Markets at highs, policy in flux
Markets reached new highs in July, but beneath the surface, concentration risk and valuation concerns are growing—especially in the U.S., where the top 10 stocks now dominate index performance. Diversification across regions and sectors remains essential. Meanwhile, the Fed held rates steady, but political pressure and stronger-than-expected economic data have clouded the outlook. A dovish pivot seemed likely until late-month surprises—including robust GDP and jobs numbers—prompted markets to reassess. Equity indices pulled back, and yields rose, reflecting renewed uncertainty. On the trade front, Canada faces a 35% tariff on non-CUSMA goods starting August 1, yet markets have responded with surprising calm. While energy and potash are exempt, other sectors may feel the pinch in Q3. Overall, the environment remains supportive but fragile. Advisors should emphasize flexibility, diversification, and a long-term view as policy, politics, and pricing continue to evolve.
The NEI perspective
Markets at all-time highs—stay diversified: Equity markets continued to climb in July, but leadership remains narrow and valuations are stretched—especially in the U.S. Bottom line: Don’t let record highs deter disciplined investing. Diversify across regions and sectors to manage risk.
The Federal Reserve (Fed) holds steady, but uncertainty rises: The Fed kept rates unchanged, but late-month economic surprises and political pressure have clouded the outlook. Bottom line: A less hawkish Fed supports markets, but recent data has rattled rate-cut expectations. Stay flexible.
Tariff risks persist, but markets stay calm: Canada faces a 35% tariff on non-CUSMA goods starting August 1, yet markets have remained resilient. Bottom line: Tariffs are back in focus. Watch for sector-specific impacts, especially in manufacturing and retail.