Winds of change bring both opportunities and risks

November 2026 Insights & Strategies

Macro Highlights for October

• The BoC raised its policy rate by 25 bps, to 2.50%. The BoC has never done just one hike and then stopped, and with a more proactive policy, intended to keep higher energy costs from seeping into other inflation segments, we now expect to see one or two additional hikes between December and early 2027, bringing the policy rate to 2.75-3.00%. While hikes are driven by energy prices and inflation, another weaker labour report in October (4,700 job losses, unemployment rate rose to 6.7%) may inject caution into the timing of hikes.
• The U.S. Federal Reserve chose to hold its policy rate at 4.00% at its October meeting, despite growing indications of inflation pressures. This essentially locks in expectations of a 25 bp rate hike in the December meeting.
• Commentary from both sides of the border suggest that the Canada-U.S. trade discussions that were derailed in August might be back on the table and moving towards a resolution by the end of the year, before additional Section 232 tariffs are expected to come into effect. Areas of focus will likely be the most recent Section 338 tariffs and counter tariffs, Section 232 tariffs focused on the auto sector, and alcohol prohibitions. The broader USMCA renewal discussion will likely drag into 2027 or 2028.

Financial Markets in October

• October ended in dramatic fashion as several large-tech darlings disappointed in various segments as 3Q26 earnings were released, and investors once again started to worry about return on A.I. investments and cash flow sustainability. Post month-end, the rout in semiconductor stocks has continued as the blue wave has cast doubts on the continuing speed of data centre build-out, with an even more dramatic selloff on November 5 as investors digested the potential for slower growth in A.I. related hardware and affects on other sectors.
• The S&P 500 declined 0.9% in October on both a price and total return basis, bringing year-to-date gains to 10.7% and 11.7%, respectively. In contrast, the S&P 500 Equal Weight Index gained 5.0% on a total return basis, recording its widest monthly outperformance relative to the standard, market-cap-weighted S&P 500 since April 2009. The S&P/TSX Composite advanced 1.1% on a price basis and 1.2% on a total return basis, bringing year-to-date gains to 12.3% and 14.4%, respectively. Excluding Materials, the TSX would have delivered a 4.6% total return for the month.
• Market participation improved significantly in both the U.S. and Canada during October. The number of constituents trading above their 50-day moving averages rose from approximately 100 to 300 in the S&P 500 and from 100 to 200 in the S&P/TSX Composite, signaling a meaningful broadening in market participation despite mixed headline index performance.

Upcoming

• As the dust settles on the mid-term elections, we will be watching to see how President Trump deals with the new political landscape. Without the constraints of concern for election outcomes, will the U.S. escalate military activity against Iran, or will funding constraints from a democratic congress force a more diplomatic and expedited resolution?
• Data centres were a point of discussion amongst various politicians during campaigning, notably in the Texas, Georgia, and Ohio gubernatorial races. Will popular resistance result in a slowing or moratorium on data centre build-outs? In general, we expect shifts in strategies and deferrals, but not outright halts in developments, but will be watching closely.
• With earnings season mostly complete, we will be watching how inflation pressures vary between the U.S. and Canada, and how that could affect the speed of number of interest rate hikes into 2027.