Overview
Markets gained ground in July, lifted by strong tech earnings and a steady hand from central banks. Momentum was challenged late in the month by renewed U.S.–Canada trade tensions and rising bond yields. Despite those headwinds, both U.S. and Canadian equities closed the month in positive territory.
U.S. Market Performance & Policy
U.S. indexes posted solid gains, with the S&P 500 up approximately 2.2% in USD (3.6% in CAD). The rally was driven by earnings from Microsoft, Meta, and other AI leaders. The Federal Reserve held its benchmark rate at 4.25–4.50%, though two policymakers dissented in favor of a cut. Chair Powell emphasized a data-driven approach, leaving markets speculating about possible action in September.
Key Economic Data (U.S.)
- Unemployment remained at 4.2%, while the economy added 139,000 jobs.
- Consumer spending rose 0.5%—the strongest pace in four months—led by housing, financial services, and healthcare. Inflation accelerated slightly: core PCE rose 0.3% MoM, pushing the annual core rate to 2.9%.
- Job openings declined by 176,000 to 7.18 million, and layoffs increased, reflecting cooling labor demand.
Canadian Market Update
The S&P/TSX Composite rose about 1.5% in July, closing near 27,260. Tech and energy stocks outperformed, while rising yields (10-year Government of Canada bonds rose to 3.45%) weighed on fixed income. Inflation ticked up to 1.9% in June, dampening expectations for a Bank of Canada rate cut at the July 30 meeting. Trade tensions added uncertainty as markets eyed an August 1 tariff deadline. Despite this, strong U.S. earnings helped support Canadian equities, and investor sentiment remained resilient. Consumer & Corporate Trends Microsoft and Meta earnings boosted confidence across markets. Spending strength and earnings quality offset inflation concerns, though bond market volatility signaled investor caution.
Outlook
In the U.S., solid earnings and consumer resilience support a cautiously optimistic view. In Canada, a strong TSX and stable credit conditions offer a positive backdrop, though inflation and trade remain watchpoints.