Weekly Market Update - October 26, 2026

Last week, Canadian short-term bond prices declined while expectations for a rate hike by the Bank of Canada (BoC) this Wednesday rose sharply. This was driven by the BoC’s business and consumer outlook surveys, Canadian inflation data, and remarks by BoC Governor Tiff Macklem. In contrast, longer-term US treasury prices rose as investors fled to the relative safety of US treasuries bonds due to an AI equity selloff and rising Middle East tensions. The 10-year US treasury yield fell eight basis points lower to 5%.  

Canada’s September consumer price inflation (CPI) data showed moderating core price pressures, with the Bank of Canada’s preferred median and trimmed metrics easing to 1.9% and 1.8%, respectively—slightly below the 2.0% target—while surging gasoline prices drove headline CPI up to 3.1%. Separately, speaking to reporters via a call while at the annual IMF/World Bank meetings, BoC Governor Tiff Macklem warned that persistently higher energy prices would push Canada’s inflation forecasts higher. The BoC’s Q3 Business Outlook Survey and Canadian Survey of Consumer Expectations pointed to persistent future inflation risks, highlighting rising five-year consumer inflation expectations toward 4% and reporting that many businesses plan to pass elevated input costs on to consumers following the breakdown in Canada-US trade negotiations. 

In response, swap markets rapidly repriced the probability of a 25-basis-point rate hike at this Wednesday’s BoC meeting from 36% to 85%. Subsequently, Canadian government bond prices declined and yields rose, with the two-year yield closing 16 basis points higher at 3.35%. In contrast, markets expect the US Federal Reserve to hold its policy rate steady this Wednesday, with market expectations for a potential 25-basis-point increase in December. 

In corporate bond news, yields on US non-investment grade (high-yield) CCC-rated bonds reached around 15.8%—their highest level in nearly four years, according to Bloomberg index data. As a result, companies with weaker credit profiles and near-term financing needs face rising borrowing costs to secure new funding or refinance existing debt, as investors demand higher risk premiums. While rising borrowing cost pressures are most acute in lower-rated credit tiers and sectors like technology—where highly leveraged AI infrastructure financing is coming under greater scrutiny—investors are closely monitoring future rotation developments into higher-quality bonds and whether CCC weakness remains contained. 

Selecting individual equity investments can be a challenging task even for the most seasoned investment professionals. Even the most well-thought-out business plans can face unforeseen circumstances that can turn the fortunes of companies. Our Chart of the Week highlights a variety of well-recognized consumer-based companies and the year-to-date total return performance of their shares.

The top and bottom performers listed in the chart reflect a stock performance difference of over 90%. While tariffs have impacted retailers such as Nike and Lululemon, heightened competition from specialized retailers like Vuori and Alo have disrupted Lulemon’s hold on the segment which has disproportionately affected its share price. Hasbro, on the other hand, has benefited from a focus on higher-margin opportunities and significantly grown and profited from its investment in popular gaming franchises.

It’s important to consider if shorter-term share price performance is a reflection of the longer-term outlook. Not only do companies need strong and defensible business plans that provide long-term growth, a supportive economic backdrop can provide the tailwinds needed to grow future earnings.