Sunday, September 6, 2026
If you only looked at the TSX’s weekly return, you might think not much happened. The S&P/TSX Composite finished Friday at 36,513.80, down 0.33% on the day and just 0.1% for the week. But underneath that fairly uneventful headline number, quite a bit changed. The Bank of Canada held rates steady but sounded increasingly concerned about inflation. Canada’s labour market lost jobs. The country’s trade surplus narrowed sharply.
Oil jumped again as tensions in the Middle East escalated. And a surprisingly strong U.S. jobs report brought the possibility of another Federal Reserve rate hike right back into the conversation. For Canadian investors, I think the important part isn’t trying to predict whether stocks go up or down this week. It’s recognizing that interest rates, inflation, oil and trade are all starting to pull markets in different directions.
The Bank of Canada Stayed Put — But the Message Changed
The Bank of Canada held its policy rate at 2.25% on Wednesday. That wasn’t particularly surprising. What caught my attention was the reasoning behind the decision. Canadian inflation has been running around 3%, largely because of higher gasoline prices. Inflation excluding gasoline was 2.2% in July, while the Bank’s core measures remained around 2%.
Normally, that would look fairly manageable. The problem is that oil remains elevated, the Middle East conflict continues to disrupt energy markets, and new U.S. tariffs — along with Canada’s retaliatory tariffs — could push costs higher throughout the economy. The Bank specifically said the upside risks to inflation have increased. In my opinion, that matters more than whether the Bank actually raises rates at its next meeting.
For much of the last couple of years, investors became accustomed to asking when rates would come down. We’re now in an environment where rates could stay where they are longer than expected — and another increase can’t simply be dismissed. For long-term investors, I don’t think that changes the basic strategy. But I wouldn’t build a portfolio around the assumption that cheaper money is right around the corner.
Ready to start investing? Click the Qtrade banner below to learn more and open a Qtrade Direct Investing account.
Canada’s Economy Is Sending Mixed Signals
Friday’s Canadian employment report added another layer of uncertainty. Canada lost about 42,000 jobs in August, while the unemployment rate remained at 6.4%. Wage growth also cooled, with average hourly wages up 2.0% from a year earlier. That’s clearly not a strong employment report. At the same time, the Ivey Purchasing Managers Index jumped to 64.3 in August, its highest level since May 2022. Its employment component improved as well, although the prices index rose sharply to 80.4.
That’s the kind of combination that makes the Canadian economy difficult to neatly label right now. Some areas are showing resilience. Others are clearly slowing. Meanwhile, prices remain a problem in parts of the economy. I don’t see much value in trying to force that into either a bullish or bearish narrative. What it tells me is that investors should probably expect uneven conditions rather than assume the entire economy moves in one direction.
Trade Is Becoming Harder to Ignore
One number from this week that I think Canadian investors shouldn’t overlook was Canada’s merchandise trade surplus. It fell from $4.2 billion in June to just $769 million in July. Canadian exports declined 2.3%, while imports increased 2.2%. Exports to the United States dropped particularly sharply. Those numbers came before the newest round of U.S. tariffs had much opportunity to show up in the data. That becomes especially important this week.
Canada’s retaliatory tariffs on roughly $20 billion worth of U.S. goods take effect Tuesday, September 8, with tariffs ranging from 15% to 50% across hundreds of products. This doesn’t mean Canadian businesses suddenly fall apart on Tuesday. But the longer these trade restrictions remain in place, the more I think investors need to pay attention to how individual companies are affected.
A railway, manufacturer, retailer or exporter with significant cross-border exposure could feel these changes very differently than a domestic utility or telecom company. That’s where I think company fundamentals become more important than simply reacting to every new political headline.
The U.S. Just Made the Rate Debate More Complicated
Canadian investors also need to keep watching what’s happening south of the border. The U.S. economy added 162,000 jobs in August, while unemployment remained at 4.1%. That was considerably stronger than expected and immediately increased expectations that the Federal Reserve could raise rates at its September 15–16 meeting. Late Friday, futures markets were pricing roughly a 57% probability of an increase. Why should a Canadian investor care?
