Market Recap – July

1. What happened in the markets in July?

At its July meeting, the Bank of Canada opted to hold the key interest rate steady at 2.75%, citing ongoing economic resilience in the face of global trade uncertainty. Officials acknowledged that while inflation remains persistent, it is currently within manageable levels. The Bank also signaled a continued openness to cutting rates should economic conditions deteriorate.

The U.S. Federal Reserve also voted to maintain its benchmark interest rate, prompting markets to temper expectations for a near-term rate cut.

On the Inflation front, headline CPI rose to 1.9% year-over-year in June, up from 1.7% in May and broadly in line with market expectations.

Equities extended their rally in July, supported by strong second-quarter earnings—over 80% of companies in S&P 500 surpassed analyst expectations. Optimism surrounding U.S. trade negotiations and a rebound in consumer sentiment further bolstered risk appetite.

Canadian Equities rose 1.7%, however sector performances were mixed: Communication Services led the way with a 5.0% gain, while Health Care lagged, declining 6.2%.

U.S. Equities (in CAD) climbed 3.6%. The rally was broad-based, with mid- and small-cap equities advancing in tandem with large-cap names.

International Equities (in CAD) were flat in July.

Canadian bonds declined 0.7% amid ongoing concerns over inflation and slowing growth, while Money market instruments were up 0.2% in July.

2. What does this mean for Embark funds?

Asset class change	Impact on cohorts
Positive Equity returns	Positive equity returns were more favourable for our younger cohorts with higher equity allocation
Negative Bond returns	Negative bond returns negatively impacted close-to-maturity cohorts with higher bond allocation
Money Market returns	Positive money market returns had a stabilizing impact on close-to-maturity cohorts, reducing the negative impact of bond returns
Canadian dollar	Canadian dollar depreciated vs. USD, favorably impacting our foreign equity exposure, especially benefiting the younger cohorts

*Note: Embark return calculations are finalized in the second part of the month when the RBC data becomes available.

Canadian equities are represented by the S&P/TSX Composite Index

U.S. equities are represented by the S&P 500

International Equities are represented by the MSCI EAFE index

Canadian bonds are represented by the FTSE Canada Universe Bond Index

Money market instruments are represented by the 91 day T-bill