The debasement trade returned in August and overwhelmed everything else. Gold rose about 13% to trade above $4,500 an ounce, its strongest month since September 1999, while silver gained roughly 19% and briefly touched $70. The catalyst was fiscal rather than geopolitical: on August 19 Treasury Secretary Scott Bessent expanded the long-end buyback program, doubling liquidity purchases of 10- to 30-year off-the-run coupons to at least $4 billion per operation, and U.S. government debt crossed $40 trillion for the first time. A falling dollar did the rest.
Benchmark | Jul-2026 | Aug-2026 |
|---|---|---|
S&P 500 Total Return | -0.1% | 2.7% |
S&P/TSX Total Return | 1.2% | 3.1% |
Source: FactSet
Global Market Overview
United States
The S&P 500 returned 2.7% as second-quarter results landed well: blended earnings growth reached 52%, falling to 33.8% excluding Alphabet and Amazon. Policy set the tone late in the month. Chair Kevin Warsh used his August 28 Jackson Hole address to warn that softer inflation prints may not reflect the underlying trend, with the Fed's preferred gauge at 3.7%. The two-year Treasury yield jumped 11.8 basis points that day, its largest one-day move since March, and odds of a September hike rose from roughly 35% to 67%. The curve bear-flattened, with three-month yields up 7 basis points to 3.83% while the 10-year added just 2 basis points to 4.75%. Energy (+7.0%), Information Technology (+6.3%) and Materials (+6.0%) led, while Utilities (-4.8%) lagged.
Europe
The MSCI All Country World ex-U.S. index returned 2.6% for the month. There was no ECB meeting in August, but the energy channel the Governing Council flagged in July intensified. Refining margins set fresh records: diesel crack spreads traded above $100 a barrel against a normal range of $15 to $25, and Atlantic Basin margins reached all-time highs as Russian export restrictions, refinery attacks and reduced Middle East product flows met distillate inventories at seasonal lows. Those costs pass straight into the goods and transport prices the ECB identified as its main second-round risk.
Canadian Market Overview
Canadian data was unambiguously strong in August. July employment rose 75,000 and the unemployment rate fell to 6.4%, its lowest in two years, while second-quarter GDP growth came in at a 3.3% annualized rate after just 0.1% in the first quarter. Inflation moved the other way: July CPI accelerated to 3.0% year over year from 2.8% in June, though excluding gasoline it was 2.2% and core measures held near 2%.
Prime Minister Mark Carney suspended negotiations on August 21, and 50% U.S. tariffs on roughly $28 billion of Canadian goods took effect the following day, with dollar-for-dollar Canadian retaliation scheduled for September 8. The Bank of Canada held its overnight rate at 2.25% on September 2 for a seventh consecutive meeting, but dropped the line describing the current rate as appropriate, said it is prepared to adjust policy as needed, and flagged increased upside risk to inflation. Traders now price hikes rather than cuts over the coming year, and the Canadian 10-year yield rose 7 basis points to 3.74%. The Canadian dollar gained 1.2% to US$0.722 even as the tariffs landed, which says more about broad U.S. dollar weakness than about confidence in Canada.
Canadian Sector Performance
Materials: +25.8%. Gold gained about 13% and silver 19%, lifting the global gold miners index roughly 43% in its strongest month on record and taking the sector from a year-to-date loss into a 19.6% gain;
Info Tech: +12.9%. Canadian technology tracked the global software and AI-infrastructure rally, where U.S. software rose 16% as second-quarter results confirmed the durability of capital spending;
Consumer Staples: -6.9%. Grocers and food processors fell as capital rotated toward metals and technology, while diesel near $5.50 a gallon and pending retaliatory tariffs on U.S. dairy and agricultural goods raised input and distribution costs;
Health Care: -7.0%. The index's smallest sector, where a handful of names drive the outcome, gave back July's 2.4% gain.
Important Dates
September 4: U.S. Employment Situation (August)
September 8: Canadian retaliatory tariffs take effect
September 11: U.S. CPI Inflation (August)
September 14: Canada CPI Inflation (August)
September 15-16: Federal Reserve FOMC Meeting
September 24: Canadian Retail Sales (July)
Final Thoughts
August's headline gain rests on a narrow base. Two sectors produced the whole of the TSX's 3.1% return while seven declined, and the leading sector is the one most exposed to what comes next. Gold advanced because real yields fell and the dollar weakened; a Federal Reserve hike on September 15-16, now priced at roughly two-thirds probability, would push real yields back the other way. Canada carries a second and separate risk, as its own retaliatory tariffs take effect September 8 and raise domestic costs just as the Bank of Canada withdraws the language calling its policy rate appropriate. A record index level is worth less than it appears when one trade produced it.