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Hello everyone. Welcome to the weekly roundup. Today we will cover monetary policy, tariffs, and the global economy.

Hello Ben. Hey Eva. Nice day downtown. Sunny, but it's shockingly cold when you go outside. Oh my god. And so it begins. Yes, it does.

Okay. Um, let's get right into it. Powell earlier this week says there's no risk-free path for monetary policy. Are we seeing a tilt towards cushioning the job market at the expense of inflation control? And what does this mean for future rate moves?

Yeah. So that's a great question and point. I mean, I think that what Powell's effectively saying, yes, is that the job number is probably the most important thing that they're looking at right now. One of the challenges that we have with data is the government shutdown. So, the government shutdown was effective October 1st. The next Fed meeting is coming up, as you know, October 29th. So if they don't have any data to use, they're probably going to continue on their path, which is future cuts no matter what if they don't have the numbers that they want. So I think yes, the key focus is the job number. I think that's the same in Canada as well, but I think they're focusing on that over inflation. And you know, when this tariff started I hadn't really thought about it from this perspective but I think we've subsequently talked about it a few times. It appears that the tariffs are causing inflation in the US and deflation elsewhere. If we look at those numbers certainly in Canada, that seems to be the case because our inflation's falling much faster than it is in the US. So I think your point's right. I think the job number is the key data point that they're watching now.

Okay. Some interesting news that came across during the week. Treasury officials indicated that the Trump administration is considering setting price floors across a range of industries to counter China's market tactics. Could this raise costs for consumers and, you know, could this further escalate global trade tensions?

Oh, yeah. I think Trump likes to think of himself as a free market leader. But any of his actions so far has been the opposite of a free market leader. So, you got to put in floors. What's that going to do? That's going to have knock-on effects everywhere. For the most part, a lot of the companies have been absorbing any cost increases, but if you force them into a corner where they have to decide if they're going to continue to be able to survive or not, then they're going to raise prices. So, I don't think setting parameters around what people have to charge or should charge or putting these floors and tactics in place, lets the market decide. Personally, I think it's a terrible idea. As for whether it is going to put pressure on the US consumer, I think yes, at a time where they probably don't need more pressure. I know we put up the chart last week about household net worth being at all-time highs in the US. That's still for a small sliver of the US population, not the masses. So putting floors on, I think, puts more pressure on the masses. So yeah, I think it would be very inflationary.

Okay, speaking on trade, the World Trade Organization raised its 2025 trade growth forecast, but gave a caution about 2026 looking much weaker. What is foiling the short-term optimism and how could this 2026 forecast affect global economic growth?

Yeah. I think that the optimism has just been around the fear that this trade war would steamroll into causing runaway inflation, higher rates, just kind of pressure on an already healing economy. So I think that's been less damaging than originally expected. When you were talking about 25, 30, 40, 50% tariffs—if those things actually went into place across the board that would put massive pressure on people. But it hasn't played out that way; it's been more of a 5% global increase in pressure. That, coupled with financial conditions getting easier, has probably resulted in a surprise to the upside for GDP. If you look at money supply, which we talk about a fair amount, has increased, but generally the ECB's been cutting, Bank of Canada cut until they took a little break and they're back to cutting, and now finally the US is into cutting mode as well. So I think easier financial conditions resulted in better GDP numbers globally.

Okay, back to rate cuts. Markets are currently expecting a cut in this October meeting, another in December and possibly three more next year. How is this easing cycle going to shape investor sentiment and general market direction going forward?

Yep. That's a great question and point. As you referenced with WTO talking about what 2026 will be like and it'll be more of a challenge potentially, I think it's where a lot of economists like to look in long cycles, flatline returns up or down, nothing ever cracks. It's hard to glance off into the future 12, 16, 18 months. The reaction of the central banks to how the economy is evolving will be very important next year. To your point around the rate cuts, yet looks like we'll see another two in the US and then three or four next year. I think three or four next year are completely contingent on what happens to the economy and the jobs numbers over the next short period of time. We have May of next year where there'll be a new head of the Federal Reserve in the US and Chair Powell will be gone. If the likely outcome is a Trump-friendly chair of the Federal Reserve, you could get five, six, seven, eight cuts, depending on how aggressively they want to push this. As you know, end of next year, we have midterms. So, that plays a part too. The Republican party wants to maintain as much power as they can, so making the financial markets pretty rosy by election time will be part of their goals and objectives. If there was nothing done and we went through a normal cycle, I think that's right: 2026 could be challenging economically. So we'll see. But your greater question is what's that mean to the markets?

I think it could mean a number of things. Maybe we bubble up more in equities and they get further extended, but then the more important side is what happens to rates. If we see bond rates start to move lower, that probably helps the economies of the world kick the can down the road a little bit farther. So, instead of a 5% 10- or 30-year bond in the US and Canada, you get a 2 or 3%. It makes financial conditions a bit better for governments and maybe they kick the can down the road a bit further. There's lots to consider. But rates right now where they are could impact markets and the economy next year for sure. Let's see the charts.

