The Markets (as of close Sept 25, 2025)

The TSX is up 4.1% in September and 20.2% year to date.

The S&P is up 2.2% in September and 12.3% year to date.

The NASDAQ is up 4.3% in September and 15.9% year to date.

 

I am attaching our latest Global Insight article on How BRICs see the World (BRICS = Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia, United Arab Emirates).

 

From our Portfolio Advisory Group (as of September 19, 2025)

Following recent signs of weakening labour market conditions in Canada and the U.S., central banks in both countries have decided to reduce their benchmark interest rates, resuming monetary easing cycles that had been on hold amidst uncertainty in the broader economic and trade policy backdrop. We discuss the decisions, the market reaction, and the potential economic implications in more detail below.

 

Rate Cuts

The Federal Reserve (Fed) lowered its benchmark rate by 0.25% at its meeting this week, a move widely expected by markets and the first cut since December 2024. A series of softer-than-expected labour market data over the summer heightened concerns over a potential growth slowdown, while recent inflation readings showed less tariff pass-through than previously anticipated, giving the Fed room to act to cushion against downside risks in the economy.

The Bank of Canada (BoC) matched the Fed’s decision, reducing rates by a quarter-point this week. A high degree of USMCA compliance in trade flows and the removal of retaliatory tariffs on the U.S. has helped keep inflation in check, opening the window for the BoC to cut rates to support some trade-impacted sectors and a labour market facing rising unemployment. However, the BoC offered little guidance on the future path for monetary easing, with officials stressing that they would be “proceeding carefully” in an uncertain policy and economic environment. For reference, the Bank Rate in Canada is 2.75% and Feds fund rate in the U.S. is 4.25%.

 

Bond yields

Markets had largely priced in the latest rate cuts, which helped push government bond yields lower in Canada and the U.S. over recent weeks. Short-term government bond yields, which are more sensitive to central bank rate decisions, have fallen steadily since mid-July. Meanwhile, longer-term yields, which tend to be shaped more by broader growth and inflation expectations, also declined as markets weighed the prospect of weaker economic momentum ahead. After this week’s rate cut decisions, however, short- and long-term yields have diverged slightly, with short-term rates generally holding on to their recent declines and long-term rates edging modestly higher. This pattern suggests that markets believe these proactive rate cuts could help prolong the economic expansion and maintain stable growth and inflation expectations over the medium term, which tends to prop up longer-term yields.

 

Economic implications

Broadly speaking, rate sensitive areas of the economy should be poised to benefit from easier financial conditions, with housing likely a primary beneficiary. In Canada, housing market activity has picked up recently with existing home sales reaching a 2025 high this month amid relatively lower prices and improved inventory dynamics. However, the sector continues to face some challenges, including affordability constraints, slowing population growth and broader economic uncertainty. Lower financing costs could provide a timely boost to demand in the Canadian housing market. Similar dynamics apply south of the border, where lower mortgage rates could provide relief in a market constrained by affordability challenges and muted builder activity.

Elsewhere, more cyclical segments of financial markets could also benefit from the tailwind of lower borrowing costs, including smaller-sized companies, more economically sensitive sectors and lower-quality corporate borrowers. Nevertheless, a risk worth monitoring is inflation, as an overly aggressive approach to rate cuts could lead to renewed concerns around inflationary pressures, a potential source of market volatility.

 

Takeaways

The evolving balance of risk between inflation and the labour market has led central banks to place a greater emphasis on keeping the labour market on steady footing. Along these lines, the resumption of rate cuts is aimed at countering downside risks, as slowing job creation has become more evident. While easier financial conditions should provide broad support for the economy, there remains significant uncertainty over how far and how fast interest rates will fall, as central banks are also committed to maintaining inflation stability that is aligned with their long-term targets. We will be watching the future path of monetary policy closely alongside government bond yields as central banks navigate the complex tradeoffs between the labour market, inflation, and the broader

economy.

 

Wealth Management

Canada’s new government will release their first budget on Nov 4, 2025. Our firm will be publishing an article following the release.

 

I am attaching an article on tax efficient asset allocation. There are different tax rules for various investments – interest income from bonds/GICs, dividend income particularly from Canadian companies such as RBC stock, and capital gains from growth. I focus heavily on this with clients. TFSA are tax free, in both investment income and in estate with a beneficiary and most people have longer time horizons for their TFSAs so I use equities here for growth over time. In non-registered accounts, I typically use a combination of fixed income and equities – I like dividend paying equities for the tax friendliness of Canadian dividends and capital gains. And in RRSPs/RIF I use more fixed income where time horizon is often shorter, cash flow is needed and the interest income is not taxed. While tax efficiency is important, it is taken into consideration with risk tolerance and investing goals.

 

In the Community

We did It! Our Durham Team completed the RBC Race for the Kids this past week. Our team raised over $5500 for Family Navigation Project at Sunnybrook for Youth Mental health. Overall, $2.8M was raised across the country. Our Durham team was our largest yet with 35 people coming out to run/walk 5 kms. Thank you to all who participated and donated.

 

 

Oshawa Chamber of Commerce had RBC Economist Cynthia Leech out to speak to a group on the outlook of the Canadian Economy. It was nice to participate and network with local business owners and leaders. I noted her one slide from her presentation that shows over 90% of Canadian exports heading to the U.S. are tariff free.

 

Team News

We celebrated Kim’s birthday last week in the office with some Crave Donuts. Crave is a local Whitby business and If you haven’t already tried Crave, I highly recommend them. The crème brulee is my favouite! 

 

Bank branches are closed September 30 but we are open as the markets are open. Our office is closed on Monday October 13 for Thanksgiving.

Happy Thanksgiving!