Markets: Green Across the Board
Both the TSX and U.S. indices pushed higher today, driven by optimism around a Trump-Xi summit and signals of potential de-escalation in the U.S.-Iran conflict.
Canada (TSX Composite): Up 204.86 points to 34,246.29, led by technology, financials, and telecoms. Standout mover: Finning International (FTT) jumped 8.7% to $104.97 after posting record Q1 adjusted EPS of $1.02 — up 7% year-over-year — and raising its quarterly dividend by 7.4%. On the downside, Boyd Group Services (BYD) fell 12% to $134.54, the worst performer of the day.
U.S. Markets: The S&P 500 gained 0.74%, the Dow Jones reclaimed 50,000 (+0.79%), and the Nasdaq rose 1.05%. Technology and semiconductors led. U.S. Treasury Secretary Scott Bessent noted that China indicated it would use its influence with Iran to help reopen the Strait of Hormuz — a significant geopolitical signal that eased oil-driven inflation fears momentarily.
Bank of Canada: Holding at 2.25%, But Path Is Unclear
The Bank of Canada held its overnight rate at 2.25% on April 29 — its most recent decision — with the next announcement scheduled for June 10, 2026. Yesterday (May 13), the Bank released its summary of deliberations, with Bloomberg reporting the headline: “Bank of Canada Sees No Clear Rate Path Amid Tariff and Oil Risks.”
The core tension: higher oil prices tied to Middle East conflict are pushing headline CPI toward a projected 2.8% peak in Q2 2026, while trade uncertainty from U.S. tariffs continues to cloud the growth outlook. The Bank’s baseline projects 2026 GDP growth of just 1.2%, recovering to 1.6% in 2027. If oil prices ease and tariffs hold at current levels, rates near 2.25% are seen as appropriate — but policymakers are explicitly not committing to a direction.
Canada’s Spring Economic Update: Sovereign Wealth Fund, Trade Workers, New Financial Crimes Agency
Finance Minister François-Philippe Champagne tabled the Spring Economic Update 2026 — “Canada Strong For All” on April 28, and has been on a cross-country tour promoting it since. Key measures:
- Canada Strong Fund: Canada’s first national sovereign wealth fund, investing in strategic Canadian projects and companies. Includes a retail investment product letting ordinary Canadians participate in returns.
- Team Canada Strong: A plan to recruit and train 80,000–100,000 skilled trade workers by 2030–31 to accelerate housing and infrastructure construction.
- Financial Crimes Agency: Canada’s first federal law enforcement agency dedicated exclusively to financial crime — fraud, money laundering, and related offenses.
- Tariff Response: $1.5 billion in support for tariff-affected industries, including a new $1 billion BDC program and $500 million in additional Regional Tariff Response Initiative funding.
- Deficit: Projected smaller than previously forecast, even as spending rises.
Canadian exports to non-U.S. markets have grown materially as businesses diversify, and the government reports $97 billion in foreign investment secured over the past year alongside 20+ new economic and defence partnerships.
U.S.: Fed Holds, Inflation Stubbornly High, Mortgages Expensive
The Fed funds rate sits at 3.50–3.75%, and J.P. Morgan Global Research now expects it to stay there through the rest of 2026, with the next move potentially a 25 bps hike in Q3 2027 — not a cut.
Why no cuts? April’s CPI came in at 3.8% annually, the highest since May 2023, partly driven by oil prices elevated by the U.S.-Iran conflict. U.S. import prices surged 1.9% in April — four times the forecast — adding further pressure. The 30-year fixed mortgage rate is 6.37% today; the 15-year sits at 5.87%. Rates are expected to stay above 6% for the foreseeable future.
Key Takeaway for Canadian Investors
The Bank of Canada’s 2.25% rate is significantly below the Fed’s 3.50–3.75%, which continues to put downward pressure on the Canadian dollar and makes Canadian fixed-income relatively less attractive. However, the TSX is benefiting from diversified export revenues and strong energy-sector earnings. The sovereign wealth fund announcement is a structural long-term positive but will take years to have market impact. Near-term, watch the June 10 Bank of Canada decision and oil price trajectory — those two variables will drive the next leg for Canadian markets.