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Fear and uncertainty moved aside this summer, and optimism is now abound. Central Bankers are cutting rates, equity markets are touching new highs, and the Toronto Blue Jays are headed to the World Series! In credit markets, we also continue to experience historically strong market conditions. 

Sources:

1. Ronalds-Hannon, Eliza and Weinman, Aaron. (2025, October 12). From Tricolor to Saks, Bonds are Now Crashing at Breakneck Speed. 
2. Nakamoto, Michiyo and Wighton, David. (2007, July 9). Citigroup chief stays bullish on buy-outs. 

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We last left you in early July with the observation that the financial markets now seemed to thrive on and reward uncertainty. The equity and credit markets had plunged in March on the initial economic fears over the Trump tariffs and then rebounded joyfully in April when Trump variously delayed and fiddled with his tariff strategy that had threatened to burn the U.S and global economy.

Sources:

1. Source: Kirby, Jason. (2025, October 4). U.S. tariff revenue piles up as Canada abandons tit-for-tat trade war approach.
2. Source: Chase, Steven. (2025, October 2). LeBlanc hopes to make progress on steel, aluminum tariff relief before USMCA review
3. Source: Chase, Steven et al. (2025, October 7). Ahead of talks with Carney, Trump says his tariffs are working.

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Interest rates have been on the rise since the end of the first quarter, particularly in the long-end of the curve. From March 31st until time of publication, Canadian long bonds have risen 66 basis points (bps) while their American counterparts are up 44 bps, translating into price declines of 13% and 7%, respectively. 

Sources: 

1. Fool, Motley. (2025, May 22). The U.S. Government’s Credit Rating Just Got Downgraded for the Third Time Since 2011. History Says the Stock Market Will Do This Next.

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The theme of Canso's previous April 2025 Market Observer was that only a fool would try to predict what would happen to the financial markets and the global economies after Donald Trump declared his Tariff War on the World. The more expertise you possessed, the less you were probably able to forecast the actual outcome. As they say, it’s not over until it’s over but rising equity markets and tightening credit spreads weren’t most experts’ first choice, but that’s what has happened. 

Sources:

1. Source: Canso Investment Counsel Ltd. (2025, April). April 2025 Market Observer.
2. Source: Burgess, Mark. (2025, July 4). Who cares about uncertainty anyway?
3. Source: Boggioni, Tom. (2025, July 5). ‘It’s all fake’: White House insider admits Trump’s trade war is just for show.
4. Source: McCreesh, Shawn. (2025, Feb 28). ‘This is going to be great television’: Trump sums up his showdown with Zelensky.
5. Source: Blanchfield, Mike and Hawkins, Ari. (July 6, 2025). In tech tax ‘cave,’ Trump and Carney may have both gotten what they wanted.
6. Source: Rjoseph1. (June 3, 2018). Trudeau calls tariffs ‘insulting’ while Trump aide labels it as ‘family quarrel’.
7. Source: Aiello, Rachel. (May 14, 2025). Canada’s new housing minister doesn’t think prices need to come down.
8. Source: CNC News. (Dec 16, 2024). Read Chrystia Freeland’s letter of resignation from Trudeau’s cabinet.

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We were writing about the confused state of political and economic affairs in June and wondered, like the Marvin Gaye song title, “What’s Going On?”. We marvelled at how the financial markets were ignoring any bad news in their haste to move ever upwards in price.