Intelligent Investment
De-escalating the Re-escalation
Canada Monthly Market Commentary - July 2026
July 30, 2026 2 Minute Read
Volatility once again defined global markets in July. The preliminary peace deal between the U.S. and Iran last month unraveled and hostilities resumed and expanded. Brent crude oil prices briefly spiked back over US$100 a barrel and bond yields surged on renewed inflation concerns. But a short tentative pause in attacks and new discussions on re-opening the Strait of Hormuz have helped oil prices and yields reverse somewhat. With allegedly a “good chance” for a new deal between the U.S. and Iran, the situation remains unresolved and complicated as strikes start back up again.
Against an already volatile global backdrop, U.S. trade policy continues to add pressure on Canada. CUSMA was not renewed and instead the agreement now falls into a sunset phase with annual reviews through to 2036. While the deal remains in force during this time, this outcome puts Canada into a potentially recurring cycle of uncertainty. Then the U.S. also re-escalated its tariff measures against Canada with new 50% duties on a raft of goods with no CUSMA exemptions, citing discrimination against U.S. commerce. Expiring U.S. global tariffs have also been replaced with new “forced labour” tariffs ranging from 10%-12.5% for 60 countries including Canada, although the CUSMA exemption does remain in this instance. However, trade negotiations between Canada and the U.S. are set to “intensify” in the coming weeks and the U.S. may look to sign an interim deal before the end of the year.
Amid all these developments, the Bank of Canada has continued to hold the policy interest rate at 2.25%. While the central bank has revised down its 2026 GDP growth forecast to 0.7% from the 1.2% projected in April, this was largely an adjustment from a weaker-than-expected Q1. In fact, the Bank of Canada expects GDP growth in Q2 to be 2.5% annualized, suggesting the economic recovery is already underway. However, in terms of the interest rate outlook, the central bank is grappling with risks on both sides. Continued pressure from high oil prices could feed through to broader inflation and require interest rate hikes. But a stronger economic slowdown from trade headwinds could also necessitate interest rate cuts. While neither scenario are the base case for the central bank, it is explicitly leaving both options open and watching incoming data closely.
Meanwhile, real estate investment activity has been building momentum and setting the stage for a stronger H2 2026. According to the CBRE Canadian Cap Rates & Investment Insights Q2 2026 report, the national average all-properties cap rate has continued to gradually compress with decreases across most asset classes in Q2 2026. However, with bond yields volatile, real estate cap rate spreads remain in flux. With a few significant M&A transactions also set to close in the year, commercial real estate investment volumes could surpass $62 billion in 2026 and set a new all-time record.
Economic Highlights:
- Employment rose by 18,200 jobs in June 2026 and the unemployment rate edged lower to 6.5%.
- Headline inflation cooled to 2.8% in June 2026 on moderating gas prices, while core measures CPI-Median and CPI-Trim fell to 1.9% and 1.8%, respectively.
- Retail sales grew 1.0% month-over-month in May 2026, marking the fifth consecutive month of increase.
Viewpoints:
- US declines to extend North American trade deal, starting clock to end it while seeking changes
- U.S. aiming for interim deals with Canada, Mexico by end of year, top Trump trade official says
- U.S. says it will hit Canada with new 50% tariffs over autos, alcohol and dairy disputes
- Trump slaps 60 economies, including Canada, with new tariffs over forced labour
- Bank of Canada holds key rate steady at 2.25%, predicts economic rebound
- CBRE Canadian Cap Rates & Investment Insights Q2 2026
- Brent oil jumps back above $90 after Trump threatens to hit Iran hard
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Brief | Intelligent Investment
De-escalating the Re-escalation
Volatility once again defined global markets in July. The preliminary peace deal between the U.S. and Iran last month unraveled and hostilities resumed and expanded.
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Brief | Intelligent Investment
Cautious Passage
Optimism for an end to the conflict in the Middle East remains high following the signing of a 14-point memorandum of understanding between the U.S. and Iran.
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Hope On The Horizon
Global financial markets are buoyant in the hope of an end to the Middle East conflict.
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