Hello everyone,
And just like that summer is coming to an end. I hope you managed to rest, recharge and enjoy a couple of sunny days, hopefully in nature or the water.
August was eventful on the world stage. The U.N. declared a famine in Gaza, Trump met with Putin in Alaska and escalated U.S. tariffs to their highest levels in nearly a century. Markets found renewed optimism after Jerome Powell’s Jackson Hole speech signaled possible U.S. rate cuts in September. The U.S. Labor market is starting to show some cracks while the full impact of Trump's tariffs is still not reflected inflation yet. The Federal Reserve has indicated that they are more concerned about the labor market than inflation targets at this point. To be continued...
- Mauricio
Economic and Market Update
Despite all the reasons to worry this year—tariffs, trade tensions, and stubborn inflation—the global economy and stock markets have done better than many expected. Investors are now paying closer attention to company earnings and how businesses are handling the uncertainty around U.S. trade policy.
Corporate Earnings: A Pleasant Surprise
- Strong Q2 results: U.S. companies beat expectations in the second quarter. More firms had their earnings forecasts upgraded than downgraded—the best ratio since 2021.
- Tariff effects delayed: Companies stocked up on goods before tariffs took effect, which softened the blow. But the real impact may still be ahead.
- Winners & losers: Automakers and retailers are already feeling the pressure from higher import costs, while big tech continues to shine, boosted by the AI investment boom.
- Looking ahead: Analysts expect healthy profit growth of ~9% in 2025 and ~12% in 2026 for U.S. companies. The global outlook is similar.
Inflation: A Mixed Story
- Producer prices (business costs) are rising, suggesting tariffs are starting to feed into inflation.
- Consumer prices (what households see) remain relatively calm, at least for now.
- This gap makes it hard to know if inflation is cooling for good or about to pick back up
Interest Rates & the Fed
At Jackson Hole, Fed Chair Jerome Powell acknowledged that the labor market is weakening and hinted that rate cuts could begin as soon as September. This was taken as an optimistic signal by markets, since lower rates generally help businesses and borrowers. The Fed is still balancing its two main jobs: keeping inflation under control while supporting employment.
Canada’s Situation
Inflation is cooling, helped by the rollback of the carbon tax.
Canadian exports to the U.S. remain largely tariff-free under the USMCA deal.
The Bank of Canada has left rates unchanged for months and likely won’t cut again soon.
Takeaway for Investors
Markets are holding up thanks to strong company earnings and the prospect of rate cuts later this year. However, trade tensions and tariffs could still push inflation higher. For now, the smart stance is to stay invested but remain watchful.
Business Owner Planning
5 key questions that every business owner should consider, by our Family Office Services team:
- What is my corporate structure?
- What is my business worth?
- What are my exit options? (tip: don't wait to plan for succession)
- What does my retirement look like?
- What would happen if I died yesterday?
These questions address key business owner planning strategies that can potentially help minimize personal and corporate tax, increase retirement income, provide an effective succession plan for your business, and enhance your estate.
If you want to discuss more, please reach out.
A day at the Zoo
Sunday we spent the day at the Zoo in Granby where Nicolas had the opportunity to touch some goats, sting rays, and other animals. He had a blast at the aquarium, and didn't stop running everywhere following the fish through the glass (and us behind him!).
