Yann Furic
B.B.A., M. Sc., CFA®
Senior Portfolio Manager, Asset Allocation and Alternative Strategies
Employment in Canada rebounds
The addition of 60,400 jobs in September exceeded expectations by 5,000 and reversed last month’s losses. Despite this increase, the unemployment rate remained stable at 7.1%. Wage growth also remained unchanged at 3.6%. The manufacturing sector added 27,800 jobs, suggesting that the Canadian economy is managing to grow despite tariffs.
Central banks on the defensive
On September 17, the Bank of Canada (BoC) and the U.S. Federal Reserve (Fed) cut their respective policy rates by 0.25%.
The Canadian economy is slowing and job growth year to date has been weak, but the country has not entered a recession.
The scenario is much the same in the United States, where job creation is stagnant, which has allowed the Fed to lower its rates despite higher inflation.
One more rate cut is expected in Canada by the end of 2025, while south of the border, markets are anticipating one or two.
The government shutdown in the United States
For the last few weeks, most U.S. public services have been at a standstill following a budget impasse in Congress. Among other things, this means that federal statistics, particularly those concerning non-farm job creation, are not available.
If this situation continues, federal employees, who are not being paid during this period, will likely reduce their consumption and thus slow the economy. This is not the first time such a situation has occurred, which explains why the impact of this paralysis on the financial markets is still limited.
OVERVIEW OF GLOBAL EQUITY MARKETSAll percentages are in Canadian dollars. |
||||
|
Country |
Index |
Return |
Change |
Year-to-date return in 2025 |
|
Canada |
S&P/TSX |
5.40% |
|
23.93% |
|
United States |
S&P 500 |
5.04% |
|
11.09% |
|
|
Nasdaq |
7.10% |
|
14.09% |
|
International stock markets |
EAFE |
3.28% |
|
21.07% |
|
Emerging markets |
|
8.59% |
|
23.38% |
|
China |
MSCI China |
11.23% |
|
37.02% |
The return shown is the total return, which includes the reinvestment of income and capital gains distributions
Source : Morningstar Direct.
RETURN ON CANADIAN BONDS |
|
| Index | Return from January 1 to September 30, 2025 |
| FTSE Canada Universe Bond Index | 2.98% |
Source : Morningstar Direct
Data influencing the markets
CANADA |
UNITED STATES |
Recession Indicator |
|
Moderate |
Moderate |
Policy Rates |
|
2.50% |
4.00% – 4.25% |
|
As expected, on September 17, the Bank of Canada cut its policy rate by 0.25%. Inflation remained within its target range. Uncertainty surrounding the imposition of tariffs by the United States could change monetary policy and lead to additional rate cuts. GDP growth was negative in the second quarter, but positive in July and over the past 12 months. Currently, markets are anticipating one more rate cut in 2025.
|
On September 17, the U.S. Federal Reserve (Fed) lowered its rates by 0.25%. The inflationary fallout from U.S. tariff policy will likely limit further anticipated rate cuts, but weak employment growth opens the door to cuts. Fed Chair Jerome Powell sees increased inflation and employment uncertainty. Between one and three rate cuts are expected by the end of the year. |
Employment Situation |
|
|
Jobs created: 60,400 Expectations: 5,000 |
Most recent data (August) Jobs added: 22,000 Expectations: 75,000 |
|
Wage growth: 3.6% Expectations: 3.6% |
Wage growth: 3.7% Expectations: 3.8% |
|
Unemployment rate: 7.1% Increase: +0.0% |
Unemployment rate: 4.3% Increase: +0.1% |
|
59,700 part-time jobs were added and 6,000 full-time jobs were lost.
|
The employment data for the previous month were revised downward. As was the case last month, there were job losses in the manufacturing sector.
|
Inflation |
|
|
August: 1.7% Decrease: 0.2% |
July: 2.7% Change: 0.0% |
Overall, what are the economic indicators telling us?
The U.S. Federal Reserve cut its rates, but the minutes of the discussions leading up to this decision show some reluctance to commit to aggressive cuts.
In Canada, the rate cut does not herald multiple reductions in the coming year.
Europe is on hold and will react to future economic data. Inflation is lower and the impact of tariffs is not yet fully known.
Global Purchasing Managers’ Index 
- Manufacturing segment: stable, with more than half of the 30 countries in this segment posting a reading above 50 (expansion).
- Services segment: continues to hold steady and remains robust.
Inflation rate
Overall: stable, continuing to move in the right direction.
Factors to watch
- Deregulation in various industries in the United States: this should help maintain economic growth and encourage investment. Other countries, such as Canada, will have to follow suit or risk losing competitiveness.
- Trade war: supported by the indiscriminate use of tariffs, this could cause an economic slowdown and increase inflation. This situation could lead to an episode of stagflation, the most negative economic scenario.
- Inflationary scenarios: if they result in keeping yields on five-to-ten-year maturities at high levels, they should be avoided at all costs, as they would slow business investment and the reshoring of production lines to the United States.
- Geopolitical uncertainty: Russia-Ukraine war, regional conflicts in the Middle East, tensions between the U.S. and China, possible annexation of Taiwan by the Chinese government.
fdp tactical views – August 2025
- We maintained the weighting of equities in the tactical allocation strategy.
- Economies are slowing but are still growing. Large U.S. companies are posting solid earnings, which is keeping the stock markets in positive territory.
- In the United States, we reduced our weighting in large-cap stocks and increased the weighting of U.S. small caps.
- We maintained our positioning in Europe and increased the weighting of Japan.
- In the fixed-income component, we increased our weighting in Canadian bonds and reduced our weighting in U.S. bonds. We hold various types of debt through U.S. and emerging market government issues.
We continue to favour stocks in developed countries and focus on risk management.
To learn how our funds performed:
Senior Manager, Asset Allocation and Alternative Strategies
Data source : Bloomberg
The opinions expressed here and on the next page do not necessarily represent the views of Professionals’ Financial. The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. Please consult your Wealth Management Advisor.
