Geopolitics & Energy Markets

• U.S.-Iran negotiations on reopening the Strait of Hormuz remain unresolved, keeping oil prices elevated
• Equity markets have recovered and advanced on strong earnings, but bond markets remain cautious about sustained inflation pressures
• A finalized deal could ease inflation concerns and support lower bond yields

Canadian Economy: Stronger Than Headlines Suggest

• Q1 GDP declined 0.1% annualized (appearing as a "technical recession"), but underlying details reveal more resilience:
• • Per capita GDP grew 0.9% (population declines distort headline figures)
  • Household spending remained strong
  • Business investment in equipment and intellectual property improved
  • The weakness was largely driven by a pullback in government defense spending
• Recent business surveys show modest expansion despite ongoing uncertainty and rising costs
• Main risk: Trade policy reviews and potential U.S. tariffs could weigh on business sentiment

Canadian Banking Sector

• Big banks posted stronger-than-expected Q2 earnings, driven by strong equity markets, improved dealmaking, and elevated trading activity
• Stock price reactions were mixed due to valuations already sitting above long-term averages

Bottom Line

Corporate earnings are providing fundamental support for markets despite macroeconomic uncertainty. A diversified portfolio approach across sectors and asset classes remains prudent given the evolving geopolitical and trade policy backdrop.