Investment update

Weekly insight into the marketplace.

June 23 to June 27, 2025

Markets rallied as Middle East tensions cooled

All four major North American stock indexes closed higher on Monday, driven by anticipation that Iran’s retaliatory attacks for the U.S. airstrikes on its nuclear facilities would be limited. Oil prices tumbled, as Iran opted for a pre-warned missile attack on a U.S. airbase in Qatar, but didn’t take action to disrupt oil supplies through the Strait of Hormuz. Iran’s threats to close the crucial shipping route had caused oil prices to spike in previous days. The Wall Street benchmarks rallied higher on Tuesday, as a fragile Iran-Israel ceasefire appeared to be holding. The Dow gained 1.19%, the S&P 500 was up 1.11%, and the Nasdaq climbed 1.43%. The TSX was also positive, edging up 0.4%, but gains were offset by falling oil prices, which declined 6% on Tuesday. The rally ended on Wednesday despite a second day of de-escalation in the Middle East. The Dow closed 0.3% lower, the TSX shed 0.6%, the S&P 500 remained flat, and the Nasdaq gained 0.3%, as investors parsed congressional testimony from Federal Reserve (the Fed) Chair Jerome Powell. The dip was short lived and markets pushed higher again on Thursday. Shrinking Q1 U.S. Gross Domestic Product data, and an increase in weekly jobless claims, drove the gains and supported the case for a July interest-rate cut. The TSX also closed higher on Thursday. News that the U.S. and China had reached a framework for trade talks helped the S&P 500 and the Nasdaq reach record highs on Friday (the Dow closed 1% higher). The TSX moved in the opposite direction, falling in the week’s final session after President Trump announced he was ending negotiations with Canada over a proposed digital services tax.

Canadian inflation held steady at 1.7%

Despite a new set of driving factors, Statistics Canada’s May inflation report, released Tuesday, showed the same outcome as the April report. On a year-over-year basis, the consumer price index (CPI) increased at a 1.7% rate in May, matching April’s increase. At a high level, shelter and rent prices were the main changes in May. Prices grew at a slower pace, putting the most downward pressure on the index (in April, falling energy prices had the biggest influence). The shelter component was up 3.0% in May, a decrease from April’s 3.4% pace. Rental costs climbed 4.5% versus a 5.2% jump in April. The price for travel tours also helped keep the annual inflation rate in check, declining 0.2% in May after surging 6.7% higher in April. Prices for cellular services, which only fell 5.5% in May (compared to a 10.8% decrease in April,) and the price for new cars (up 4.9% annually versus 4.6% in April) put the most upward pressure on the CPI. There will be one more CPI reading (July 15) before the Bank of Canada’s next interest-rate decision.

Fed Chair Jerome Powell reaffirmed rate-cut stance

Through two days of congressionally mandated sessions on Capitol Hill – Tuesday’s U.S. House of Representatives Financial Services Committee and Wednesday’s Senate Banking Committee – Fed Chair Jerome Powell delivered remarks on the Fed’s monetary policy and answered legislators’ questions. The semi-annual testimony was under more scrutiny than usual, with the impact of U.S. President Donald Trump’s tariffs and trade policies still largely unclear. President Trump has also been highly critical of Powell lately, ramping up personal attacks and suggesting there’s a short list of possible replacements for the central bank’s top job. In his testimony, Powell was steadfast in his wait-and-see approach to cutting interest rates, saying, “We are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.” Pressed on the economic theory that tariffs only provide a one-off shock to prices, Powell said, “That is not a law of nature. If it comes in quickly, and it is over and done, then yes, very likely it is a one-time thing.” He clarified: “It is a risk we feel. As the people who are supposed to keep stable prices, we need to manage that risk. That’s all we’re doing.” Powell’s testimony did little to change the expectation that the Fed will cut rates.