August 2026 market update

Global equity markets rose in August, although geopolitical tensions, renewed Canada-U.S. trade disputes and persistent inflation created uncertainty. Concerns about elevated valuations in artificial intelligence stocks also remained in focus, while rising bond yields reflected ongoing inflation worries.

Canada’s economy showed encouraging signs of recovery, growing at an annualized rate of 3.3% in the second quarter, supported by stronger exports, household spending and business investment. Employment also improved, with the unemployment rate falling to 6.4%. However, escalating trade tensions with the U.S. threaten to undermine this progress and could weigh on business investment and future economic growth.

Elsewhere, the U.S. labour market showed signs of cooling, while inflation in Europe remained above the European Central Bank’s target, raising concerns that interest rates may need to stay higher for longer. Despite these challenges, equity markets generally performed well in August. The S&P/TSX Composite Index gained 2.96%, bringing its year-to-date return to 14.38%.

Looking ahead, inflation, central bank decisions and trade relations will remain key factors influencing markets. While economic growth has shown resilience, investors should be prepared for continued uncertainty as these developments unfold.

Read the full August 2026 Market Update from Canada Life Investment Management for more details on the economic and geopolitical developments shaping global markets.