Podcast
Inflation, Interest Rates and the Fed
Will Simpson and Greg Wise
July 11, 2026
Unpacking market drivers going into the second half of 2026.
A choppier week than the index moves suggest. The TSX squeezed out a small gain of about 0.3% after shedding nearly 1% on Wednesday and clawing it back Thursday on strength in gold miners and financials. U.S. markets were mixed, with the S&P 500 up 0.6%, the Nasdaq up 1.1% and the Dow down 1.0%. A firmer loonie trimmed roughly 25 basis points from each, reversing some of the tailwind we have grown used to.
The whipsaw had a clear source. Fresh U.S. strikes on Iran and a collapsing ceasefire sent oil higher midweek and knocked more than 800 points off the Dow at its intraday low. By Thursday, tankers were still crossing the Strait of Hormuz, oil had retreated and the market decided it had overreacted. That is now the third or fourth time this year markets have priced in a Middle East escalation and reversed the move within 72 hours.
Underneath the geopolitics, the AI trade found its footing. Semiconductors led decisively, helped by SK Hynix’s U.S. listing. Investors rotated into chips and out of the hyper-scalers, a distinction worth watching. Meta was the exception, confirming plans for its first Canadian data centre in Alberta.
There are two things to watch. Existing home sales fell 2.4% in June against expectations for a gain, while a growing chorus argues that equities are not pricing in the possibility of a Fed hike in the second half. Heavy AI capex, resilient consumer spending and firm oil prices are collectively inflationary in the near term.
Our view remains that markets are in the later stages of the cycle, with a higher bar for further gains following a strong first half. Investors have so far looked past the war, higher oil prices and softer economic data, supported by the belief that continued AI investment can sustain growth.
That backdrop may continue to support markets. Late-cycle advances can persist for longer than expected, and our focus is not on trying to predict the exact turning point. We remain positioned to participate in the areas showing leadership while maintaining diversification, managing risk and retaining the flexibility to adjust as market conditions evolve.
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