Markets continue to defy expectations, with North American indices—including the S&P 500, NASDAQ, Dow, and TSX—touching new highs. That’s six positive weeks out of the last seven, a strong run despite ongoing risks. This reinforces our approach: using tactical adjustments aimed at managing risk and seeking opportunities, rather than reacting to seasonal predictions like a weak September.

Central Banks Fuel the Rally Recent rate cuts by the Federal Reserve and the Bank of Canada provided the expected boost. The Fed’s 25 bps cut was its first since 2024, and the BoC resumed easing as well. While markets briefly considered a pullback, the prevailing mindset remains “buy the dip”—at least for now.

New Developments: Government Shutdown and Data Gaps This week, a major development has added fresh uncertainty: a U.S. government shutdown began on Wednesday, halting the release of key economic data including jobs and inflation reports. This leaves the Federal Reserve “flying blind” ahead of its next policy meeting, with experts warning that the lack of data could complicate rate decisions during a turbulent economic period.

Labour Market Softness Job creation is slowing in both the U.S. and Canada. In the U.S., job openings now trail the number of unemployed, and the jobless rate is edging higher. Canada has seen a sharp drop in employment recently, adding to the cautious tone.

Bond Market Signals Despite rate cuts, bond yields have ticked higher. The U.S. 10-year yield rose to 4.13%, and Canadian yields followed suit. This suggests investors remain concerned about inflation, debt levels, and fiscal pressures. 

Equities: A Constructive Outlook Looking ahead, we remain optimistic. Lower rates, tax cuts, and easing trade tensions create a supportive environment for economic growth and corporate profitability into 2026. High-quality businesses are well-positioned to benefit from this broadening recovery.

Sector Rotation and Inflation Watch Leadership is expanding beyond Mega cap tech into financials, healthcare, and consumer discretionary. While market breadth has narrowed—only 56% of S&P 500 stocks are above their 50-day average—opportunities remain across sectors.

Perspective: Market Highs Are Normal While new highs can feel like a peak, history tells a different story. The S&P 500 has hit dozens of new highs in many years—it's a sign of strength, not a warning. As Peter Lynch once said, “Far more money has been lost by investors preparing for corrections than has been lost in the corrections themselves.”

Time in the Market > Timing the Market Trying to time the market often means missing its best days—many of which come right after the worst. Staying invested through cycles is key. Warren Buffett put it best: “The stock market is designed to transfer money from the Active to the Patient.”

Volatility Is the Price of Admission Corrections and rallies are part of the journey. We view volatility as an opportunity to add quality names at better prices—not a reason to retreat.

As always, we’re here to help you navigate these shifts and keep your portfolio aligned with your long-term goals.

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This e-newsletter has been prepared by Christine LaLiberte and expresses the opinions of the author and not necessarily those of Raymond James Ltd. (RJL). Statistics, factual data and other information are from sources RJL believes to be reliable, but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities.

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