Launch Pad

On the markets front, S&P 500 and TSX futures are pointing higher this morning after both indexes reached fresh highs last week, as softer economic data reduced expectations for a September Fed rate hike. Attention now turns to the consumer, with Target and Walmart reporting this week after U.S. retail sales unexpectedly fell last month, providing another read on whether consumers are starting to pull back. So far, corporate results have been a source of optimism, with about 85% of reporting S&P 500 companies beating earnings estimates and profits rising 32.7%, while forward guidance remains strong. AI infrastructure remains a major driver, with Big Tech spending expected to exceed $700 billion this year, helping tech companies despite questions about eventual returns on those investments.

Getting a little warm. Year-over-year inflation in Canada rose to 3.0% in July from 2.8% in June, slightly above expectations, mainly due to the Middle East conflict pushing gasoline prices 25.7% higher from a year earlier. Underlying inflation remains more under control, however, with CPI excluding gasoline at 1.9% and the Bank of Canada’s preferred core measures averaging just 1.95%. The economy is also showing signs of strength, with unemployment falling to a two-year low of 6.4% and preliminary data pointing to 3.4% annualized GDP growth in Q2. Travel and airfare prices contributed to inflation amid World Cup demand and higher fuel costs, while grocery inflation slowed to 3.1% and shelter inflation eased to its slowest pace since 2020. Economists are noting that the numbers suggest the rise in headline inflation remains largely energy-driven, with limited evidence so far that higher fuel costs are creating broader inflationary pressures.

More sanctions. The Trump administration is preparing to put additional economic pressure on Iran. Treasury Secretary Scott Bessent is promising to turn up the heat and increase financial pains that go beyond existing sanctions, embargoes, and asset freezes. Potential steps include expanding sanctions on Chinese independent “teapot” refineries that buy Iranian crude and targeting larger Chinese banks involved in processing Iranian transactions, although this risks retaliation from Beijing and could disrupt critical-mineral supplies. The U.S. could also increase enforcement against Iran’s shadow oil fleet, currency exchangers, aviation networks, and entities helping Iran skirt sanctions, though experts warn Iran has created new channels to replace sanctioned ones. Experts have also suggested that the U.S. could pursue secondary tariffs against countries doing business with Iran, but this would require new congressional authority after the Supreme Court struck down the previous legal basis for tariffs.

The rise in proposed U.S. data centres overstates how much AI-related electricity demand is likely needed, as developers flood utilities with speculative and sometimes duplicate connection requests. Recent estimates found that utilities and grid operators will ultimately commit to only about 28% of the 1,066 gigawatts currently requested, with just 123 gigawatts already committed. The inflated pipeline is making it harder for utilities to forecast demand, delaying legitimate projects and potentially raising electricity costs as grids plan expensive infrastructure upgrades around uncertain demand. Utilities are responding with higher application fees and collateral requirements, while Texas has temporarily paused approvals to audit its huge pipeline of requests (maybe everything is bigger in Texas). While AI should still drive growth in electricity consumption, the figures suggests there should be some caution around headline estimates of future data-centre power demand.

Taiwan raised its 2026 economic growth forecast to 11.05% from 9.64%, putting the economy on track for its fastest expansion since 1987 as rising global demand for AI chips and technology boosts exports and manufacturing. Exports are expected to jump about 41% this year, the strongest growth in 50 years, reflecting Taiwan’s role in the AI supply chain through companies like TSMC. The economy expanded 12.93% year over year in Q2, while growth is expected to moderate but remain strong at 6.04% in 2027. The boom is also generating some inflation pressure, with 2026 CPI now forecast at 2.07%, slightly above the central bank’s 2% target. Despite sudden growth and somewhat higher inflation, analysts expect Taiwan’s central bank to keep interest rates unchanged through the end of the year.

Betting on the future. Sports betting is competing with traditional investing among some younger folks, with 26% of Gen Z “investors” saying they consider it a part of their long-term financial strategy. More than half of Gen Z respondents of a recent survey said they redirected money intended for investments toward sports betting at least once over the past year, compared with 31% of millennials, 10% of Gen X, and 4% of boomers. Legal sports betting has grown into an almost $17 billion industry in the U.S. and prediction markets have become more accessible, blurring the line between investing and gambling for younger adults. Anyone who has tried to watch a sporting event without seeing a betting ad probably doesn’t need convincing that the industry has gone mainstream. Higher living costs may also be contributing, as some younger investors turn to higher-risk areas such as sports betting, prediction markets, and crypto in hopes of a big pay day. The survey also points to a shift in how younger adults approach their finances, with 48% of Gen Z respondents saying AI had influenced a financial decision they otherwise would not have made.

Gold prices are higher and extending a two-week advance as weaker U.S. retail sales data weighed on the greenback, making bullion cheaper for most buyers. Gold is now $4,400 after ending the previous week almost 1% higher. Gold’s recovery above the key $4,000-an-ounce threshold has been driven by renewed investor appetite and an increase in central bank purchases, notably from China. Gains last week took the metal above its 100-day moving average for the first time since April, and it continues to hover near that level. The minutes of the Fed’s July policy meeting out Wednesday will also provide some clarity on rate forecasts.