Market Pulse

Stocks remained exceptionally strong in August, with the S&P 500, S&P/TSX, and EAFE indexes returning 1.91%, 4.79%, and 4.30%, respectively. This robust performance was largely driven by expectations of upcoming rate cuts, which generally support economic growth. Canadian markets outperformed in part due to a 15.9% surge in the basic materials sector.

Earnings growth continued to impress, as FactSet data showed that 81% of companies exceeded EPS and revenue estimates for Q2. While some concerns emerged that short-term earnings were being temporarily boosted by front-loaded purchases to offset higher expected costs, analysts are now revising Q3 and full-year calendar estimates upward. According to FactSet, six of the 11 sectors have seen estimate increases, with Communications, Information Technology, Financials, and Consumer Discretionary leading the way. These upward revisions highlight the underlying resilience of the economy.

In the U.S., unemployment rose to a four-year high of 4.3%, increasing the likelihood of rate cuts in September. However, ongoing uncertainty around tariffs and inflation may lead the Federal Reserve to adopt a cautious approach. This follows a report of job losses for the first time since the pandemic. Canada is also experiencing labor market softness, with 66,000 jobs lost in August and the unemployment rate climbing to 7.1%. While these figures may appear concerning, analysts at Morgan Stanley interpret the weak job numbers as a sign that the economy may have moved past a recession and is beginning to recover.

U.S. small-cap stocks performed exceptionally well in August, returning over 7% and outpacing large-cap counterparts by 5%. The Russell 2000, which tracks small-cap companies, is approaching its November 2021 all-time high, suggesting that small-caps may begin to catch up to larger-cap stocks. Maintaining these gains will likely depend on the anticipated rate cuts, as small-cap companies often rely on debt financing to drive growth. While a rate cut is expected, ongoing monetary easing could be a critical factor in sustaining performance.

Emerging market investments have also attracted increased interest amid expectations of rate cuts. In 2025, emerging markets have outperformed developed markets in overall returns, highlighting the importance of investor diversification. Although U.S. markets have been strong recently, it is uncommon for a single geographic region to consistently outperform over the long term. Geographic diversification should be considered as an essential component of portfolio construction, alongside asset and sector diversification.

All data sourced from FACTSET and Bloomberg L.P.
All data is for the reported month and in local currency.

The Ups & Downs

• CRH plc (CRH) gained 17.63% as the broad materials sector showed extreme strength gaining 15.9%.

• Shares of Apple Inc. (AAPL) rose 11.19% as the company reported year-over-year double digit increases in earnings and revenue.

• Shares of Deere & Co. (DE) fell 9.43% as tariff pressure, competition and weak North American demand have hurt the stock.

• Metro Inc. (MRU.TO) dropped 7.09% as the company missed EPS and revenue expectation, weighing on investor confidence.

All data sourced from FACTSET and SIACharts.
All data is for the reported month and in local currency.

Portfolio Returns

As of August 2025