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While global growth remains resilient, financial markets are navigating crosscurrents that demand our attention. 

The global economy is holding up well. Business activity is expanding across manufacturing and services. The U.S. is particularly strong—we're expecting third-quarter GDP growth to potentially exceed 3%, nearly double the previous quarter's pace.

But here's the challenge: alongside this economic strength, we're tracking two significant risks.

First, Middle East tensions have intensified. Oil prices have surged near or above $100 a barrel due to attacks on energy infrastructure and shipping. This matters because higher oil prices feed into inflation, which puts pressure on central banks to raise interest rates.

We're already seeing this reflected in bond yields climbing across major markets. While higher yields partly reflect economic resilience, rising borrowing costs could eventually restrain growth.

Second, the Canada-U.S. tariff dispute continues to escalate. Canada implemented retaliatory tariffs this week, strategically targeting politically sensitive U.S. states heading into midterm elections.

While this creates volatile headlines, RBC Economics expects the broader economic impact to remain contained. Canada's support packages for affected businesses and workers should help. And deep economic integration between our countries suggests the negotiating table remains the likely destination.

Bottom line: The outlook is relatively favourable, but we're staying disciplined. We're maintaining balanced portfolio positioning—balancing growth with defensive exposures—to navigate these crosscurrents.