The Week in Review

Weekly Market Recap: U.S. and Canada

Things were looking pretty good in the markets this week until they stumbled over a cliff Friday. The Nasdaq 100 and S&P 500 showed brief moments of strength but ultimately faded, while the Dow Jones struggled more consistently throughout the week. Here in Canada, the TSX managed to buck the broader trend and finished in positive territory. Overall, investors seemed cautious.

In terms of performance, the TSX rose 0.40%, making it the only major index to close in the green. The S&P 500 dipped 0.39%, while the Nasdaq 100 slipped 0.60%—reflecting some weakness in tech. The Dow Jones was the hardest hit, falling 1.32% by week’s end.

Major Economic Stories

Recap of the Week

This week’s overarching theme was cautious optimism, with consumer sentiment rebounding while industrial activity and inflation data painted a more nuanced picture.

Here’s what we learned this week.

Canada Manufacturing Sales Slide Sharply

Manufacturing sales in Canada dropped 2.8% in April, worse than forecasted.

The decline is the steepest monthly drop since October 2023. Petroleum, auto, and metals sectors led losses. U.S. tariffs continue to pressure manufacturers. Many businesses reported price hikes and rising input costs.

• Sales fell to C$69.6 billion in April

• Petroleum and coal down 10.9%

• Half of firms reported tariff impact

• Sales down 2.7% year-over-year

U.S. Inflation Edges Higher in May

U.S. annual inflation ticked up slightly to 2.4% in May.

Though the increase broke the recent cooling streak, it came in just below expectations. Food and transportation costs nudged higher, but energy prices continued their steady decline. Core inflation remained flat, showing possible signs of anchoring.

• Headline CPI rose 0.1% month-over-month

• Gasoline prices dropped 12% annually

• Energy down 3.5% year-over-year

• Food inflation rose 2.9% from last year

Core Inflation Stays at 2021 Lows

U.S. core CPI remained at 2.8%, brushing aside forecasts for a rise.

This marks one of the lowest levels since 2021 and is a sign of underlying price stability. The report reassured markets looking for signs the Fed’s policy is gaining traction.

• Forecast had called for 2.9%

• Monthly core CPI rose just 0.1%

• Inflation trend aligns with Fed goals

• Shelter inflation dipped slightly to 3.9%

U.S. Consumer Sentiment Rebounds

Consumer confidence rose sharply in June, smashing expectations.

The University of Michigan index showed improving views on both current conditions and future expectations. Inflation expectations also dropped, easing worries about long-term price pressures.

• Sentiment index jumped to 60.5

• Future expectations soared 21.9%

• Year-ahead inflation fell to 5.1%

• Long-term inflation expectations eased to 4.1%

Key Takeaways From this Week’s Economic News

Bank of Canada’s Crossroads: Inflation or Recession?

The Bank of Canada is staring down one of its toughest decisions in recent memory: does it prioritize slowing inflation or support a weakening economy? That decision is being complicated by diverging forecasts from Canada’s major banks. RBC and Scotiabank are now calling for no further rate cuts in 2025, citing improving economic signals and easing trade tensions. Meanwhile, BMO and Desjardins still expect a combined 75 basis points in cuts, anticipating more economic softness ahead.

What makes this moment especially tricky is the lack of precedent. The trade war with the U.S. has introduced a layer of policy unpredictability that’s almost impossible to model. The way I see it, economists are essentially flying blind. Governor Tiff Macklem isn’t trying to hide this uncertainty recently, saying the Bank is being “less forward-looking than usual.” That kind of language tells me they’re watching the data week to week; there’s no grand plan right now, not really a “Plan A” you might say. If inflation flares up again, cuts are likely off the table. But if trade drags the economy down further, we could still see more easing later this year.

Consumer Sentiment Comes Back from the Brink

After months of gloom, American consumers finally seem to be feeling a little better. The June consumer sentiment reading from the University of Michigan jumped to 60.5, well ahead of expectations. That’s a 15.9% spike in one month, led by more optimism about current conditions and the future. Even more striking, inflation expectations fell sharply, with the one-year outlook dropping to 5.1%. That’s still high, but the pace of change tells me that people are starting to believe inflation is cooling.

Are we seeing a pivot? If consumers continue to feel more confident, we might see a stabilization in spending and a more resilient economy heading into Q3. And in consumer-driven economies like the U.S., sentiment often leads the data. But let’s not forget: sentiment is still about 20% below pre-election levels. This isn’t a full recovery, but it might be the start of one.

