Inflation Rises in Canada, Driving Interest-Rate Expectations and Impacting Markets

Canadian resource and financial stocks are in focus as inflation ticks higher, with rising oil prices among the key factors. Materials, metals, and energy sectors are showing strength due to increased commodity prices, while financials in both Canada and the US are responding to changing interest-rate expectations. The latest inflation report is approaching, which could lead to a Federal Reserve rate hike. According to Bruce Campbell, portfolio manager at StoneCastle Investment Management, market pricing now implies approximately 1.4 rate hikes by year-end, up from earlier expectations of falling rates.

Campbell notes that current market conditions are driving interest-rate expectations higher, with the second half of September historically being a challenging period for equities before a stronger year-end performance. He also points to the US presidential cycle, where the second year has historically been the weakest of the four-year cycle. However, Campbell cautions that seasonality is not a roadmap and should be used as context rather than prediction.

Gold has rallied since its mid-year low, closely following its historical seasonal pattern highlighted by Campbell. He sees early indications of a potential turn higher for technology stocks, which have experienced some weakness recently. 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.