Weekly Wrap

It was a tough week for tech and international investors as competition from cheaper Chinese AI solutions and rising oil prices from Middle Eastern tensions (see below) conspired to dampen market bullishness. Even solid earnings could not rescue the market this week, as US banks showed tremendous profit gains and ultra-strong balance sheets from last quarter’s results. Canadian stocks were flat this week as gains in banks, energy and rail stocks were offset by losses in gold stocks. The gold speculation that captivated conspiracist’s attention earlier this year appears well and truly over as gold prices fell another 2.5% this week, down 8% on the year and 25% off its peak in January. US stocks are off 1% with tech stocks losing 3.5% this week. Developed international and emerging markets fell 2% and 4.5%, respectively, as these regions are the most vulnerable to disrupted oil flows out of the Strait of Hormuz. Indeed, oil prices rose 12% and the Loonie followed oil prices higher, gaining 1% against the US Dollar.

Market Insights

Chinese AI Breakthrough Triggers Global Semiconductor Selloff. A newly released Chinese AI model, Kimi K3, triggered a broad technology selloff as investors questioned whether increasingly capable, lower-cost models could reduce future AI-related capex spending. Today, Bloomberg’s Asian semiconductor index fell more than 6%, the NASDAQ is down 3% this week and several China- and Japan-listed AI-related stocks posted double-digit losses. Independent benchmark testing placed the new AI model alongside leading US models on some measures, although the claims have not yet been widely validated. The market reaction also reflected broader concerns about stretched technology valuations, uncertain returns on AI capital spending, and profit-taking after strong semiconductor gains. Some investors compared the launch with last year’s Chinese AI shock, while others viewed it as confirmation that China is closing the performance gap, especially on cost efficiency, rather than a wholly unexpected disruption. Last year’s fears of weaker chip demand later eased as the hyper-scalers maintained heavy AI spending. In summary, the launch of Kimi K3 has intensified scrutiny of AI spending returns and advanced chip demand, but its lasting commercial and market impact remains uncertain.

Hormuz Fighting Intensifies as Energy and Shipping Risks Rise. The US and Iran expanded their attacks during a sixth day of renewed hostilities, raising concern that the confrontation could return to full-scale war. US forces struck bridges and other infrastructure in southern Iran, while Iran targeted US bases and nearby Gulf states. A strike damaged a Kuwaiti desalination and power facility, and Qatar reported intercepting incoming missiles. Iran also continued requiring ships to obtain permission before travelling through the Strait of Hormuz. Commercial traffic through the strait has fallen sharply, with estimated crude flows declining to about 5.5 million barrels per day from 9.4 million the previous week. The US has reinstated its blockade of Iranian ports and withdrawn a temporary sanction exemption covering Iranian oil exports. Oil prices remain well-below war-time highs, however, signaling that traders expect Hormuz flows to resume. Although the attacks remain below the intensity seen earlier in the year, strikes against transport, power and water infrastructure increase the risk of broader economic disruption. Middle eastern states are now investing in new channels to bypass Hormuz and the incentives and constraints on both sides, however, suggest another attempt at de-escalation is likely. 

Portfolio Update

No major changes for our portfolios this week. It has been a busy last few weeks with a handful of changes to our equity holdings and some re-balancing moves in our fixed income but this has been very client specific. Ethan has been hard at work getting the fixed income weightings where we want; one of the bigger positions we have acquired has been the Vanguard Short Term bond ETF but this holding is quite different between clients. VSB holds government bonds and is a low risk pseudo-cash position from which we may draw upon when better long term opportunities arise. However, with equity markets remaining very high, it's looking like we might have the VSB holding for a while. Therefore, we are tweaking this ETF to ensure it is the right thing to hold amongst other potential fixed income options which, admittedly, are none too exciting. Nevertheless…the work carries on!

Please note any changes apply to our PIM Portfolios Only, subject to restrictions. Please call to clarify if you have any questions.

Planning On

Supporting our clients’ health, wellness, and aging

As our clients navigate the complexities of aging and life transitions, RBC Wealth Management and the Milau Private Wealth Management Group can play a vital role in guiding you through these transitions. While we are not experts in healthcare or social work, through our Longevity Concierge, we have access to specialized resources, experts and professionals who can collaborate with us to delivered tailored support to you and your family. Through these resources we can help you proactively plan for longevity, maintain your quality of life, and navigate challenges with confidence.

For clients who have over a million dollars invested with us, we can also offer a Wellness Consultation, a complimentary 1-hour consultation with a qualified social worker to discuss concerns about your own future care needs, or those of an aging parent or dependent. The team of social workers provide guidance on planning for care needs, managing caregiver stress, and understanding in-home and retirement home options.

We also have a strategic relationship with Cleveland Clinic Canada, and our clients gain access to preferred pricing on select services.

Lastly, we have a lot of resources our team can send to you on topics such as aging well, planning for the cost of health care, dementia, caregiver burnout, etc.

If any of the above has been on your mind, please reach out and start the conversation with us.  

This information is not intended to provide legal, tax, or insurance advice. To ensure that your own circumstances have been properly considered and that action is taken based on the latest information available, you should obtain professional advice from a qualified lawyer or accountant, as applicable, before acting on any of the information.

Staff Announcement

It is with mixed emotions; we would like to share that our esteemed colleague Marci Hammer will be embarking on a new adventure. After nearly a decade of dedicated service to RBC—including her invaluable contributions to our team since 2022—Marci will be relocating to the Okanagan. Her last day with us will be July 31, 2026.

Marci has been instrumental in supporting your administrative needs with professionalism, warmth, and attention to detail. Many of you have experienced her superb service firsthand! Her journey with RBC began in 2017 with RBC Wealth Management Services and, throughout her RBC career, she has built lasting relationships and earned the trust and respect of our entire team and especially that of her ‘work bestie’, Lori.

We wish Marci all the best in this exciting new chapter. If you'd like to share farewell messages or connect with her before she departs, please don't hesitate to reach out to her at marci.hammer@rbc.com.

Charts of the Week

Feel free to share this newsletter with anyone who might benefit from it or find value in it. Thank you for reading our commentary. We welcome your feedback!

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