Investor sentiment improved in August, driven by hopes of rate cuts and extended trade truces. Canada’s GDP dropped, reflecting export challenges and business pullbacks. U.S. policy shifts and retail sector pressures added complexity to the global outlook.
September 4, 2025
Introduction
Global equity markets moved higher over the month of August. More clarity towards the global trade environment and suggestions that the U.S. Federal Reserve Board (Fed) could lower interest rates at an upcoming meeting boosted investor confidence. The U.S. economy estimate for growth in the second quarter was upwardly revised, benefiting from a steep drop in imports. Inflation remained elevated in some economies around the world, with concerns mounting that tariffs could push inflation higher.
Canada’s economy shrank over the second quarter of 2025, in large part due to a decline in exports and business investment. The labour market has shown signs of weakness in recent months, which is expected to weigh on consumer activity in the months to come. Inflation remains below the Bank of Canada’s (BoC) 2% target.
The S&P/TSX Composite Index reached a new record high at the end of August. Canada’s main index got strong performances from the materials and health care sectors. U.S. equities edged higher. Yields on 10-year government bonds in Canada and the U.S. declined. The price of oil declined, while gold prices finished higher.
At the end of the month, the U.S. Court of Appeals for the Federal Circuit upheld a May ruling by the Court of International Trade that U.S. President Donald Trump’s ‘Liberation Day’ tariffs were illegal. President Trump has said that he will appeal the decision to the U.S. Supreme Court. The decision impacts the extra duties on Canada, Mexico and China.