Canada’s Manufacturing Struggles Show Tariff Toll

Canada’s 2.8% drop in manufacturing sales in April is a clear signal that the U.S. trade war is starting to bite. This was the worst monthly showing since late 2023, and the effects are widespread. Key industries like petroleum, auto manufacturing, and metals are under pressure, and half of manufacturers report feeling the impact of U.S. tariffs. That’s no longer a niche issue; it’s now become systemic.

What's even more telling is how firms are reporting the effects. A third are seeing input prices rise, a quarter are feeling cost pressures from shipping and labor, and a fifth are seeing demand changes. And this goes beyond just about slower sales, it’s about margin compression, strategic uncertainty, and disrupted supply chains. And that’s not something the Bank of Canada can fix with interest rates. This is a structural problem, not a cyclical one. If trade tensions persist, expect more softness from Canadian industry in the months ahead.

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

The next Bank of Canada interest rate decision isn’t until late July, but there are already plenty of factors for Tiff Macklem and the other policymakers to consider. At this point, he says the Bank is being “less forward-looking than usual” as it navigates uncertain trade dynamics and economic signals. Question: Is that a smart move—or a sign of hesitation at the wrong time?

LAST WEEK’S POLL RESULTS

Last week I asked whether you're more likely to trust macroeconomic data or your own personal experience when evaluating the economy. As it turns out, the results couldn’t have been more split - right down the middle. I love it when that happens.

This says to me that there’s real tension between what the data says and what people feel in their day-to-day lives.

Reader Comments

Personal Experience

INTEREST RATE DELIBERATIONS
What’s Next for the Bank of Canada?

• Big banks split on BoC’s next interest rate move

• Macklem says uncertainty limits forward guidance for now

• Trade tensions are clouding inflation and growth projections

• BoC remains firmly data-driven amid conflicting economic signals

From the broken record files, I’ll repeat what I’ve talked about in recent months. The Bank of Canada is facing a complex challenge: respond to economic deterioration or contain lingering inflation pressures. The ongoing trade war with the U.S. has clouded forecasts and left economists divided on the path ahead. As market players look for clarity, Governor Tiff Macklem’s cautious tone reflects the Bank’s recognition that a wrong move could deepen volatility.

Diverging Forecasts Signal Uncertainty

Economists from Canada’s major banks are split on what the Bank of Canada should do next. RBC and Scotiabank believe rate cuts are over, pointing to stronger-than-expected economic indicators and fading trade uncertainty. Meanwhile, BMO and Desjardins are still expecting substantial easing, forecasting 75 basis points of cuts by early 2026.

Inflation vs. Recession Debate

Macklem has said the Bank is trying to gauge “which [problem] is going to be the bigger one.” Holding rates steady, for now, is the compromise. RBC’s outlook turned more optimistic, revising 2026 GDP forecasts higher and calling trade tensions “broadly positive.” But as Moshe Lander, a senior lecturer in economics at Concordia University points out, the BoC is forced to balance forward guidance with rapid changes in the data.

Until there’s clarity on inflation momentum or recession risk, the Bank will remain data-dependent.

Read More Here

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THE CONSUMER
Consumer Sentiment Climbs Sharply on Tariff Pause

• June sentiment index rose 15.9%, beating all forecasts

• Tariff truce lifted optimism about economy and spending

• One-year inflation expectations fell sharply to 5.1%

• Confidence improving, but remains well below 2024 highs

I was a bit surprised by the report out this week that U.S. consumer sentiment rebounded strongly in early June, a sign that Americans may be adapting to trade uncertainty more quickly than expected. The University of Michigan’s index jumped to 60.5, with future expectations and current conditions both showing double-digit improvements. This comes as President Trump dialed back aggressive tariff threats, giving a bit of breathing room for markets and households.

Tariff Relief Improves Outlook

The 15.9% spike in sentiment coincided with a softening of the administration’s rhetoric and a temporary 90-day negotiation window with China. Consumers appear to have “settled somewhat from the shock,” said survey director Joanne Hsu. The shift suggests that while tariff risks haven’t gone away, the pause alone was enough to lift household optimism. Current conditions rose 8.1%, while future expectations soared 21.9%.

Inflation Fears Ease, But Not Gone

Consumers’ inflation expectations also improved: the one-year outlook fell sharply to 5.1% and the five-year view edged lower to 4.1%. That nice, but these levels remain well above 2024 norms, showing lingering concerns. Economists still expect tariffs to exert upward pressure over time, even if current CPI data remains muted. If sentiment holds or improves further, the Fed may feel less urgency to intervene with rate cuts this summer.

