United States - AI-Related Investment is Still Doing the Heavy Lifting

There’s a lot going on beneath the surface right now. 

Tensions in the Middle East haven’t gone away, and while markets aren’t reacting dramatically day-to-day, the impact is showing up in energy and fertilizer prices. That’s important because these price rises will keep inflation sticky.

At the same time, the U.S. economy is holding up relatively well. Latest figures show growth around 2%, which on the surface looks solid. But when you dig a little deeper, it’s becoming clear that fewer areas are doing more of the work.  Government spending has helped, but the real driver continues to be investment in artificial intelligence. AI is carrying a significant share of the growth story right now with tax refunds kicking in soon. 

There’s also a shift happening at the Federal Reserve. Kevin Warsh is expected to step in as Chair, and while he’s emphasizing independence, there are underlying pressures—particularly around government debt and interest costs—that won’t be easy to ignore and will probably give the US government some influence over monetary policy.  With that transition underway and a more divided Fed, the direction of interest rates is a bit less predictable in the near term.

Canada - Spring Fiscal Update – Some Tinkering but No Change to the Overall Strategy

The Spring Fiscal Update in Canada was a bit better than expected—but not a game changer.

The deficit came in lower this year, mostly because the economy held up better than anticipated and some government spending was slower to roll out. Deficits are still expected to run in the $55–65 billion range for the next several years, and there’s still no clear path back to balance. Any fiscal “room” created by stronger economic performance has largely been redeployed into new spending initiatives, including targeted affordability measures such as fuel tax relief and grocery support.  This number represents around a 2% deficit – one of the lowest in the G7 and way below the US at 6%.  To be fair, Canada is in relatively good shape. Debt levels are manageable, and the cost of servicing that debt remains well below what we’ve seen in more stressed periods historically. 

One notable development is the proposed Canadian Sovereign Wealth Fund. While details remain limited, the structure appears different from traditional models like Norway’s. Rather than accumulating surplus resource revenues, this fund is expected to be financed through asset sales or borrowing from the public, with capital directed toward domestic investment priorities. For now, the expectation is the it will work like a Canada Savings Bond with equity upside potential, However, the lack of clarity—particularly around investor access and return expectations—means this remains an area to watch rather than act upon now.

Your Portfolio

This is one of those environments that looks steady on the surface—but is becoming more selective underneath.  Markets are still moving higher, but a lot of that strength is concentrated in a relatively small group of large technology companies, particularly those tied to AI. We’re starting to see more variation within that group as well, which is worth paying attention to.  There are a couple of things we’re watching closely. Higher energy prices could start to weigh on consumers, and central bank policy—especially in the U.S.—is becoming a bit less predictable with the upcoming leadership change. 

That said, nothing here changes the core approach.

We continue to focus on quality, diversification, and long-term discipline. Short-term volatility is part of investing—and often where the best opportunities come from.