The bond market takes the wheel
August forced every narrative through one filter: the cost of money. Strong earnings and resilient activity ran up against four linked concerns: dependence on the AI capital-spending cycle, energy-driven inflation risk, a renewed Canada–U.S. trade conflict, and the rising cost of financing large government deficits. New Federal Reserve (Fed) Chair Kevin Warsh sharpened it at Jackson Hole on Aug 28: he gave no steer on rates, called commodity strength an upside inflation risk to watch, and pushed back on forward guidance. Markets were left to price a still-hawkish hold with the 30-year Treasury near a two-decade high. For Canadian investors, the mix was relatively supportive. The domestic market leans on financials, energy, and materials. However, Canada is not insulated: weaker U.S. tech leadership, higher global yields or renewed trade friction spill in quickly.