Resilience in the Face of Uncertainty
This year’s Jackson Hole Symposium surprised many market watchers. Fed Chair Jerome Powell struck a more measured tone than expected. While he acknowledged that inflation has cooled somewhat, he stressed that it’s still too high for the Fed to even consider cutting rates. Powell also highlighted growing cracks in the labor market, pointing to both weakening demand and supply-side issues. Interestingly, he outlined a change in the Fed’s approach, stepping back from “average inflation targeting” in favor of putting inflation control front and center again.
In short, with tariffs reintroducing inflation pressures and growth showing signs of fatigue, the Fed seems comfortable with keeping rates at their level into 2026 if necessary. Investors shouldn’t count on rate cuts anytime soon.
| Index | Jul-2025 | Aug-2025 |
| S&P 500 Total Return | 2.2% | 2.0% |
| S&P/TSX Total Return | 1.7% | 5.0% |
Global Market Overview
August was marked by continued divergence across global markets. U.S. equities held up well, with the S&P 500 gaining 2.03%, thanks largely to strong consumer spending and a rebound in tech stocks. July’s core CPI came in at 0.2% month-on-month, offering a bit of relief and fueling hopes that inflation might be back on a cooling trend. Consumer spending also picked up by 0.5%, particularly in services like healthcare, dining, and financials. The job market, however, is showing signs of softening, only 35,000 new jobs were added last month, and unemployment edged up slightly to 4.2%.
Global markets were mixed. Sentiment across Europe remained under pressure, as it is dealing with political uncertainty and broader worries about trade tensions resurfacing. Meanwhile, the ECB left its deposit rate unchanged at 2.0% in July, but internal disagreements about inflation risks pointed to uncertainty ahead. In the UK, retail sales continued their downward slide, marking the 11th consecutive monthly drop. In Japan, bond yields touched levels not seen in 17 years, as markets increasingly expect the BoJ to finally tighten policy.
Canadian Market Overview
Canadian equities continued to gain momentum, with the S&P/TSX Composite Index posting a solid 4.96% increase in August. Despite a gradual rise in unemployment, which hit 6.9% by July, the labor market hasn’t shown signs of sharp weakness. Inflation, on the other hand, is cooling faster than expected. The headline CPI dropped to 1.7% in July, its lowest reading in over a year, marking the fourth straight month below the Bank of Canada’s 2% target. That said, core inflation (excluding volatile items) still hovered around 2.5%, with housing, insurance, and utilities keeping upward pressure intact. This divergence continues to leave policymakers walking a fine line: inflation is cooling, but not uniformly.
Looking ahead, GDP growth is expected to remain modest. The Bank of Canada projects around 1% growth through the rest of 2025, assuming trade tensions don’t flare up again. Modest gains in household spending and a pickup in exports could help offset some of the broader softness.
Canadian Sector Performance
The Canadian equities posted solid gains during August led by:
- Financials (+4.27%): Boosted by strong quarterly earnings from major banks and reduced loan-loss provisions.
- Energy (+3.96%): Supported by higher oil prices and renewed global demand optimism.
- Technology (+2.47%): Lifted by Shopify’s impressive 20% rally after surpassing earnings expectations and issuing an upbeat revenue forecast.
Important Dates
- September 5: Canada Unemployment data
- September 11: U.S. CPI Inflation (August)
- September 16: Canada CPI Inflation (August)
- September 17: Fed Interest Rate Decision
- September 19: Canadian Retail Sales
Portfolio Strategy Tip
With the Federal Reserve maintaining a cautious stance and signaling no urgency to lower interest rates, investors may want to continue emphasizing a Quality at a Reasonable Price (QARP) approach. This strategy centers on selecting financially sound companies trading at fair valuations, particularly those with solid balance sheets, consistent cash generation, and the pricing power to navigate a slower economic environment.
Final Thoughts
The road ahead isn’t without bumps. While some central banks have eased their monetary policies, the Fed isn’t yet ready to follow their paths, growth is slowing, and geopolitical risks are still simmering. Powell’s Jackson Hole message confirmed that rate cuts aren’t on the table anytime soon. Meanwhile, Canada is juggling falling inflation with rising joblessness. For investors, now’s the time to be selective, favor resilience over risk, and not chase returns in overextended areas of the market.