Today
A day after the S&P 500 and Nasdaq closed at record highs, U.S. futures are pointing to a lower open this morning, with Canadian futures also trading lower. Beneath the recent strength in the major indexes, market breadth has continued to narrow. Just 233 companies in the S&P 500 closed above their 200-day moving average on Tuesday, down from 368 in August. At the same time, gains have been concentrated among some of the index’s largest technology stocks. Over the past three months, Microsoft and Nvidia contributed about 400 bps based on their current weights, while Meta and Apple were also significant contributors. That concentration has helped the S&P 500 reach new highs even as higher oil prices and interest rates have weighed on other parts of the market. For now, strong earnings and continued enthusiasm around AI have kept the largest technology stocks relatively resilient, but the divergence between the headline index and broader participation remains worth watching.
France’s deteriorating fiscal and political outlook is being repriced across European markets, with investors demanding a larger risk premium to hold French assets. The 10-year French government bond yield has climbed to 4.75%, while its spread over German bunds recently reached 159 bps, the widest since the 2012 eurozone debt crisis, making French bonds the worst-performing among G10 sovereigns this year. Political uncertainty ahead of next year’s presidential election is adding to fiscal concerns, as Marine Le Pen and Jean-Luc Mélenchon emerge as leading contenders while the current government struggles to pass a budget through a divided parliament. Stress is spreading beyond sovereign bonds with the CAC 40 falling -3.9% this year versus a 7% gain for the Stoxx 600, while French banks have underperformed and their credit-default-swap spreads have risen relative to European peers. The euro has also weakened to its lowest level since May 2025, suggesting investors see France’s problems as a potential euro-area problem rather than an isolated domestic issue.
It’s a different story in Brazil, with Brazilian assets rallying after Flávio Bolsonaro’s stronger-than-expected first-round election performance increased expectations for a more market-friendly government and eventual fiscal reform. Strategists are bullish on Brazilian equities, the real, and local bonds if Bolsonaro defeats President Lula in the October 25 runoff. The optimism reflects hopes that a Bolsonaro government would address Brazil’s fiscal imbalance, with the budget deficit approaching 10% of GDP and public debt exceeding 80%, which have contributed to high interest rates and constrained economic growth. Bolsonaro has promised spending restraint, lower taxes, and reduced bureaucracy, but has provided few details, meaning markets are currently giving him the benefit of the doubt. Brazil’s congress is expected to swing to the right, with a more conservative Congress being viewed positively regardless of the presidential outcome because it could constrain fiscally expansionary policies if Lula wins.
Trump’s trade war is fast-tracking Canadian economic policy, giving Mark Carney momentum to streamline regulation and expand energy, transportation, and other major infrastructure as Canada looks to reduce its dependence on the U.S. market. Carney’s Building Canada Strong Act would cut federal project decisions to one year, while at the same time coordinate assessments and give the government more authority to pre-approve projects in designated regions of national interest. The shift is most notable in the energy sector, with the government designating a new west-coast oil pipeline as a project of national interest. Still, critics warn that faster approvals and expanded ministerial discretion could weaken environmental assessments, politicize project decisions, and make Indigenous consultation more difficult. Implementation will also be the next big test for Carney as he looks to make Canada into a more investment-friendly, trade-diversified economy.
Consumer confidence in Canada has weakened, with the Bloomberg Nanos Canadian Confidence Index falling to 50.5 from 50.9 last week and 51.8 just four weeks ago, leaving sentiment only slightly in positive territory. The decline was driven mostly by weakening expectations for the broader economy and housing market, with the expectations sub-index falling to 46.75, well below the 50 threshold. That caution is also showing up in holiday spending plans, with Canadians preparing to cut spending as higher living costs and trade tensions put pressure on household budgets. A forecast from PwC expects an 11% decline from last year to an average of $1,487 per household on gifts, travel, and entertainment. Travel is expected to see the largest decline at 14%, while 75% of consumers plan to take steps to stretch their budgets and 69% expect to purchase less expensive alternatives. If you’re worried about receiving a handmade gift, don’t worry, with consumers still expected to actively shop, although the shopping may be taking place in the sales aisle. Trade tensions are also expected to play a role in holiday shopping, with 54% of consumers willing to pay more for Canadian-made products, 72% actively seeking alternatives to U.S.-made goods, and just over 10% planning cross-border shopping, close to half the 2024 level.
Luxury spending in the U.S. continued to weaken in September, with credit-card data showing purchases fell -6% from a year earlier following -4% declines in both July and August, raising concerns about one of the luxury industry’s most important remaining growth markets. The slowdown comes as brands are already struggling with weakness in China and economic uncertainty stemming from the Iran war, leaving wealthy U.S. consumers that much more important to the sector’s recovery. While higher-end shoppers remain well positioned due to strong equity-markets, spending is becoming more uneven, with leather goods and ready-to-wear remaining strong while watches and luxury jewelry weaken. The decline coincides with falling U.S. consumer confidence and rising Treasury and mortgage rates, which could weigh on economic activity and discretionary spending around the November midterm elections.
Diversion:
High stakes 
