Issue No. 73

September saw broad weakness across equity and fixed income markets as investors navigated a challenging macroeconomic backdrop. Rising bond yields, persistent inflation concerns and uncertainty surrounding trade policy weighed on investor sentiment throughout the month. Ongoing geopolitical friction between the U.S. and Iran kept global energy supplies in focus, contributing to volatility across commodity markets. While most equity sectors moved lower, technology-related companies showed relative resilience amid continued optimism surrounding artificial intelligence investment and corporate earnings. Commodity returns were mixed, with WTI crude oil gaining amid ongoing supply concerns, while gold declined despite heightened market uncertainty and natural gas moved lower.

Here are some of September’s most notable events:

U.S.-Iran negotiations resume. Optimism rose late in the month after reports emerged that both sides were discussing a phased agreement to reopen the Strait of Hormuz, including the removal of the U.S. naval blockade. However, the proposed framework resembles a similar agreement reached in June that ultimately collapsed, highlighting the challenges of reaching a lasting resolution. The conflict's impact has extended beyond energy markets, contributing to the broader rise in driving up global bond yields to multi-year highs.

Rising yields signal a new era for investors. Global bond yields moved higher in September as investors weighed the impact of persistent inflation, elevated government borrowing and continued geopolitical tensions. In September, central bank paths diverged: the Bank of Canada left its policy rate unchanged at 2.25%, noting that uncertainty surrounding trade disputes and geopolitical developments continued to cloud the outlook. Whereas later in the month, both the U.S. Federal Reserve (the Fed) and European Central Bank raised interest rates by 0.25%, reinforcing expectations that borrowing costs may remain elevated for longer.  Importantly, for the Fed, this marked its first return to policy tightening since 2023.[CC1] [CP2]

Trade discussions highlight the importance of diversification. Canada imposed reciprocal tariffs on selected U.S. imports on September 8, while later that day President Trump signed executive orders banning certain Canadian imports and introducing new tariffs on selected products, with additional U.S. import restrictions scheduled to take effect on September 29. The longstanding economic ties between the two countries remained an important foundation for trade and investment. At the same time, Canada continued to explore opportunities to diversify its international partnerships and reduce reliance on any single market. As policymakers and businesses navigate an evolving trade landscape, efforts to broaden trade relationships and strengthen global economic connections have taken on increased importance, helping support a more diversified and adaptable economy.

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