Okay, so we are recording this around 1:00 on October 16th. Anything that gets covered in the markets and media between now and then we'll comment on next week as well as we can. As always, if there's any questions you have around some of the things we talk about, please feel free to reach out to us at the time. You mentioned some economic forecasts off the top. This is our most recent from our economics team, broken down by advanced economies and emerging economies. It's a good way to look at it. For Canada, the forecast is the same as this year—1.2% for next year as well. Again, these are all contingent on how things play out short to medium-term. In the US, again, forecasting pretty similar returns. Overall, advanced economies have a similar return profile for economic activity next year. For emerging countries, China is an important one to watch because if we see a deceleration into 2026, that will drag on the global economy. India as well, slight deceleration. Mexico, pretty similar, actually slight acceleration. There's a lot to consider for 2026, but easing financial conditions is really the biggest reason why I think WTO revised their forecast for economic activity. This isn't the market, this is the economies—they are connected, but not one and the same. Important just to think about what and how that might look going forward.

This is to your point and your question off the top: what does the employment number look like and does that have an impact on what the US central bank does? I thought this was a great chart I hadn't seen delivered this way, but it's a good snapshot for us—young people bearing the brunt of labour market weakness. If you look at 20 to 24, that's a really important demographic of people coming out of university and starting to get into the workforce. Now we're starting to creep up close to those 10% levels, which is much more like European unemployment in that age group. If the US is starting to see that, they graduate a lot of people every year, but if they have no place to go into the workforce, that's increasing some of the risks—not only the economy, but the civil unrest the US is experiencing right now. This will be a key point to pay attention to and be conscious of.

This is a little bit more detailed on our expectation for where rates go over the next little while. This forecasting is great for a best-case scenario, but we've had so many changes over the last many years that I tend to look two quarters ahead and say what does this look like? If you're on the US, you're looking at October 15th: target 4.25%. The next meeting is October 29th. It's all but priced in for a 25 basis point cut, so expect that to go to four. In the last meeting of the year, expect that to go to 3.75%. Then we're kind of flatlining out into that 3.5% by the Federal Reserve. I think this is more of a tilt towards let's see what happens when Powell is removed and there's a new Fed chair in, and we'll look at the numbers then. From Canada's perspective, there's many things to look at, but this is what most people pay attention to—the target or overnight rate. Right now in Canada, we're at 2.5%. We're pricing in another two cuts. Maybe it's one cut of 50 basis points or two of 25. We're expecting another two cuts before the end of this year and then sticking down around that 2% level. I met with a number of mortgage advisors yesterday and we discussed what does it look like? My response was we're probably close to the end of the cycle. Does this stop at two? Do we go to 1.75? Do we stop at 2.25? I think we've come close to reaching the bottom of the current cycle from an interest rate perspective, certainly on the short end, and that would be quite key and important to pay attention to. It has many knock-on effects to the economy and borrowing costs, but I think Canada's closer to the end of that. A big driver for what happens from here has to do with that employment number, and we'll have to keep watching that. Canada had an employment number beat last week, but their data has been extremely choppy.

As always, the opinions expressed do not necessarily reflect those of National Bank Financial. I prepared this research and documentation myself. If you have any questions, please feel free to reach out to me or your advisor. Everyone's risk profile is a little bit different, so some of the things we talked about today may not be appropriate for everybody.

Okay, thank you, Ben. You're welcome. What's on the agenda for next week?

For Canada, probably the biggest thing we should pay attention to is CPIs on Tuesday. That will be a big driver of whether they cut or not on October 29th. In Canada, I'd be watching that quite closely. Right now, we still anticipate they cut, but that would be a big piece to watch. If there's a surprise to the upside, then no cuts; surprise to the downside, then a cut is probably locked in. I'd say that's the big one to watch in Canada.

From a market perspective, I continue to watch precious metals and gold. Gold's continued up and over that 4,000 level now for quite some time. Some of these stocks have run much higher than expected. So I'd be watching that and considering what to do, if anything, at this point. We've had a couple of failed rallies in the big picture of the market this week. We had a nice open today and then we're trading down now into early afternoon, which tends to be a sign that maybe the market's getting a bit tired. So I'd be watching to see if that continues. Generally speaking, from an economic perspective, watch the inflation number in Canada. In the US, the thing to watch is when they finally come to an agreement so they can move forward, get back to work, and get rid of this self-imposed cap with their debt levels. The longer they stay in this lockdown period, the longer the data gets muddied, and it's not a great time for that to happen.

Yeah, that's the focus. Thank you. Thank you everyone for listening. Remember to visit, subscribe, and follow us on YouTube and LinkedIn at Heart Investment Group. The link to our daily financial heartbeats will be in the caption of this video and in your email box. For our clients, please reach out to me if you have any questions or if you'd like to book a review meeting with Ben. Thank you everyone and have a good day. Bye. Thanks. Take care.

