Daily Commentary

MarketMinder’s View: While the focus on inflation is understandable given the public is hyper-attuned to prices, we think this misses the bigger picture more relevant to markets. On inflation, the July personal consumption expenditures (PCE) price index rose 3.7% y/y and the “core” (excluding food and energy) 3.3%, both inflation rates holding steady from June. The article calls the latter a “guidepost” for the Fed, but its actual target is the headline figure, and we doubt the data here predict policy moves no matter how much analysts slice and dice them. But given prices outside energy and semiconductor-related gadgets are largely tame, we don’t think a rate hike would do much—nor does it seem necessary, given money supply is growing far below the white-hot rates that led to 2022’s nosebleed inflation. Meanwhile, highlighting America’s economic resilience, Q2 GDP revisions left 1.5% annualized headline growth intact but lifted consumer spending growth from 3.2% to 3.4%. Now, Q2 is far in stocks’ rearview, which brings us to the buried lede: “[O]rders of major capital goods rebounded last month, led by transportation equipment orders, and shipments of durable goods ‌outside the defense and aerospace sectors pointed to continued brisk business investment in the artificial intelligence space.” Per the Census Bureau, July durable goods orders jumped 1.1% m/m, accelerating from June’s 0.5%, and as today’s orders becomes tomorrow’s production, the growth outlook continues to brighten. But that remains second fiddle in articles like this as false fears receive top billing—a classic recipe serving up more bull market.

MarketMinder’s View: With global trade tensions flaring again as America and Canada rekindle their tit-for-tat, this story helps show a big reason markets aren’t too bothered. (As it mentions specific companies, please note MarketMinder doesn’t make individual security recommendations.) Now, the titular “trade surplus” (exports topping imports) is a meaningless measure. No one considers grocery stores’ “trade surplus” with their customers as an “imbalance,” so Vietnam’s with the US exceeding Mexico’s and China’s is hardly telling. (Adding imports and exports, Mexico remains the US’s largest trading partner, by far, Canada second and China third.) That distraction aside, here are the relevant bits: “After targeting Chinese imports during his first term, the president again hit them with the highest tariffs as part of his ‘Liberation Day’ duties last year. Despite recent efforts to stabilize ties between the two superpowers, the effective tariff rate on Chinese imports was 23.2% in June, according to the Penn Wharton Budget Model, well above the global 7% average. [US President Donald] Trump said his aim was to revive American manufacturing. Instead, the tariffs moved production from China to its southwestern neighbor, Vietnam, where the effective rate stood at 6.5% in June. ... In the first half of this year, U.S. imports from Vietnam reached $123 billion—up 40% from a year earlier, according to federal data. The value of Vietnamese imports during those six months exceeded the $114 billion total for all of 2023.” Vietnam is a prominent example, but the same story of business adaptation to trade barriers applies globally. The amount of trade Liberation Day tariffs affected last year was orders of magnitude more than the latest on Canada—and yet global growth kept chugging along and stocks did great after their initial tantrum when tariffs were announced. Per the Netherlands’ latest CPB World Trade Monitor, global trade volumes hit record highs in June—a lot of it non-US trade, as Canada’s record high exports attest (its US exports remain below their 2022 zenith). US tariffs inspired other countries to sign deals with one another, helping balance US protectionism. Tariffs, like any tax, add costs and can be a headache, especially when seemingly imposed erratically, which makes it difficult for businesses to plan. But also like taxes, they aren’t generally an insurmountable obstacle to conducting commerce. They are just one, and usually not the most important, business consideration—and an even smaller market driver as firms find workarounds.

MarketMinder’s View: Don’t make too much of short-term stock moves, but Canadian stocks’ hitting record highs after America hit Canada with fresh tariffs underscores how trade threats have lost their bite and markets have moved on. The reason: Stocks move on the gap between expectations and reality 3 to 30 months ahead. Not only are the latest tariffs relatively tiny (the headline coverage makes them seem huge) but other factors weigh more. For example, “The Iran war has lifted oil prices, benefiting the energy producers that account for a nearly 17 per cent weighting in the S&P/TSX.” (Since the article names specific companies, we also remind readers MarketMinder doesn’t make individual security recommendations.) “Put it all together and the Canadian stocks benchmark is on pace to outperform the S&P 500 index for a second straight year, rising 16 per cent so far in 2026 in U.S. dollar terms compared with a 12 per cent gain for the U.S. gauge.” Now, we don’t think this has forward-looking implications for Canadian stocks. It is backward-looking, and oil prices don’t look likely to stay so high as markets move on from Middle Eastern disruptions. And if markets are over tariffs, we doubt “relief” from them “will be like a sugar rush,” as the article’s ending suggested. But the broader observation about recent returns is worth bearing in mind when tariff dread inevitably returns elsewhere.