bit of volatility midweek. Tech led the charge and more cyclical names lagged a bit, but the overall tone was upbeat. Momentum built into Friday as investors leaned into the view that inflation pressures are cooling (more on that below) and rate cuts are almost certain this coming Wednesday.

Breaking it down: the Nasdaq 100 was the star, up +1.86% on the week, while the S&P 500 wasn’t far behind at +1.59%. The Dow Jones gained +0.95%, and the TSX moved higher by +0.86%, but still trailed its U.S. counterparts.

Major Economic Stories

Recap of the Week

This week was all about the mixed U.S. inflation picture, with some reports showing price pressures gradually cooling. It looks like investors have grown more confident that disinflation is taking hold, even though core categories are still stubbornly sticky.

Producer Prices Cool Unexpectedly

Producer price inflation came in softer than expected, giving fresh hope that supply-side pressures are easing.

Producer price inflation fell unexpectedly in August, with the headline PPI down 0.1% month-over-month after a sharp +0.7% rise in July. On a 12-month basis, final demand PPI is now up 2.6%. Core PPI, which excludes food and energy, also eased, rising about 2.8% year-over-year. It looks like upstream inflationary pressures might be starting to fade.

• Drop in PPI signals easing wholesale cost pressures

• Lower energy and input costs may reduce consumer price pass-through

• Core readings above 2.5% still show sticky inflation

• Balancing volatile goods vs sticky services will guide Fed outlook

Consumer Inflation Picks Up

Headline CPI rose 0.4% month-over-month in August, lifting the year-over-year rate to 2.9% from 2.6% in July.

Shelter and food costs drove the increase, while gasoline also added upward pressure. The rebound shows inflation progress has stalled, complicating the Fed’s path toward rate cuts. Even with the uptick, overall inflation remains well below its 2022 highs.

• Rising CPI keeps inflation sticky for households

• Shelter remains the largest and most persistent driver

• Gasoline rebound pushed headline higher in August

• Latest data reduces odds of aggressive Fed cuts

Core Inflation Remains Stubborn

Core CPI, which excludes food and energy, rose 0.3% month-over-month in August, with the year-over-year number coming in at 3.10%.

Services inflation, especially housing and healthcare, continues to offset easing goods prices. This persistence underlines why the Fed remains cautious even though there have been earlier signs of cooling.

• Core inflation above 3%

• Services categories keep inflation stickier than expected

• Goods disinflation may have largely run its course

• Monetary policy likely stays restrictive

Key Takeaways

Cooling Producer Prices Are a Win

If you’re looking for some encouraging data points, I think you’ll be happy with the softer producer price index. Seems as though businesses are seeing some relief on input costs, especially from energy and transportation. That’s important because PPI trends often feed into consumer prices, meaning this cooling could show up in CPI in the months ahead.

For markets, this is a sign that corporate margins might hold up better than expected. If companies don’t have to pass along higher costs, that’s good for both profits and consumers. A risk, of course, is that energy markets remain volatile, and that a rebound in oil or shipping costs could erase some of these gains. Still, this report might fuel hopes that the worst of the supply-side inflation shock may be behind us.

Headline CPI Progress Has Stalled

The August headline numbers did not move in direction markets wanted, and it shows inflation is proving more resilient than many had hoped. Shelter and food stayed sticky, and gasoline swung higher, adding to the pressure. Instead of steady disinflation, we’re seeing a pause, even a slight reversal, in the trend.

For me, this is a reminder that inflation’s last mile is the hardest. Yes, 2.9% is far below the peak of 9% we saw in 2022, but the Fed won’t feel comfortable cutting rates aggressively if price gains are creeping higher again. While a cut on Sept. 17 looks almost certain, the path beyond that is murkier. The takeaway is that markets may need to temper expectations for a fast easing cycle until inflation resumes a consistent cooling trend.

Core Inflation Remains the Fed’s Headache

Core CPI rose month-over-month in August, and that keeps the annual rate at 3.1%. Services categories ( housing, healthcare, and insurance) continue to drive the stickiness, offsetting declines in goods. That persistence explains why the Fed remains cautious even as headline inflation has fallen sharply from its highs.

I think this is the number policymakers are most focused on. Core above 3% means underlying inflation isn’t yet under control, and that will limit how far and how fast the Fed can cut. Yes, we’ll almost certainly see the first cut this week, but the pace after that could be much slower than markets are hoping. To me, this is where the classic tug-of-war between Wall Street optimism and Fed caution will play out.

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

PM Carney’s $60B slate of national projects, (full story below) from LNG to critical minerals, has been branded a “net positive” for Canada’s economy. But the big question remains: will these investments translate into sustainable, long-term jobs, or just short-term construction booms? Please vote on this week’s question:

LAST WEEK’S POLL RESULTS

Last week I asked: “Odds are 90% the Bank of Canada cuts rates this month. But with inflation still sticky, the question isn’t if they WILL, it’s whether they SHOULD. What do you think?”

71% of you said yes, the Bank should cut. Growth and relief wins out over the battle of inflation. Thanks to everyone who took the time to vote.

