Market Commentary – Q3 2025

During the month of September:

• September has historically been the worst month of the year for North American stock markets. However, this month has been a positive one for investors with equities in both Canada and the United States generating positive returns.
• On September 17th, The Bank of Canada lowered its benchmark interest rate by 0.25% and signaled that additional rate cuts could be on the way in the coming months. This could provide a spark to the Canadian real estate market, which has seen activity slow, and prices weaken.
• The U.S. Federal Reserve also reduced its overnight interest rate by 0.25%. It is widely expected to lower rates again later this year.
• With interest rates coming down in both Canada and the United States, the loonie gained slightly relative to the U.S. dollar and currently sits at approximately 73 cents.

Hard economic numbers showed that the Canadian economy is stabilizing after the GDP expanded 0.2% in July.  August’s advanced reading is suggesting no growth, and if September numbers hold steady, Canada would avoid a technical recession, with Q3 growth tracking at an annualized 0.7%.

The economic rebound was led by industries hard­est hit by falling exports: oil and gas, manufac­turing, mining, wholesale trade, and transportation.  Transportation in particular saw a boost from activity tied to the LNG Canada project in Kitimat BC- which was built to ship natural gas to Asia rather than the United States. This demonstrates that economic trade diversification beyond the U.S. will continue to help power Canada’s economy and strengthen relationships with global trading partners.

Both Prime Minister Mark Carney and Bank of Canada Governor Tiff Macklem warned of tectonic shifts reshap­ing the global economy, urging Canada to diversify trade and reduce our reliance on the U.S.  Macklem went further, cautioning that tariffs have already hit trade-sensitive industries hard and put the economy on a permanently lower growth path.  Below-trend growth and softer labour demand point to enough slack in the economy to possibly justify another Bank of Canada rate cut in October.

South of the border, both the tech-heavy Nasdaq and S&P 500 notched their best third quarter since 2020 and their best September performance since 2010.  The S&P 500 also recorded its fifth consecutive monthly gain, up 13.7% year-to-date.   AI poster child Nvidia became the world’s first $4 trillion company, and Oracle signed a $300 billion deal with OpenAI to build data centers across the U.S.  The data centers are a part of OpenAI’s Stargate initiative, a new company which intends to invest $500 billion over the next four years building new AI infrastructure for OpenAI in the United States.  This would bring the project’s current planned capacity to nearly seven gigawatts — the equivalent of seven large-scale nuclear reactors.

Meanwhile, the price of gold continued to climb, enjoying a massive 45% increase year-to-date. The precious metal notched its best third quarter since 1986.

U.S. President Donald Trump continued his tariff assault on global trading partners, with a flurry of tariffs announced in Q3. The most recent tariff announcement included 10% tariffs on imported timber and lumber, and 25% duties on kitchen cabinets, bathroom vanities and upholstered furniture.

These actions pile more tariffs on Canada, the biggest softwood lumber supplier to the U.S. Canadian producers already face combined U.S. anti-dumping and anti-subsidy tariffs of about 35% due to a long-stemming dispute over timber harvested from Canadian public lands. The federal government hopes to negotiate U.S. tariff reductions through a broader revamp of the 2020 Canada-U.S.-Mexico Agreement on trade. (CUSMA). It has also mentioned that it would provide up to $1.2 billion in aid to Canadian softwood lumber producers to cope with the prior duties.

Investors have enjoyed another fruitful year so far, but planning is key to continued success. At this stage, given markets, and the time of the year, if you have capital to invest, my recommendation would be to hold off until the new year and re-assess conditions at that time. 

Regards,
Cory Hill
Financial Advisor & Portfolio Manager

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