Because U.S. interest rates affect global bond yields, currencies, equity valuations and investor sentiment. Higher yields can be particularly uncomfortable for expensive growth stocks because investors suddenly have more attractive alternatives to taking equity risk. That’s one reason I’m watching next week’s U.S. inflation numbers closely. The labour market just gave the Fed more room to raise rates. Inflation may determine whether it actually needs to.
Oil Is Once Again Bigger Than an Energy-Sector Story
Oil had a big week. Brent crude finished Friday at $96.28 per barrel, up 7.6% for the week, while WTI finished at $91.48, gaining almost 10%. Renewed fighting between the United States and Iran and continued disruption around the Strait of Hormuz pushed the geopolitical risk premium back into crude prices. Then on Sunday, OPEC+ decided to keep its October production policy unchanged. The group is still dealing with production and shipping disruptions caused by the conflict. For Canada, higher oil isn’t automatically good or bad.
The positive side: Canadian energy producers can benefit from stronger crude pricing, particularly companies with strong production and manageable costs.
The risk: expensive oil pushes gasoline and transportation costs higher, adds inflation pressure and potentially gives central banks another reason to keep interest rates higher.
That’s why I’m watching oil as a Canadian investor even beyond the energy stocks I own or follow. Right now, crude prices are affecting the broader inflation and interest-rate story.
So Where Does That Leave Canadian Investors?
What surprised me most this week is how well the TSX absorbed all of this. Oil surged. Bond yields remained a concern. Canadian employment declined. Trade data weakened. Rate expectations moved around considerably. And yet the TSX finished the week down only 0.1%. There is a bullish interpretation to that. Canadian companies are still generating profits, resource prices remain supportive for major parts of the index, and markets are showing some resilience despite a difficult macroeconomic backdrop. But there is also a legitimate risk case.
Tariffs are increasing, oil is feeding inflation, borrowing costs may remain elevated, and both Canada and the United States are producing economic data that make the next move from central banks less predictable. My takeaway isn’t that investors should become defensive or aggressive. It’s that this probably isn’t a great environment for making emotional portfolio decisions based on one economic report. I’d rather continue focusing on valuations, balance sheets, cash flow and the quality of the businesses I own.
What I’m Watching This Week
Tuesday, September 8 — Canada’s retaliatory tariffs take effect
This is probably the biggest Canadian-specific development of the week. I’m watching for any response from Washington, signs of renewed negotiations and comments from Canadian companies exposed to the affected industries.
Thursday, September 10 — U.S. Producer Price Index
The August PPI report will provide an early look at whether inflation pressure is building further up the supply chain. With oil and other input costs rising, markets could react strongly to any surprise.
Friday, September 11 — U.S. Consumer Price Index
This could be the biggest market-moving economic release of the week. It arrives only days before the September 15–16 Federal Reserve meeting and could materially shift expectations for U.S. interest rates.
Oil and the Strait of Hormuz
There isn’t one scheduled announcement here, which is exactly the problem. Oil gained sharply last week, and another escalation or de-escalation in the Middle East could quickly affect energy stocks, inflation expectations, bond yields and the Canadian dollar.
Final Thoughts
Heading into this week, I think there are more moving pieces than the TSX’s relatively quiet weekly performance suggests. Canada’s economy isn’t falling apart, but there are clear areas of weakness. The Bank of Canada isn’t rushing to raise rates, but inflation risk has increased. Higher oil prices are helping one of Canada’s most important industries while simultaneously creating problems elsewhere. And now another round of tariffs is about to hit.
For me, that’s a good reminder that markets rarely give investors a perfectly clear picture. I’m not trying to predict exactly where the TSX will be next Friday. I’m paying attention to whether the businesses I own continue to perform well enough to justify owning them for years. That’s still the part of investing I can actually control.
This article represents my personal opinion and is for informational purposes only. It is not financial advice.
Ready to start investing? Click the Qtrade banner below to learn more and open a Qtrade Direct Investing account.