Reader Comments

Yes

"Rate Reduction or Not, That is the Question:

We are in a terrible economic, political and existential crisis, one that has no simple answer. Personally, I think the most important at this juncture is the economy. We must revamp every aspect of our economy, how we trade, who we trade with, how our business class must adopt a new approach to doing business abroad, what is needed domestically to re-invigorate a nonproductive work force, and a non productive business model. Now with all these cards on the table what path do I believe we should follow, Lower Rates. Why - well look at the benefits of low rates, lower cost of money, which reflects in lower cost of housing, lower cost in food, generally lower costs. What benefit is there in maintaining high interest rates, generally not too much. We must not follow the P. Poilievre dance card of no direction, no ideas, no positive approach. Canada needs real leadership, which we finally have. Do not listen to the INCEL group, they will lead us down the path to Nowhere!" — entender1012

No

"We need some private sector investments to spark our economy, govt spending won’t cut it, will only make things worse. A rate cut will encourage borrowing and generate more private investing. Carney is failing and is clearly in over his head. He will not save Canada." — steevengingras1970

THE ECONOMY
Carney’s National Projects Tagged “Big Net Positive”

• Ottawa unveils over C$60B in new national projects

• LNG, nuclear, minerals, and port expansions lead the slate

• New Major Projects Office aims to speed approvals

• Strategy ties growth to energy security and climate goals

Prime Minister Mark Carney unveiled an initial slate of national infrastructure and energy projects on Thursday this week that he says will be a “net positive” for Canada’s economy. The plan, with more than C$60 billion in total investment, includes doubling LNG Canada’s export capacity, developing a small modular nuclear reactor in Ontario, expanding mines for critical minerals in British Columbia and Saskatchewan, and enlarging the Port of Montréal. These projects are being fast-tracked under a new Major Projects Office intended to streamline regulatory approvals. The goal is economic diversification, greater resilience in trade, and accelerating clean energy transitions.

Strategic Impulse & Broader Impacts

For Canada, shortening permit timelines and speeding up construction are intended to boost competitiveness, reduce dependence on U.S. markets, and provide supply chain security. The projects have a dual purpose: fuel growth now, and position Canada for long-term strength in clean energy, metals, and infrastructure.

Potential Risks & What I’m Watching

Even with ambitious scope, execution risks are still there. I’m talking about things like environmental reviews, Indigenous consultation, and climate policy alignment, which will all be under close scrutiny. Budget overruns and regulatory pushback could weigh on public perception. But if done well, these projects may represent a turning point in Canada’s economic and climate strategy.

Read More Here

REAL ESTATE
Stock Market Surge Lifts Real Estate Values

• Stock gains fuel housing demand through wealth effect

• Lower mortgage rates add to buying power

• Supply constraints keep pressure on home prices

• Risks include affordability squeeze and rising rates

The strong rally in the stock market has been spilling over into Canadian real estate, and rising financial asset values are increasing household wealth and boosting demand for property. Investors and homeowners are feeling richer, and that sentiment is helping push up real estate values, especially in markets already tight on supply. When you combine lower borrowing costs in many areas with solid equity gains, buyers have been given more leverage. But, while the momentum is strong, the underlying affordability concerns and potentially volatile interest rates could act as headwinds for the immediate future.

What’s Driving the Momentum

The wealth effect is a key factor here: as stocks climb, people feel more confident about spending, and one of the first places that confidence shows up is in housing. Mortgage rates, while not as low as in recent years, are still favourable enough in many markets to make buying more attractive. If we shift over to the supply side, a lot of areas are running up against constraints, such as land, zoning, construction costs, and labour shortages all limit how fast new homes can be built. These factors together, strong demand and lagging supply, are pushing prices upward.

The Warning Signs & Outlook

That said, there are some red flags. Rising real estate values make home buying tougher for first-time buyers, especially in high-priced regions. Inflation, still a concern in some core sectors, could also feed into rates or costs of building, which of course will squeeze margins. I’ll be watching to see whether this trend maintains momentum if stock markets bump up against valuation risks, or if borrowing conditions tighten.

Read More Here

CASH AND MONEY MARKETS
$7 Trillion in Cash Poised for Change

• U.S. money market funds now hold over $7.5 trillion

• Fed rate cuts could shrink yields and trigger outflows

• Cash may shift into stocks, bonds, or alternatives

• Timing uncertain as risk appetite and liquidity needs vary

More than $7.5 trillion is parked in U.S. money market funds, creating one of the biggest cash cushions in history. With the Fed expected to start cutting rates, yields on these ultra-safe investments will fall, and that should raise questions about where the money goes next. Some analysts see a wave of cash moving into equities and bonds, while others argue investors may sit tight longer than expected.

What’s Driving the Narrative

Money markets became attractive when short-term rates surged, but that tailwind is fading. Stubborn inflation and opportunity cost could soon make cash less appealing. Suffice to say, the Fed’s pace of cuts will be critical, and slower moves could delay outflows.