Hello everyone, and welcome to the weekly roundup. Today, we will be covering tariffs, the global economy, and market sentiments. Ben and Eva are both here, dressed appropriately for sweater season, as autumn has truly arrived even after a pleasant weekend. While it’s sad the warm weather is over, we’re optimistic about getting through the colder days ahead.

Kicking off with tariffs, earlier this week Canadian Prime Minister Mark Carney and US President Donald Trump met to discuss the ongoing tariff situation. Although nothing concrete has emerged from their discussions yet, the USMCA (or NAFTA, as many still refer to it) covers a significant portion of our economic activities in terms of goods and services sent to the US. Currently, this equates to an average tariff of about 5% across all industries. Certain sectors like steel, lumber, and milk are particularly affected due to high tariffs, and solutions are being sought, with optimism for a positive outcome based on President Trump’s history of deal-making. While meetings like these are promising, the actual results remain uncertain, though the general sentiment is positive so far.

Turning to Europe, the recent change in France’s government—with a new Prime Minister and the previous one stepping down quickly—raises questions about the potential impact on the French economy and broader European markets. Interestingly, in France, being named Prime Minister immediately grants a lifetime pension, even after a short tenure, along with a driver and limo for life. Despite these perks, the situation has led to some instability, reflected by rising bond yields and concerns about future developments. Some speculate that President Macron might step down, but currently, he’s seen as a stabilizing force. With the announcement of a new Prime Minister, there’s expectation of conservative leadership and fiscal restraint, especially as the European Central Bank continues to cut rates. These factors may bode well for France, although uncertainty remains high. From an investment perspective, Europe offers attractive valuations (12–14 times earnings), compared to higher multiples in the US (23 times) and Canada (17 times). Opportunities may exist in European markets due to these favourable valuations.

Speaking of valuations, October has seen record highs in both US and Canadian equity markets, predominantly driven by tech and gold stocks. Tech stocks, particularly in the US, have experienced cycles of strong rallies, reminiscent of the late 1990s, but today’s environment is more mature. Recent tech IPOs like Circle and Figma represent established, profitable businesses, unlike the speculative launches of the past. Momentum in major tech names such as Nvidia, Amazon, Apple, and Tesla is largely fuelled by money flows—especially from pension plans and passive ETFs like those managed by Vanguard and BlackRock. As passive ETFs buy indices, they drive up valuations significantly. While valuations matter, they seem less relevant in the current climate, with market momentum setting the tone.

Gold and mining stocks have also surged, with central banks worldwide buying gold instead of US dollars this year, which has been a key factor behind the rally. The mining stocks have appreciated by around 100% this year, but such rapid gains call for caution. The advice has been to take profits from gold and gold miners, with the understanding that no asset class should double in value within six months.

To illustrate these trends, charts were reviewed highlighting technical analysis, fundamental indicators, and market sentiment. One notable opportunity identified was in natural gas stocks, which, after a period of decline, are now showing signs of breaking out as demand increases with the approach of fall and winter, and as energy needs rise due to AI and technology developments. While not recommending outright purchases, there may be merit in considering natural gas stocks for portfolios.

US data from ISI Evercore reveals interesting consumer trends. Despite fears of recession, retail and restaurant activity have picked up, with strong back-to-school spending and increased dining out, contradicting media reports of economic slowdown. US consumer net worth is rising, supported by growing investment accounts and home values, contributing to increased confidence and spending. Financial conditions have also improved with rate cuts and expectations of more. Despite controversy over tariffs, they are generating additional revenue for the US, with significant spending planned for manufacturing and industrial sectors over the next few years, leading to generally positive sentiment shifts. The US consumer, accounting for about 70% of GDP, remains a key driver of economic growth.

As always, the opinions expressed do not necessarily reflect those of National Bank Financial. For personalized advice, clients should consult with their advisor, as each person’s risk tolerance is unique and should be considered in investment decisions.

Looking ahead, with the Canadian market closed on Monday for Thanksgiving, attention will turn to gold and mining stocks, especially to see if the $4,000 level holds for gold. The upcoming meetings on October 29th in both Canada and the US may provide signals on potential rate cuts, which could influence market strategy. After a significant run-up in various sectors, vigilance is required to identify opportunities for profit-taking and new investments. October is historically volatile, so any indicators of a shift in market direction will be closely watched. The US dollar is also a critical factor at the moment, with its recent uptick and corresponding downturn in gold warranting caution.

Thank you, Ben, and thanks to everyone for joining. Please remember to visit, subscribe, and follow us on YouTube and LinkedIn at Hard Investment Group. Daily financial updates will be available in the video caption and your email if subscribed. Clients are encouraged to reach out for questions or to schedule a review meeting. Wishing everyone a great Thanksgiving weekend—take care!