June 2026 Market Update

As we move into summer, investors are once again being reminded that markets rarely travel in a straight line. After reaching new highs earlier in the month, global markets experienced increased volatility as geopolitical tensions in the Middle East intensified. Rising oil prices, higher bond yields, and renewed inflation concerns caused investors to take a more cautious approach. While headlines have focused on global uncertainty, the Canadian story remains somewhat different. Much of the recent increase in inflation has been driven by energy prices rather than widespread price pressures throughout the economy. At the same time, several of the Bank of Canada’s preferred measures of inflation continue to trend lower, suggesting that underlying inflation remains relatively well contained.

Canada: Looking Beyond the Headline Inflation Number

Canada’s inflation rate recently rose to 2.8%, up from 2.4% previously. However, much of this increase can be attributed to higher gasoline and energy prices resulting from global events. When energy is removed from the calculation, inflation remains much closer to the Bank of Canada’s 2% target. We continue to see encouraging signs beneath the surface:

• Grocery inflation has moderated.

• Shelter inflation remains relatively stable.

• Rent increases have slowed nationally.

• Core inflation measures continue to trend lower.

This is important because it suggests that Canada’s inflation challenge is increasingly being driven by external factors rather than excessive domestic demand.

Interest Rates: A Balancing Act

The Bank of Canada continues to face a difficult balancing act. Economic growth has slowed, inflation is largely being driven by energy costs, and consumers continue to feel the effects of higher borrowing costs. As a result, many economists expect the Bank of Canada to proceed cautiously with future rate decisions. While additional rate cuts remain possible later this year, the path forward is likely to be gradual rather than aggressive.

For investors, this environment continues to support attractive yields from fixed income investments while also creating opportunities in select areas of the equity market.

Portfolio Positioning

Throughout May, we made several adjustments across our managed portfolios. We modestly reduced cash holdings from 23% to 18% and trimmed portions of our fixed income U.S exposure, allowing us to selectively increase equity allocations in both US and Canada where we believe long-term opportunities remain attractive. These changes reflect our ongoing process of evaluating risk, valuation, and future return potential, not a change in our overall philosophy. Our portfolios remain diversified and continue to focus on:

• Sustainable income generation

• Capital preservation

• Long-term growth opportunities

• Managing volatility through diversification

• Maintaining flexibility during uncertain periods

While recent geopolitical events have increased short-term volatility, we believe the current environment presents opportunities for patient investors with a long-term perspective.

Staying Focused on What Matters

Periods of uncertainty can create anxiety for investors, particularly when headlines are dominated by geopolitical conflict, inflation concerns, or market pullbacks. History has consistently shown that successful investing is not about reacting to every headline. Instead, it is about maintaining a disciplined strategy, remaining diversified, and staying focused on long-term financial goals. The portfolios we manage are designed with this philosophy in mind. While markets may experience periods of volatility, our focus remains on helping clients generate reliable income, preserve capital, and participate in long-term growth opportunities.

Bottom Line

As we enter the second half of 2026, we continue to monitor three key themes:

• Inflation and the impact of higher energy prices.

• Future Bank of Canada interest rate decisions.

• Economic growth trends in both Canada and the United States.

Although uncertainty remains, many of the underlying fundamentals we monitor continue to improve. Inflation outside of energy is moderating, interest rates have moved well below their peak levels, and many high-quality companies continue to demonstrate resilience. As always, we remain focused on protecting client capital while positioning portfolios to participate in future opportunities.

If you have any questions or need anything, please remember we are always here for you.

With Kind regards,  

Your SilverBirch Wealth Management Team