Launch Pad

Go Canada. Canadian equities have continued to see inflows despite escalating U.S.-Canada trade tensions, with the TSX reaching record highs. On a total return basis, the Canadian benchmark has gained over 16% in U.S.-dollar terms in 2026 versus 12% for the S&P 500, while its largest domestic index ETF (XIC) is heading for an 11th straight month of inflows. Strategists argue that some Trump administration policies have inadvertently supported the market, like elevated oil prices from the Iran war benefitting Canada’s large energy sector, while rising gold prices have boosted materials stocks. The federal government’s push to accelerate mines, pipelines, ports, and other infrastructure to reduce dependence on U.S. trade has also help support construction and industrial companies. Although investors remain cautious about trade-exposed industries and some are taking profits after the strong rally, strategists generally expect tariff-related weakness to be temporary and see the potential for another market boost if Canada and the U.S. return to the negotiating table.

Yesterday’s U.S. PCE price index showed inflation remaining elevated in July, lifting market-implied odds of a September Fed rate hike to about 36%. At the same time, Q2 GDP growth remained unchanged at a modest 1.5% annualized rate, though underlying domestic demand looked much stronger. Consumer spending, which accounts for roughly 70% of economic activity, accelerated to a healthy 3.4% pace, while business investment excluding housing rose 8.5%, helped by the AI investment boom. Housing investment also increased for the first time since late 2024 despite mortgage rates remaining high. With inflation still well above the Fed’s 2% target and fresh tariff pressures emerging from the U.S.-Canada trade dispute, we likely won’t see any rate cuts in the U.S. any time soon.

The U.S. government’s growing debt burden is becoming more sensitive to elevated interest rates, with national debt now above $40 trillion and annual interest costs already around $1 trillion, or roughly 15% of federal spending. With 10-year Treasury yields near 4.7% and 30-year yields above 5%, experts estimate that debt-servicing costs could rise to about $1.5 trillion annually by 2029 at current rate levels, and approach $1.8 trillion if yields increase another 100 bps. There are now worries that this can snowball, with higher debt requiring more borrowing. While Scott Bessent’s expanded long-dated bond buybacks and falling oil prices have provided some short-term relief, investors remain focused on fiscal deficits, heavy government issuance, and rising corporate borrowing to finance AI infrastructure. Without some government spending restraint, lower inflation, and easing geopolitical pressures, bond investors may continue demanding higher yields, keeping financing costs high for the government.

Impact-investing funds struggled during the first half of the year, seeing outflows as relatively high fees and weak performance weighed on demand, with only three of more than 60 impact equity funds tracked by Bloomberg Intelligence outperforming their benchmarks. Broader ESG-labelled funds proved more resilient, attracting roughly $12 billion of net inflows, highlighting a divergence between impact strategies and the wider ESG market. The weakness comes amid a challenging political and regulatory environment for sustainable investing, making fees and investment performance that much more important in determining which funds attract capital. The broader ESG landscape remains mixed, with some companies scaling back clean-energy plans even as sustainable debt issuance continues in the bond market. The data suggests investors have not abandoned ESG-related investing, but are becoming more and more selective about paying higher fees for specialized impact strategies that fail to deliver competitive returns.

Feeling guilty? Nearly three quarters of adults in the U.S. feel at least some guilt about spending money on things they enjoy rather than directing it towards financial goals. The anxiety appears driven less by over-the-top discretionary spending and more by inflation, rising housing costs, and economic uncertainty. About 70% report stress over balancing financial responsibilities with enjoying life, while 77% sometimes cut back, postpone, or forgo enjoyable activities because of financial pressures or competing priorities. Most consumers remain focused on the future with over half of respondents trying to balance long-term goals with current enjoyment with just 8% saying that they prioritize present-day experiences. Despite the unease, more than two-thirds still spend on enjoyable activities at least monthly, suggesting consumer spending remains resilient but more deliberate as households weigh current enjoyment against saving, debt reduction, and retirement goals.

Step aside Usain Bolt. China’s Tiangong Ultra humanoid robot ran 100 metres in 8.86 seconds at the World Humanoid Robot Games in Beijing, more than seven-tenths of a second faster than Usain Bolt’s 9.58-second world record. The performance marks a huge advance in robotics given Tiangong’s 21.50-second winning time at last year’s games. The Beijing Humanoid Robot Innovation Center says its robots have also surpassed human records in the 400 metres, 1,500 metres and high jump, although us humans shouldn’t throw in the towel just yet, with the machines facing reliability challenges and even catching fire after crashing into a stopping mat.


Diversion: Shots fired

Chicago wheat prices extended its rally, hitting a three-year high, as concerns grow that the war between Russia and Ukraine could escalate and further disrupt supplies from one of the world’s most important grains. Recent conflicts have damaged ports and grain terminals, significantly curbing shipments from one of the top wheat exporting regions. Russia and Ukraine account for more than a quarter of global exports, as well as large amounts of barley, corn, and sunflower oil, raising the prospect of another bout of food inflation for consumers already struggling with higher energy and transport costs. Wheat’s rally marks a sudden shift in the global market for the grain, where abundant supplies had kept prices lower.