Market Update September 2025
This past month, equities delivered strong performance in Canada and the U.S., with commodities and currencies also making notable moves. Here’s how markets played out last month, and how we’ve positioned portfolios in response.
How Did the Markets Perform in August?
Markets posted broad-based gains despite ongoing political and trade uncertainty.
S&P/TSX ↑5.0% – Strength was led by Materials (+15.9%), with further support from Health Care (+9.2%) and Small Caps (+9.3%). Industrials and Consumer Discretionary were flat.
S&P 500 ↑2.0% – Materials and Health Care each rose about 5%. U.S. Small Caps outperformed with a +7.1% gain, supported by expectations of future Fed rate cuts.
Gold ↑4.4% – Demand remained strong as investors continued to move into gold amid rising global deficit spending.
Oil ↑6.1% – The second-strongest monthly gain of 2025, driven by the Iran–Israel conflict and U.S. retaliation.
Interest Rates, Inflation, and Employment
Interest Rates:
Bank of Canada – Held rates steady in August (next decision: September 17). Markets expect cuts toward 2.25% by year-end.
U.S. Federal Reserve – Markets are pricing in a 90%+ probability of a 25 bps cut at the September 17 meeting, though a 50 bps cut has not been ruled out. Fed Chair Powell remains cautious, citing inflationary risks from the Trump administration's policies.
Inflation:
Canada – CPI fell to 1.7% in August (from 1.9% in July), driven by a -16.1% drop in gasoline prices. Groceries and rent, however, remain elevated.
U.S. – CPI rose to 2.7% year-over-year, with Core CPI at 3.1%. Traders increased bets on September rate cuts following the report.
Unemployment:
Canada – Rose to 7.1%, the highest since May 2016, as 66,000 jobs were lost, mainly part-time.
U.S. – Rose to 4.3%, the highest since October 2021, with only 22,000 jobs added versus expectations of 76,500.
Portfolio Adjustments in July
We made no trades last month, as the adjustments over the past four months have already positioned portfolios appropriately. Looking ahead, if conditions remain steady, we may reduce cash and fixed income by 2–3% and reallocate to equities or make a modest increase to gold as a hedge.
What We’re Watching
Rate decisions - Canadian and U.S. announcements on September 17 will be pivotal for markets.
Equities - Small caps and cyclical sectors continue to benefit from expectations of lower rates.
Gold - Remains an important hedge as fiscal spending increases globally.
Oil - Prices remain volatile amid ongoing geopolitical risk.
Bottom Line
Your portfolio remains structured to protect capital, generate consistent income, and capture opportunities as they arise. Political headlines and tariff disputes will likely continue, but our focus remains on fundamentals: earnings strength, economic resilience, and prudent risk management.
If you’d like to talk through these updates or what they mean for your portfolio, please reach out. We’re always here for you.
