Overview
CTI Capital’s monthly review finds that markets entered August cautiously after record-setting July gains. Early weakness came from soft labor data, tariff concerns, and rising bond yields. Resilient corporate earnings and expectations of a Federal Reserve policy shift helped stabilize sentiment by month-end.
U.S. Market Performance & Policy
On August 1, equities sold off sharply, with the Dow down 500 points. Still, the S&P 500 stayed more than 25% above April lows and the Nasdaq over 35% higher, lifted by Microsoft, Meta, and other large firms.
Focus shifted quickly to the Fed. Futures priced in an ~89% chance of a September rate cut, supported by weaker data and policymakers’ willingness to ease if needed.
Key Economic Data (FRED):
- Fed Funds Rate: 4.33% (unchanged in July)
- Unemployment: 4.2%, up from June
- M2 Money Supply: $22.1 trillion, rising gradually
Consumer & Corporate Trends
Confidence softened as the Conference Board index fell to 97.4, with inflation expectations at 6.2% on essentials. At the same time, U.S. buybacks topped $1 trillion YTD, led by Apple, Alphabet, and JPMorgan.
Economic activity was mixed but resilient: manufacturing hit a three-year high at 53.3, while services held at 55.4, signaling expansion despite cost pressures.
Canadian Market Update
The S&P/TSX Composite hovered near 22,500 in August, weighed by softer energy prices but supported by financials and industrials. Oil slipped below $77, dragging resource stocks lower, though banks and infrastructure names held firm.
BNN Bloomberg highlighted investor focus on Bank of Canada policy. Markets now see elevated odds of an October rate cut as inflation cools. Housing activity steadied, with sales volumes improving in Ontario and British Columbia despite high mortgage rates.
The Globe and Mail’s Report on Business noted strong bank earnings, underpinned by robust capital and stable credit quality. Corporate investment in technology and infrastructure continues to offset commodity headwinds, suggesting moderate but steady growth heading into the fall.
Outlook
In the U.S., strong earnings and the prospect of Fed easing support cautious optimism. In Canada, resilient banks and central bank flexibility provide stability, though energy markets and trade remain watchpoints.
