Market Recap* – July, 2026

1. What happened in the markets?

Canadian GDP surprised to the upside in May, rebounding from a mild contraction in Q1 and rising at a 3.5% annualized rate. Stronger activity in construction and natural resources helped lift economic growth above expectations. Canada’s services sector also continued to expand. Importantly, the latest gains have been broad-based, with trade-exposed industries showing signs of stabilization and recovery after facing headwinds earlier in the year.

Canadian equities gained 1.2% in July, led by the Energy sector, which advanced 6.9%. Rising tensions in the Middle East fueled concerns over potential supply disruptions, driving oil prices higher and boosting energy stocks. Investor sentiment toward Canadian resource companies was further supported after the U.S. excluded energy and critical minerals from its proposed tariffs on Canadian imports.

U.S. markets remained volatile in July, with investors navigating concerns about AI spending, rising oil prices, and ongoing tensions in the Middle East. While the Federal Reserve’s decision to leave interest rates unchanged initially spooked investors, strong earnings from major technology companies and signs of easing inflation helped restore confidence. A strong finish helped the S&P 500 recover earlier losses, with the index climbing more than 2% over the final two trading days to close the month little changed, at -0.1%.

Canadian bonds declined 1.6% in July as renewed inflation concerns weighed on fixed income markets. Rising oil prices, driven by escalating tensions in the Middle East, heightened fears that inflation could prove more persistent than previously expected. Meanwhile, resilient economic data reinforced expectations that central banks may need to keep interest rates higher for longer, which resulted in lower bond prices and negative returns for Canadian fixed income investors.

Money market investments generated a modest 0.2% return. Backed by short-term government securities, this allocation continued to provide a source of consistent income while helping protect capital during a volatile market environment.

The Canadian dollar weakened over the month as persistent tariff threats continued to cast a shadow over Canada’s economic prospects.

2. What does it mean for Embark Funds?

Asset class	Change	Impact on cohorts
Canadian Equities	↑	Positive for younger, growth-oriented cohorts. Canadian equities were up driven by strong Energy sector performance.
U.S. Equities	↓	Negative for younger, growth-oriented cohorts. Concerns about high stock market valuations weighed on U.S. equities.
Bonds	↓	Negative for older and more conservative cohorts as renewed inflation fears resulted in declining bond prices.
Money Market	↑	Positive for older and more conservative cohorts, as short-term government securities continued to provide reliable income with limited fluctuations.
Canadian Dollar	↓ CAD	Weaker Canadian dollar provided a lift to younger cohorts with more foreign exposure. The decline in CAD was primarily driven by the potential negative impact of tariffs on Canadian economic growth.