Podcast
How to Think About AI
Will Simpson and Greg Wise
August 22, 2026
Making sense of the risks, opportunities and what becomes more valuable in an AI world.
Markets took a step back this week, with rising bond yields doing most of the damage. The TSX slipped about 1.0% but continues to hover just below the record highs set earlier this month, while the S&P 500 fell 2.6%, the Nasdaq 3.2%, and Europe 0.9% in Canadian dollar terms, with a firmer loonie adding to the drag on US returns.
Under the surface, the story was more defensive. Gold pushed to a more than two-month high, lifting the miners, while energy stocks rose alongside oil prices. Financials and more retail-sensitive names came under pressure as yields climbed.
The bond market was the main event. The 30-year US Treasury yield jumped to its highest level in nearly 20 years as elevated oil prices kept inflation worries alive and concerns around US government debt resurfaced. The US Fed stepped in midweek, announcing it would at least double its buybacks of 10-, 20- and 30-year debt. That brought about a day of relief before yields resumed their climb, with markets skeptical that the intervention addresses the underlying debt issue. With the Middle East standoff keeping oil above US$90 a barrel and Jackson Hole on deck, the inflation debate isn’t going away quietly.
Closer to home, Canada continues to hold up reasonably well. July inflation came in slightly hot at 3.0%, keeping the Bank of Canada conversation alive, but the overall backdrop remains constructive. Q2 growth is tracking around 3.4% annualized, well ahead of the BoC’s forecast; employment has remained strong, and the loonie posted a third consecutive weekly gain.
The bigger development came overnight on trade. After appearing close to an agreement earlier in the week, Canada-US negotiations broke down late Friday following last-minute changes to the US proposal. The US has now imposed a 50% tariff on roughly $28 billion of Canadian goods, with Canada pledging to respond dollar for dollar and suspending negotiations for the time being.
The important point is that the newly affected goods represent only about 5% of Canada’s exports to the US, so this is not a blanket 50% tariff on Canadian trade. Still, the breakdown marks a meaningful escalation and a sharp reversal from the optimism of only a few days ago. As we’ve seen throughout these negotiations, the backdrop can change quickly, and markets will likely want to see greater clarity and something concrete before pricing in any lasting resolution.
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