Read More Here

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HOUSING
Condo Market Slump Threatens Housing Supply

• Toronto’s condo inventory surged 14x from 2022 levels

• Sales dropped 75%, spooking investors and developers

• Pre-construction delays could worsen long-term housing shortage

• CMHC warns short-term relief may hurt future supply

Music to the ears of some market watchers, Canada’s condo markets in Toronto and Vancouver are undergoing a major correction, with plunging sales and rising inventories now threatening future housing supply. According to CMHC, condo sales in Toronto have dropped 75% since 2022, while resale prices have tumbled more than 13%. This looks like a reprieve for renters today, but it could turn into a long-term supply issue.

Demand Collapse Freezes Construction

In Toronto, months of inventory for pre-construction condos are now 14 times higher than they were in 2022. Yes, you read that correctly; 14 times higher than three years ago. This glut is slowing new construction starts, undermining Canada’s housing targets. Buyers are spooked by falling values, and investors are hesitant in the face of soft demand and trade uncertainty. John Pasalis is president of Realosophy, a Toronto-based brokerage, and he says he hasn’t seen demand this low for two decades.

Investors Take Heavy Losses

Some investors face 6% capital losses on new builds, while units purchased in 2019-2020 are now worth significantly less. With rising interest rates and uncertain rental yields, many are reluctant to buy or hold. It’s true that this creates temporary affordability gains, but the CMHC warns it will also discourage new construction and fuel long-term shortages. Policymakers may soon need to weigh stimulus measures to avoid an underbuilding crisis.

Read the full story here.

THE AUTOMOTIVE INDUSTRY
EV Sales Slump Raises Mandate Doubts

• EVs only 8.7% of Q1 vehicle sales

• Quebec rebate pause triggered national sales decline

• Federal EV rebates paused due to budget shortfall

• Automakers say mandates unworkable without major support

It looks like even electrical vehicles can ‘stall’, so to speak. At least EV sales can. EVs made up just 8.7% of new vehicle registrations in Q1 2025, the lowest since 2023 and not even close to the federal target of 20% by 2026. The drop follows subsidy freezes and a lack of infrastructure expansion, and has led to industry leaders questioning whether Ottawa’s EV mandate is realistic.

Policy Whiplash Hurts Momentum

Quebec’s temporary suspension of EV rebates earlier this year dealt a major blow, especially since the province accounts for half of all national EV sales. (This came as a surprise to me, given that every third car you see in Vancouver is a white Tesla.) Even with subsidies back in place, EV adoption outside Quebec is back to 2023 levels. The federal rebate program also remains paused due to depleted funding, and with little clarity on future incentives, both consumers and automakers are pulling back.

Mandate Feasibility in Question

GM Canada’s president recently urged Ottawa to scrap the EV quota altogether, calling it unworkable without parallel investment in affordability and infrastructure. Targets rise to 60% by 2030 and 100% by 2035, but that trajectory now looks out of reach. Without a course correction, either in policy support or public charging access, Canada’s EV transition could hit a hard ceiling well before the mandate timeline.

Read the full Story Here

OTHER NEWS FROM THE PAST WEEK

Competition Bureau Sues DoorDash
Canada’s Competition Bureau is taking DoorDash to court over allegedly misleading “drip pricing,” where advertised prices are inflated by fees at checkout. The Bureau wants the company penalized and consumer refunds. DoorDash vows to contest the accusations.

Wealthsimple CEO: Banks Are a Tax on Canadians
Wealthsimple’s Michael Katchen argues that high fees and outdated processes make traditional banks a financial burden on Canadians, justifying the fintech’s push into everyday banking services.

Canada Youth Unemployment Hits 9-Year High
Youth unemployment in Canada climbed to its highest level in nine years, with younger workers disproportionately affected by economic softness. Experts say recovery needs targeted policy efforts .

Boeing Stock Under Pressure
Boeing shares dropped roughly 5% following a fatal Boeing 787 Dreamliner crash in India, reigniting safety concerns and weakening investor sentiment toward aerospace stocks.

Costco Adds Executive Member Perks
Costco is rolling out new executive-tier benefits—early store access, Instacart credits, and extended hours—to boost upgrades, though staff warn of operational challenges .

Shaq to Pay $1.8M to Settle FTX Lawsuit
Shaquille O’Neal agrees to a $1.8 million payment to resolve litigation tied to his promotion of the failed FTX crypto exchange, marking one of the first celebrity crypto settlements .

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Market Movers

S&P 500 Returns | Week At-a-Glance

TSX Returns | Week At-a-Glance

Top 10 Weekly Gainers

Top 10 Weekly Losers

10 Most Overbought Stocks

10 Most Oversold Stocks

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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