Despite the TSX index adding more than 25 per cent since the U.S. tariff low, right on the tail of the S&P 500’s almost 30 per cent return, Canadian investors remain concerned about near-term catalysts for future market expectations.
This article is a journalistic opinion piece which has been written based on independent research. It is intended to inform investors and should not be taken as a recommendation or financial advice.
According to Google Gemini’s figures on search results about the Canadian market on August 25, these catalysts include:
- How tariff strong-arming will play out, given Carney’s recent lifting of retaliatory tariffs on goods covered under the USMCA.
- How the trajectory of interest rates will affect economic growth.
- What Big Six Banks’ Q3 2025 earnings slated throughout the upcoming week will signal about market momentum.
Let’s take a closer look, one by one, to get a better handle on the challenges Canadian investors are facing and what opportunities might be found between market fundamentals and market sentiment.
US-Canada tariffs
While a 25 per cent tariff on U.S. cars, steel and aluminum remains in place to counteract the U.S.’s 50 per cent tariff on Canadian steel and aluminum, it’s worth noting that more than 90 per cent of Canadian goods entered the U.S. tariff-free in July thanks to complying with the USMCA, making Carney’s move a symmetrical quid pro quo that favors partnership over rivalry and sets a more amenable mood to ongoing negotiations towards a more wholistic trade agreement.
The countries’ return to a mostly normalized economic relationship is already priced in for Canadian investors, supposing they own an index fund tracking the TSX, but there may still be bargains in your single stock holdings, or in names on your watchlist, that are worth taking advantage of, especially if financial improvements over multi-year periods have been met with falling stock prices. This focus on undervalued high-quality businesses set up for strong long-term growth aligns with a recent McKinsey survey on investors’ most pressing priorities when it comes to portfolio management, with an emphasis on a combination of profitable growth and shareholder value creation.
The survey goes on to mention that “31 per cent of respondents cite AI and technology utilization as a characteristic of a winning company in 2025,” as compared to the 2023 survey, where “AI never came up as an important feature to which investors were paying attention.’ This highlights a burgeoning trend indicative of the broader market’s propensity towards fixation and fickleness, while offering another avenue towards a potential allocation. Investors can take advantage here by removing themselves from AI hype and sticking to time-tested sources of shareholder value, including solving unmet needs and demonstrating financial discipline, positioning themselves to benefit from the ongoing fundamentals tailwind, which is but a heightened expression of the fact that profitability is the only thing that matters over a long-term investment horizon.
Should tariff tensions ease over the coming weeks, it will be a tide that lifts all boats, but it will only be the vessels with the strongest foundations that’re able to chug along, pursuing their growth plans, regardless of the macroeconomic worries of the day.
The state of interest rates
Interest rates, doubtlessly one of these worries, have been on hold at 2.75 per cent in Canada and 4.5 per cent in the United States since Trump announce his tariff regime in March. In response, the Bank of Canada is taking a data-dependent approach, ready to act based on the interplay between a weakening economy (based on slowing wage growth and rising unemployment) and tariffs’ upward pressure on inflation, which came in at 1.9 per cent in June 2025, down from 8.1 per cent in June 2022.
This heightened state of rate uncertainty is causing investors to feel the pressure, leading to decreased spending and a greater focus on the options available to save and make their capital grow in tough economic times. Here are three to consider:
- Moving farther out onto the bond risk curve, supposing your portfolio isn’t as diversified as it should be across duration and credit ratings.
- John Bogle’s famous flip of the saying, “don’t just sit there, do something!”, into “don’t do something, sit there!”, highlighting how successful long-term investing is often about enduring volatility without responding to it with portfolio changes.
- Adding an allocation to dividend stocks or real estate investment trusts (REITs), whose regular distributions can be higher than bonds, but remain contingent on board approval as opposed to bonds’ contractual nature.
Whichever direction you choose, your guiding light shouldn’t be central bankers in suits, but your financial goals, understood through the easy-to-forget fact that long-term stock returns have occurred over much tougher times than the present moment. Practically, this calls for balancing risk and capital preservation into a portfolio tailored to your specific financial situation, optimizing for your ability to stick with it regardless of economic fluctuations.
Big Six Bank earnings
As a barometer for the health of the Canadian economy, the Big Six Banks and how they fare with Q3 2025 earnings this week will likely see investors running for the hills or piling on risk, temporarily spiking or tanking the TSX, but long-term expectations will eventually re-orient to the banks’ new results, leveling out their stock charts as the media moves on to the next story of the week.
With data from LSEG showing that these familiar names, including RBC, TD and Scotiabank, will report a combined C$1.15 billion quarter-over-quarter reduction in loan loss provisions in Q3, with net interest income expected to grow by between 9.3 and 57 per cent, the probability for upside surprises is looking strong.
From a long-term perspective, the Big Six Banks are global industry leaders, a de-facto monopoly in Canada and reliable dividend payers, whose more than a century in business and well-established ability to turn a profit will help them protect financials’ top spot in terms of TSX sector representation – 34.08 per cent according to the Vanguard FTSE Canada All Cap Index ETF – for decades to come.
Does that mean you should invest in them? Absolutely, it does, but only in the sense that they’re an essential part of a globally diversified portfolio, across company size, industry and geography, built to withstand volatility knowing full-well that it’s a market feature and not a bug.
The takeaway here is that short-term economic shifts are unpredictable and therefore not actionable, except for gamblers and traders, whose make-or-break approach has nothing to do with building shareholder value through increasingly attractive income statements. Rather, it’s human creativity and its centuries-long innovation track record that deserves our optimism when it comes to putting money to work.
Join the discussion: Find out what investors are saying about U.S. and Canadian tariffs, inflation and Big Six Bank earnings on Stockhouse’s stock forums and message boards.
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