Investor Risk

If investors stay defensive, markets may be disappointed by slower flows and institutional positioning, especially pension funds and large asset managers, which will likely set the tone.

Read the full story here.

THE REAL ESTATE INDUSTRY
Mortgage Industry Pushes CRA for Income Verification Tool

• Lenders want CRA tool to combat rising mortgage fraud

• Fraud often involves fake tax slips and inflated income claims

• Proposed system would allow real-time, secure borrower verification

• Privacy, consent, and access remain major concerns

Canada’s mortgage industry is calling on the Canada Revenue Agency to roll out a secure, digital income verification tool. The goal is to streamline the mortgage approval process, reduce exposure to fraud from misleading or forged documents, and improve confidence for both lenders and borrowers. After consultations in fall 2024 involving lenders, brokers, credit unions, and insurers, the industry identified key priorities for what a verification system should include. Meanwhile, many Canadians are expressing concern about fraud in the housing market and want stronger safeguards.

What’s Driving the Demand

Mortgage fraud has been creeping up, especially when borrowers submit fake or altered tax slips, overstate income, or use manipulated documentation to qualify for larger mortgages. The current verification practices, which include collecting notices of assessment, T4 tax slips, employment letters or bank statements, are effective but slow and imperfect. A digital tool could provide real-time, verified income data directly from CRA records, with borrower authorization, making the process faster and more reliable.

Potential Features & Key Considerations

Industry feedback suggests the tool should include at least two years of income data, covering total, net, and taxable income, and also show if the borrower owes money to the CRA. There are some stakeholders that reject a simple “yes/no” verification, and they argue that detailed data matters, especially for self-employed, gig, or rental income. Security elements such as two-factor authentication, audit trails, borrower notices, and protections for users without CRA online access are also seen as essential.

Challenges & What I’m Watching

Personally, I do believe this concept is valid, but I’ll add that having worked in a very highly regulated industry, developing something like this raises privacy, legal, and technical questions. How do you protect taxpayer data? How do you validate consent? How do you ensure equitable access (for rural areas, or people without strong digital access)? Another thing to consider is that the timeline is vague, and although consultations have been completed, industry stakeholders say progress since then has been slow. The effectiveness of the tool will depend heavily on how well it balances speed, accuracy, and privacy.

Read the full Story Here

OTHER NEWS FROM THE PAST WEEK

Other News Summaries

Nearly 80% of Economists See BoC Cutting Rates Next Week
Many economists now expect the Bank of Canada to cut rates next week, citing easing inflation and slowing growth. Markets are watching closely for signals on how deep the coming cycle might run.

Winklevoss Twins’ Gemini Deal Sparks Crypto Buzz
Gemini, the crypto exchange run by Tyler and Cameron Winklevoss, is expanding through new partnerships, signaling renewed institutional interest in crypto even as regulators push for tighter compliance.

Canada Post Union Set to Give Update on Bargaining Saga
Canada Post’s union is preparing a major bargaining update as talks continue over wages, benefits, and modernization. The outcome could ripple across delivery reliability and inflation-sensitive labour disputes.

Trying to Time the Next Correction? There’s a Better Way
A new analysis argues market timing rarely works and suggests using regime analysis and long-term signals instead. The approach stresses discipline over prediction to navigate volatile market cycles.

Couples Face Tough Choices on Retirement Goals
Financial planners warn that couples often struggle to align retirement visions. Lifestyle expectations, risk tolerance, and spending habits can diverge sharply, making communication as important as financial returns.

Boeing Faces FAA Fine Over 737 MAX Safety Issues
The FAA is weighing a new fine against Boeing tied to 737 MAX safety lapses. Regulators allege documentation and quality-control failures that echo past problems with the troubled aircraft.

BYD, Tesla Could Lose From Mexico Tariffs
Mexico’s proposed tariffs on Chinese-made cars threaten major EV players like Tesla and BYD. The move could reshape North American supply chains and accelerate calls for more local production.

Trump Scraps Biden-Era Airline Passenger Rule
The Trump administration has repealed a Biden-era rule aimed at forcing airlines to be more transparent with fees and refunds. Consumer advocates warn travelers could face higher hidden costs.

Doritos, Cheetos Move to Natural Colors
PepsiCo is shifting Doritos and Cheetos to natural colors, removing artificial dyes. The change reflects rising consumer demand for “clean labels,” though taste and brand identity remain crucial risks.

Coffee Prices Climb on Global Supply Crunch
Coffee prices are rising sharply as droughts in Brazil and shipping disruptions tighten supply. Consumers worldwide could face higher prices at cafés and grocery stores heading into the fall.

Loblaw Launches Bread-Fixing Compensation Website
Canadians impacted by the bread price-fixing scandal can now apply for compensation through Loblaw’s newly launched website. The rollout comes after years of legal and reputational fallout.

Foreign Worker Program Faces Fresh Scrutiny
Canada’s Temporary Foreign Worker Program is under renewed scrutiny, with critics highlighting exploitation risks. Business leaders argue it’s still critical to fill labour gaps in agriculture, hospitality, and construction.

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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