- Inflation is ticking higher, with rising oil prices among the factors Bruce Campbell is watching ahead of the latest inflation report.
- Materials, metals and energy are showing strength as commodity prices rise, while higher interest-rate expectations are putting financial stocks in focus.
- Gold has rallied since its mid-year low, closely following the historical seasonal pattern highlighted by Campbell.
- September has historically become more challenging in its second half, before markets enter what has typically been a stronger period toward year-end.
Inflation is moving back onto investors’ radar, and changing expectations for interest rates could have important implications for Canadian resource and financial stocks.
In the latest episode of Markets in Motion, StoneCastle Investment Management portfolio manager Bruce Campbell examines rising inflation expectations, the changing outlook for U.S. interest rates and the sectors showing strength as commodity prices climb.
Campbell points to rising oil prices as one factor contributing to inflationary pressure. With another inflation reading approaching, he says continued strength could increase the likelihood of the U.S. Federal Reserve raising rates.
This article is being disseminated on behalf of StoneCastle Investment Management, a third-party issuer, and is intended for informational purposes only.
That marks a significant change from expectations earlier in the year, when markets anticipated falling rates. Campbell says current market pricing now implies approximately 1.4 rate hikes by year-end — not literally a fractional hike, but a reflection of the probability assigned to future increases.
Resources respond to higher prices
For Canadian investors, the changing inflation environment is already being reflected across several important sectors.
Materials, metals and energy are performing strongly as commodity prices rise, while financials in both Canada and the United States are also responding to changing interest-rate expectations.
Technology has experienced some weakness, although Campbell sees early indications of a potential turn higher that he believes warrants watching over the coming weeks.
Gold has been another standout. Campbell says the metal has followed its historical seasonal pattern remarkably closely, topping around February and March, declining into July and subsequently moving higher.
September volatility before a stronger year-end?
Seasonality could become increasingly important over the next several weeks.
The latter half of September has historically been challenging for equities before markets move into a stronger year-end period. Campbell also points to the U.S. presidential cycle, where the second year has historically been the weakest of the four-year cycle.
As always, he cautions that seasonality isn’t a roadmap. Instead, he compares it to climate: historical tendencies can provide useful context without determining exactly what will happen.
One particularly encouraging historical pattern is fourth-quarter performance. Campbell’s data shows that a significant portion of market returns in the period examined has tended to arrive during the final three months of the year.
With inflation data, the Federal Reserve and a seasonally choppy period all coming into focus, the next few weeks could prove important for investors positioning for the final quarter of 2026.
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