July 2026 Market Update
Looking Beyond the Headlines
As we move into the second half of 2026, markets continue to navigate inflation concerns, interest rate uncertainty, geopolitical tensions, and ongoing trade discussions. While headlines can create short-term volatility, we remain focused on the long-term opportunities that continue to emerge.
One of the biggest themes this month has been the review of the Canada-United States-Mexico Agreement (CUSMA). While much of the attention has been on potential risks, the bigger opportunity may be Canada's ability to benefit from increased investment in energy, infrastructure, critical minerals, and artificial intelligence. Canada remains well-positioned thanks to its stable financial system, abundant natural resources, and strong trade relationships across North America.
Inflation and Interest Rates
Inflation remains above the Bank of Canada's target, with the Consumer Price Index (CPI) rising 3.2% primarily due to higher gasoline and transportation costs. Excluding gasoline, inflation remains much closer to the Bank's target range.
The Bank of Canada held its overnight lending rate at 2.25% in June, maintaining a cautious approach as it balances inflation concerns against slower economic growth.
Portfolio Positioning
During the quarter, we made several modest adjustments across our portfolios.
Increased Equity Exposure
We increased equity exposure modestly as we continue to see attractive opportunities in quality companies with strong long-term growth potential. Areas such as infrastructure, artificial intelligence, energy, and industrial innovation continue to benefit from powerful long-term trends.
Reduced Fixed Income Exposure
While fixed income remains an important component of diversified portfolios, we reduced our exposure modestly as we found more attractive opportunities elsewhere. In today's environment, select equities continue to offer better long-term growth and income potential.
Maintaining Higher Cash Levels
We continue to hold slightly higher cash levels than normal.
Cash currently serves several important purposes:
Provides stability during periods of market volatility.
Creates flexibility to take advantage of buying opportunities.
Generates attractive yields.
Carries less interest rate risk than many longer-term fixed income investments.
As market conditions change, we will continue to adjust portfolio positioning accordingly.
Income and Risk Management Remain Our Priority
Many of our clients rely on their portfolios to help support their lifestyle and retirement income. While market headlines focus on inflation, interest rates and trade negotiations, our focus remains on ensuring your portfolio continues to generate income while managing risk appropriately.
This is one of the reasons we increased equity exposure modestly during the quarter. We continue to find opportunities in high-quality businesses that can provide both income and long-term growth potential.
At the same time, we reduced some fixed income holdings and maintained higher cash levels. This helps provide stability, preserves flexibility, and allows us to take advantage of opportunities when markets become volatile.
Our objective remains unchanged: to generate dependable income, preserve capital, manage risk prudently, and position clients to benefit from long-term growth opportunities.
Bottom Line
Despite ongoing uncertainty, the overall backdrop remains constructive. Inflation appears manageable, interest rates may be stabilizing, and long-term opportunities continue to emerge in areas such as energy, infrastructure, artificial intelligence, and Canadian resource development.
While markets may experience periods of volatility, we believe maintaining a disciplined, long-term approach remains the best path forward.
As always, thank you for your continued trust and confidence. We appreciate the opportunity to help guide you and your family toward your financial goals.
If you have any questions or need anything, please remember we are always here for you.
With Kind regards,
Your SilverBirch Wealth Management Team
