Fall economic update
Explore the economic trends, market developments and investment themes shaping the Canadian financial landscape.
What happened over summer
Heading into fall, investors have been closely watching key developments in Canada’s economy and global financial markets. Economic growth strengthened through the summer, but rising energy prices, renewed inflation concerns and growing uncertainty around the interest-rate outlook influenced market sentiment. Despite periods of volatility, Canadian and U.S. stock markets remain resilient as investors look toward year-end.
Canadian economy at a glance
| Indicator | Current | Direction YTD |
|---|---|---|
| Prime Rate | 4.45% | → |
| Inflation | 3.0% | ↑ |
| Unemployment | 6.4% | ↓ |
| TSX Composite | 35,235.87 | ↑ |
| Canadian Dollar | US$0.7048 | ↓ |
| 10-Year GoC Yield | 3.99% | ↑ |
Performance ending September 30, 2026. Direction YTD indicates whether each measure is generally higher, lower or little changed compared to the start of the year. Sources: Morningstar Direct, Bank of Canada and Statistics Canada.
What we’re watching
- Interest rates: The Bank of Canada maintained its benchmark interest rate at 2.25% on September 2. While policy-makers noted that inflation and economic growth have evolved broadly as expected, they also warned that inflation risks are increasing and signalled they are prepared to raise rates if necessary.
- Inflation: Inflation remained above the Bank of Canada's 2% target through the summer, rising from 2.8% in June and holding steady at 3.0% in both July and August. Much of the increase was linked to higher energy prices.
- Employment: After adding 75,000 jobs in July, Canada’s labour market lost momentum in August, shedding 42,000 positions. The decline ended three consecutive months of job growth, although the unemployment rate stabilized at 6.4% after trending higher in May and June.
- Housing: Housing activity remained relatively stable through the summer. After rising 0.5% in both June and July, home sales slipped 0.7% in August, while prices remained largely unchanged. New listings increased 3.3%, suggesting more choice for buyers.
- Economic growth: Canada’s economy strengthened through the spring and summer, with gross domestic product (GDP) rising 0.8% (3.3% annualized) in the second quarter. Early first-quarter data raised concerns that the country may be slipping into a recession, but subsequent revisions suggested the economy was more resilient than initially thought.
What this means for investors
The Canadian economy entered the fall in solid shape, but challenges remain. For investors, these developments reinforce the importance of maintaining a long-term perspective and a diversified portfolio that can help navigate changing market conditions.
What the TSX is telling investors
One surprise through 2026 has been the resilience of Canadian stocks. Despite ongoing trade tensions, questions about economic growth and uncertainty around interest rates, the Canadian market has continued to deliver strong returns. By the end of August, the TSX had gained more than 15% year to date.
Unlike the U.S., where technology stocks captured much of the attention, Canada’s gains were supported by financials, materials and energy. Strong bank earnings and higher gold and copper prices helped drive performance, despite ongoing uncertainty surrounding trade and economic growth. The TSX’s resilience demonstrates that markets often focus on longer-term opportunities rather than short-term headlines.
The takeaway is simple: opportunities can emerge in unexpected places. Maintaining a diversified portfolio with mutual funds and segregated funds can help ensure you’re positioned to benefit when different sectors, industries and investment styles take their turn in the spotlight.
Looking beyond Canada’s borders
In the U.S., much of the market’s momentum has continued to come from technology companies that benefit from ongoing investment in AI. Strong earnings from several large tech firms helped reinforce confidence that businesses remain willing to invest heavily in AI-related infrastructure, cloud computing and digital innovation.
At the same time, investors have had to navigate a complex mix of economic and geopolitical developments. Throughout the summer, markets reacted to renewed tensions between the U.S. and Iran. The conflict contributed to higher oil prices and raised inflation concerns, reminding investors that events far from home can have ripple effects across domestic financial markets.
One trend worth watching: The AI story is moving beyond Big Tech
Artificial intelligence (AI) remains one of the most influential forces shaping financial markets, but the story is no longer limited to a handful of large tech companies. As businesses continue investing in AI capabilities, the impacts are felt across a broader range of industries and sectors.
Summer earnings reports offered several examples of this shift. While technology companies, such as Microsoft and AMD, highlighted continued demand for cloud computing and AI-related infrastructure, other businesses also benefited. Caterpillar Inc. pointed to growing demand for equipment used in data-centre construction and power-generation projects, while Canadian technology manufacturer Celestica raised its outlook on strength in AI-related infrastructure spending. Shopify also highlighted growing adoption of AI-powered tools among merchants.
This trend reflects a broader evolution in the AI story. What began as a technology-focused investment theme is increasingly extending into areas such as data centres, energy infrastructure, utilities, industrial equipment and communications networks.
Simple ways to stay on track
Whether you’re building wealth, preparing for retirement or drawing income from your investments, fall is a good time to review your financial roadmap and make sure it still reflects your goals and priorities.
- ✓ Review your investment goals
- ✓ Revisit beneficiary designations
- ✓ Check your registered accounts
- ✓ Confirm your risk tolerance still fits your portfolio
- ✓ Schedule an annual investment review
Take a few minutes to confirm that your investment strategy still supports what’s most important to you.
Review the beneficiaries named on your registered accounts and insurance policies to ensure they reflect your current wishes.
Review your registered accounts to identify opportunities to optimize contributions, withdrawals or your overall savings strategy.
Consider whether your goals, time horizon and comfort with market fluctuations have changed over the past year.
Connect with your financial representative to discuss any questions and review your plan, progress and opportunities for the year ahead.
Have you used our helpful online tools?
If you haven’t set up your mutual funds dashboard, contact your financial representative for help. The dashboard lets you easily review your account balances, transaction history, quarterly statements and year-end tax documents. You can also find additional resources, including market commentary, insightful articles and portfolio and product information, to help you make informed investing decisions.
A Co-operators Online Services account is a convenient way to keep tabs on your segregated funds. Through this easy-to-use, secure platform, you can view your personal information, the current value of your investments, contribution percentages and transaction history. You can also see the date you completed an Investor Profile Questionnaire. Access Online Services today!
We’re here for you
Partnering with us helps keep your investment plan on track, so you can feel confident about your financial future. Our experienced portfolio managers can guide your investments through uncertain times, making it easier to stay focused on your goals. Connect with your financial representative when you decide it’s time to review your plan.
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