Launch Pad

Giddy up. Fed Chair Kevin Warsh’s highly anticipated Jackson Hole speech will take place today, with investors looking for clearer guidance on the conditions that could prompt the Fed to change interest rates. Since taking office in May, Warsh has reduced forward guidance and emphasized allowing markets and incoming data to drive expectations, but critics argue that his refusal to articulate the Fed’s policy has contributed to uncertainty and rising long-term Treasury yields. The stakes have been raised by Treasury Secretary Scott Bessent’s decision to expand long-dated bond buybacks, creating an uncertain backdrop as fiscal authorities intervene in markets while Warsh pushes for a more hands-off approach. Given how much Warsh has been tight lipped, investors will focus less on an explicit rate forecast and more on whether Warsh clearly explains the Fed’s inflation framework and the economic conditions that would justify either tightening or easing policy. 

Cost of standing firm. Mark Carney’s tough stance against Trump has public support, with 76% of Canadians now backing his decision to suspend trade negotiations. Canada has responded to new U.S. tariffs with dollar-for-dollar levies on $20 billion of U.S. goods and a $7.5 billion support package, but economists warn that Canada’s smaller and highly U.S.-dependent economy cannot sustain a prolonged trade war. The latest U.S. tariffs affect about 5% of Canadian exports and could eventually cost 90,000 jobs, while a full U.S. withdrawal from CUSMA would likely push Canada into recession. Recent surveys also found that 40% worry their jobs are at risk, suggesting political support could weaken as unemployment, inflation, and factory closures become more visible. Carney faces a narrowing window to maintain public backing while trying to diversify Canadian trade and get better terms from the U.S., especially if November’s U.S. midterms fail to constrain Trump’s trade policies. 

China’s industrial profit growth slowed for a third consecutive month in July, adding to signs that the broader economy is losing momentum despite continued strength in tech. Industrial profits rose 11.2% year over year in July, the weakest pace this year, leaving earnings up 17.6% through the first seven months of the year as production, consumption, and investment weakened and price gains moderated. Performance was uneven, with electronics and integrated circuits remaining major drivers of profit growth, while automakers, metals producers, and furniture manufacturers saw steep declines amid weak domestic demand, the property downturn, and slowing infrastructure investment. Private-sector profit growth moderated to 10.9% year to date, while earnings at foreign-invested firms rose just 1.2%. The figures reinforce concerns that AI-related industries are not yet large enough to offset weakness elsewhere in China’s economy. 

Record corporate profits are helping explain the strength of U.S. equities, even as many households remain pessimistic about the economy. Corporate profits rose 9% in Q2, pushing profits to a record share of domestic income, while employee compensation fell to a record-low share, creating a wider gap between the fortunes of corporations and households. That disconnect could become politically significant, especially as the U.S. approaches midterm elections, as consumers continue to struggle with elevated prices and perceived declines in living standards. For markets, however, record earnings and margins remain a tailwind, reinforced by Nvidia’s strong results and guidance. 

That’s a wrap. Canada’s major banks have closed the books on fiscal Q3 earnings, with results  generally exceeding expectations, helped by strong capital-markets activity, contained credit losses, and solid domestic banking results. Capital-markets earnings across the six largest lenders rose an average 35% from a year earlier, led by TD, where the division’s profit rose 87% to a record $743 million on strength in equities and commodities trading, underwriting, and advisory activity. TD reported adjusted EPS of $2.77 versus $2.48 expected, while provisions for credit losses of $917 million were well below forecasts. RBC and CIBC also beat earnings expectations with adjusted EPS of $4.28 and $2.73, respectively. Revenue growth outpaced expenses across the banks, creating positive operating leverage, while profitability improved, including adjusted ROE of 18.1% at RBC, 16.8% at CIBC and 16% at TD. Despite the strong headline results, RBC and CIBC shares declined as investors viewed their earnings beats as more dependent on capital-markets businesses and not on recurring retail and commercial banking earnings. 

What’s in a name? Nobody owns Lake Ontario outright, with jurisdiction shared between Canada and the U.S. The name itself long predates that border. According to the National Museum of the Great Lakes, “Ontario” comes from the Huron word Ontarí’io, meaning “great lake” or “beautiful water.” French explorers and mapmakers used several names for the lake during the 1600s and early 1700s, but the Indigenous-derived Ontario ultimately became the name that endured. Nearly four centuries of history apparently wasn’t enough to save the name, with Trump signing an executive order directing U.S. federal agencies to call it “Lake America.” The order can change the name used on U.S. federal maps and documents, but it does not change the name in Canada, the international border or Canada’s jurisdiction over its portion of the lake. So, two countries, one lake, and potentially two names. Lake Ontario may only be the beginning, with Trump saying he could turn his attention to the oceans next, floating the Atlantic or Pacific as possibilities (we think he was joking). New York Governor Kathy Hochul seemed to put it best pointing out that the acronym for the Great Lakes has gone from “HOMES” to “SHAME”.   

Soybeans are at the highest price levels since January 2024 as strong Chinese purchases from the U.S. boosted optimism that Beijing is working to meet commitments under a trade deal between the world’s two largest economies. The most-active contract rose for a fourth day, and futures are  heading for a third straight weekly advance. According to the USDA, China booked 1.1 mln tons for the next marketing year in the week of Aug. 20, bringing the country’s purchases for the season that starts in September to 6.8 mln tons, compared with none a year earlier. China is the largest importer of soybeans in the world and state-owned firms have driven most purchases of U.S. soybeans, while uncertainty over tariffs and bilateral ties have kept private crushers largely on the sidelines. China has also yet to make significant purchases of other U.S. crops, including corn and wheat, seen as important to meet the wider trade commitment. Drought threatening crops in parts of the U.S. is also fueling supply concerns and supporting prices.