Hello everyone,

The tale of two indices intensifies: the S&P 500 continues its slide, down another 2.44% (https://ycharts.com/indices/%5ESPX/level), while the S&P/TSX Composite moves upward by another 2.52% (https://ycharts.com/indices/%5ETSX/level) , a significantly stronger forward trend compared to last month.

The downward pressure observed across the S&P 500 throughout July 2026 reflects a multifaceted repricing of market risk, prominently initiated by a sharp correction within the mega-cap technology sector. Following aggressive multi-quarter gains, broader equity markets entered a phase of heightened skepticism regarding the timing and efficiency of corporate capital expenditures on artificial intelligence infrastructure ((https://www.invesco.com/us/en/insights/bull-stock-market-key-signals-to-watch.html). Hyperscale technology firms faced immediate post-earnings revaluations after issuing expanded capital deployment schedules. Most notably, Alphabet raised its 2026 capital expenditure guidance to an unprecedented range of $195 billion to $205 billion while signaling continued elevated investment into 2027 (https://www.schwab.com/learn/story/weekly-traders-outlook). With aggregate industry-wide AI infrastructure spending projected to exceed $700 billion for the fiscal year, institutional investors have increasingly penalized high spending over concerns regarding near-term monetization and return on investment.

This repricing triggered a broader pullback across hardware and semiconductor equities, pulling the Philadelphia Semiconductor Index down from its late-June record highs (https://www.schwab.com/learn/story/weekly-traders-outlook). However, benchmark losses remained somewhat insulated due to a concurrent capital rotation into value and defensive sectors, such as Healthcare and Financials (https://www.schwab.com/learn/story/weekly-traders-outlook).

Compounding technology weakness, macroeconomic headwinds and geopolitical supply shocks further strained valuation multiples during the month. Renewed geopolitical conflict in the Middle East (again), particularly heightened security risks along the Strait of Hormuz, drove a crude oil price increase of approximately 8% across July (https://www.schwab.com/learn/story/weekly-traders-outlook, July 2026). These elevated energy costs, alongside ongoing supply chain bottlenecks in high-bandwidth memory production, reignited market concerns surrounding sticky core inflation and broader input cost pressures. Concurrently, market expectations regarding monetary policy pivoted toward a distinctly hawkish posture under Federal Reserve Chair Kevin Warsh, fueled by resilient labor market indicators and strong underlying economic activity (https://www.schwab.com/learn/story/weekly-traders-outlook).

Fixed-income markets responded by pricing in an elevated probability of an FOMC rate hike at the September meeting rather than previously anticipated easing, triggering a rapid rise in 10-year Treasury yields (https://www.schwab.com/learn/story/weekly-traders-). Driven by the convergence of rising discount rates, energy price shocks, and corporate margin scrutiny, the S&P 500 broke below its 50-day moving average in late July, marking a technical shift in mid-year equity momentum (https://www.schwab.com/learn/story/weekly-traders-outlook).

Meanwhile, back home, the S&P/TSX Composite Index continued its upward trajectory throughout July. The Canadian market benefited significantly from its heavy structural tilt toward resource commodities, which were up 14.5% (https://ycharts.com/indices/%5ESPTTEN/level), month to date. Energy equities served as a primary catalyst for the index, driven higher by an approximate 8% surge in international crude oil prices stemming from geopolitical friction and shipping interruptions in the Strait of Hormuz as stated earlier. This environment of elevated energy prices was further reinforced by stronger-than-expected second-quarter corporate earnings across major Canadian oil and gas producers, including Canadian Natural Resources, Cenovus Energy, and Vermilion Energy, which provided robust support to energy sector valuations and consequently, higher stock prices.

Furthermore, the Canadian technology sector displayed resilience that contrasted sharply with the steep drawdowns in U.S. semiconductor equities. Because the TSX technology index is less weighted toward heavily capitalized AI chipmakers (which experienced post-earnings revaluations in New York), it proved somewhat largely insulated from American chip-stock liquidations. Individual hardware and manufacturing contributors such as Celestica Inc. provided positive momentum following earnings beats, rising over 9.5% in late July (https://ycharts.com/companies/CLS.TO/price). Finally, steady performance from major Canadian banking institutions, including Royal Bank of Canada, TD Bank, CIBC, and Scotiabank, anchored the index as financial sector strength offset elevated bond yield pressures.

Moving into August, this month historically occupies a unique position in stock market seasonality. While long-term data over a century or two shows that August yields a slightly positive average return overall, modern financial market history over the past 30 to 50 years paints August as one of the quieter, more volatile, and historically weaker calendar months for major benchmark indices (https://www.yardeni.com/charts/us-stock-market/stock-market-historical-patterns/sp-500-historical-monthly-annual-returns). Not to be a downer, over the past half-century, August consistently ranks among the bottom three performing months of the year, competing with September for the weakest late-summer stretch (Stock Trader's Almanac, 2024). The probability (I took a stats course this spring…lol) of an index posting a positive monthly return in August hovers around 55% to 57%, which is noticeably lower than stronger spring and late-fall months like April or November, where win rates frequently exceed 65% to 70%.

Several key structural catalysts drive these distinct August dynamics, most notably the phenomenon known as the "summer doldrums." Institutional portfolio managers, desk traders, and corporate executives frequently take vacation during August, causing trading volumes across major exchanges to drop significantly; this thin market liquidity often exaggerates price swings, as relatively minor buying or selling pressures can lead to sharper market movements (https://www.compasscapitalct.com/blog/summer-time-and-the-financial-markets). Furthermore, by early August, most of S&P 500 constituents have already reported their second-quarter corporate earnings, leaving the market in a fundamental vacuum without the fresh impetus of earnings beats to sustain buying momentum.

While markets may keep playing the same hand, what I can tell you from the above is that the secret to portfolio growth this summer wasn't cutting-edge AI neural networks after all, it was just good old-fashioned Canadian oil, maple-flavored banking, and a total lack of silicon chips! Go Canada Go! Lol. Enjoy the rest of your summer!

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