Daily Commentary

MarketMinder’s View: Not only did Canadian GDP grow 3.3% annualized in Q2, but Q1 got revised from a slight contraction to slight growth (0.3%). This is key because it erases the sequential quarterly slides some called a “technical recession,” putting the economy on even stronger footing than everyone suspected heading into the latest tariff spat. (We never really bought that labeling and this revision illustrates why.) As for Q2, while the FIFA World Cup gets some credit for boosting hospitality, that doesn’t explain business investment’s 2.3% annualized growth. Businesses’ continued willingness to take risk defies warnings of tariff madness raising uncertainty and knocking growth. Those worries linger, as the article’s final paragraphs indicate, illustrating Canada still has plenty of room between reality and expectations—a bullish backdrop for local stocks.

MarketMinder’s View: The meaning here is a little hard to parse if you don’t know how the UK’s capital gains tax system works, so here are the basics. The UK’s tax year runs from April 6 – April 5. So capital gains taxes collected in tax year 2024 – 2025 would include taxes paid on gains realized between April 6, 2024 and April 5, 2025. Complicating matters, the UK’s capital gains rates rose for assets sold on or after October 30, 2024, to 18% for lower tax brackets and 24% for higher. The tax-free allowance also dropped in April 2024. So this record tax haul in 2024 – 2025 stemmed partly from people racing to sell ahead of feared capital gains tax changes and partly from the tax base widening as rates rose. The lack of granularity makes it hard to parse the frontrunning from the tax hike, but a government writeup notes almost half of the tax take came “from those who made gains of £5 million or more,” which may hint at frontrunning feared changes. (See the “Capital Gains Tax Commentary” at Gov.uk for more.) This would all be trivia, but the government is reportedly mulling another capital gains tax hike in October, leading some to warn doing so will reduce revenues as it discourages selling. These data don’t address that claim, and we won’t get a clearer look until the 2025 – 2026 tax figures come out in a year (they are always delayed because Brits report and pay capital gains taxes on stocks in the tax year after the sale). We have crunched some numbers and found capital gains tax revenues correlate more with market cycles than tax rate changes, which may be some handy information if tax rates do rise and fears of it backfiring on public revenues knock sentiment. At any rate, for now, note that UK stocks did just fine alongside 2024’s capital gains tax hike, handsomely beating the rest of Europe (an apt comparison given regional fundamentals and the relative lack of Tech, which boosted US and global returns that year).

MarketMinder’s View: First, this article dives into politics in France, so please note we favor no politician nor any political party, assessing matters solely for their potential effects on markets and the economy. As this piece points out, France’s 10-year bond yield has hit its highest level since 2008 and spreads against Germany hit levels seen during the eurozone sovereign debt crisis as, “Investors have warned about a ‘nightmare scenario’ for France’s public finances in the event of a run-off between National Rally’s Ms Le Pen and hard-Left firebrand Jean-Luc Mélenchon. France’s public debt exceeds 116pc of GDP, and concerns remain that it will rise as polling shows National Rally’s Ms Le Pen leading the race to succeed Emmanuel Macron.” Concerns around Le Pen stem chiefly from her plan to reject most austerity measures and potentially blow out the budget deficit. Mélenchon has fanned fear by suggest he will subject French debt to the guillotine, taking about 18% of French OATs owned by the government itself and just cancelling them. This all sounds very scary, but let us dive a bit deeper to add critical context. First, anchoring a number to 2008 evokes fear because of the global financial crisis, but a look at history implies there is nothing special about a 4% French 10-year bond yield (and French sovereign debt wasn’t part of the 2008 story). Per FactSet, French 10-year yields exceeded 4% for most of the late 1990s and early 2000s—yet those weren’t disastrous times for the French economy or markets. That 10-year French debt yields were below 4% for most of the past 15 years is in line with the low-rate environment by historical standards globally (see the US for more). Second, on spreads: Yes, French 10-year yields are about 0.86 percentage point above Germany’s, a spread seen from October 2011 through July 2012 (data from FactSet). Yet it was also at or above this mark at points in 2024 and 2025. Here is the key: In neither case did a French debt calamity ensue. The eurozone debt crisis was about Greece, Portugal, Ireland and to a lesser extent, Spain and Italy. Those spreads were FAR higher than this. Last, it is a stretch at this juncture to proclaim either Le Pen or Mélenchon will be the next French president. The presidential election is set for April 18, 2027. A lot can change between now and then, and when you consider the long, long history of politicians’ cooling down their rhetoric once they enter power, we caution investors against presuming France is on the verge of a financial crisis should either of the supposedly “nightmare” candidates enter power next year. This is doubly true for France, considering how fractured Le Pen’s party is on economic policy. For more, see our July commentary, “Long-Term Forecasts and Court Verdicts: The Latest in British and French Politics.”