Markets Rally as Investors Look Beyond the Headlines

Week Ending August 7, 2026

After taking a wee little break, I’m back with our weekly market update. If you noticed there wasn’t an update last week, that’s why!

Sometimes it’s good to step away, recharge and come back with a fresh perspective.  And there was certainly plenty happening in the markets while I was away.

Last week was a good reminder of something I talk about often with clients: markets don’t always react to the headlines the way you might expect.

On the surface, Friday’s U.S. employment report wasn’t particularly encouraging. The U.S. economy unexpectedly lost jobs in July, and previous months were revised lower. Yet markets rallied.

Why? Because investors immediately started thinking about what softer employment could mean for interest rates and whether it could give the Federal Reserve more reason to be patient.

Combined with another strong week of corporate earnings, that was enough to push markets sharply higher.

Here in Canada, the story was quite different, and considerably more encouraging.

Market Overview

Weekly Market Performance

• S&P 500: +3.57%
• Nasdaq Composite: +5.19%
• Dow Jones Industrial Average: +2.96%
• MSCI EAFE Index: +2.32%
• S&P/TSX Composite Index: +2.57%

It was the strongest week for the major U.S. averages since April, with technology companies once again leading the way.

What I found interesting was that the rally wasn’t driven by one single piece of good news.

Instead, investors seemed willing to look through some of the uncertainty and focus on what could come next.

That shift in perspective is important. Markets are constantly trying to anticipate what the economy, interest rates and corporate profits might look like six or twelve months from now, rather than simply reacting to what is happening today.

Why Markets Moved Higher

The week started on a positive note as oil prices moved lower and investors reacted to diplomatic developments in the Middle East.

That helped ease some concerns around inflation, while another round of corporate earnings gave investors confidence that many businesses continue to perform well.

Technology was once again a major driver of the market.

By Friday, however, attention shifted almost entirely to employment.

The U.S. economy unexpectedly lost 23,000 jobs in July, compared with expectations for a gain. On top of that, May and June employment figures were revised lower by a combined 103,000 jobs.

Normally, weaker employment isn’t something we would celebrate. But markets are forward looking.

Investors interpreted the softer jobs report as another reason the Federal Reserve may have more flexibility when it comes to interest rates. Bond yields moved lower following the report, while stocks moved higher.

It’s a good example of why short term market reactions can sometimes feel counterintuitive.

Bad economic news can occasionally be good news for markets if investors believe it will lead to lower interest rates.

Canada Had a Much Better Jobs Story

One of the most encouraging stories of the week happened right here at home.

Canada added approximately 75,000 jobs in July, while the unemployment rate declined to 6.4%.

There were also encouraging signs beneath the headline, with employment gains across several parts of the economy.

That doesn’t mean every challenge facing the Canadian economy has disappeared.

Canadians are still navigating affordability pressures, trade uncertainty and an economy that has been uneven at times but the latest employment numbers were certainly an encouraging sign.

For the Bank of Canada, stronger employment also gives policymakers another reason to remain patient as they continue watching inflation and the broader economy.

This is something worth remembering when we hear broad statements about the Canadian economy being either “good” or “bad.”

The reality is almost always more nuanced.

Some parts of the economy can be slowing while others remain resilient, which is another reason we try not to make investment decisions based on a single economic report.

What the Week Really Meant

If I had to summarize last week in one sentence, it would be this:

Markets are looking ahead, not in the rear-view mirror.

Friday was probably the clearest example.

The U.S. employment report was weaker than expected, yet stocks rallied because investors immediately began thinking about what that weakness could mean for future interest rate decisions.

At the same time, corporate earnings have remained healthy enough to give investors confidence that many businesses continue to grow.

Here in Canada, stronger employment provided another reason for cautious optimism.

None of this means markets will move higher every week.

There will always be another economic report, another earnings season and another headline that creates uncertainty.

That’s exactly why we don’t build financial plans around predicting what markets will do next Tuesday.

We build them around your goals, your time horizon and a portfolio designed to participate in long term growth while navigating the inevitable periods of uncertainty along the way.

One strong week doesn’t change a financial plan. Just as one difficult week shouldn’t either.

Looking Ahead

With the busiest part of earnings season now behind us, attention will begin shifting back toward inflation and the consumer.

This week’s U.S. Consumer Price Index and Producer Price Index reports will give investors another look at whether inflation continues to move in the right direction.

Retail sales will also be important.

After Friday’s weaker U.S. employment report, these numbers take on a little more significance. If inflation continues to moderate while economic growth slows gradually, investors may become increasingly comfortable that the Federal Reserve can remain patient.

If inflation proves stubborn, however, the interest rate conversation could change quickly.

For Canadian investors, the bigger picture remains relatively balanced.

Canada’s latest employment report was encouraging, and our market continues to offer exposure to areas such as financials, energy, materials and infrastructure that can behave very differently from the technology heavy U.S. market.

That’s one of the reasons diversification continues to matter.

Different countries, sectors and companies won’t all perform well at exactly the same time. We don’t need them to.

The goal is to build a portfolio where the different pieces can work together over time.

This Week: Key Economic Data

Tuesday, August 11

• NFIB Small Business Optimism Index
• Existing Home Sales
• New York Fed Q2 Household Debt & Credit Report

Wednesday, August 12

• Consumer Price Index (CPI)
• Monthly Treasury Balance

Thursday, August 13

• Weekly Jobless Claims
• Producer Price Index (PPI)
• Federal Reserve speeches

Friday, August 14

• Retail Sales
• Business Inventories
• University of Michigan Consumer Sentiment

This Week: Companies Reporting Earnings

Earnings season begins to slow this week, but there are still several notable companies reporting.

Monday, August 10

• Simon Property Group

Tuesday, August 11

• Lumentum Holdings

Wednesday, August 12

• Cisco Systems

Thursday, August 13

• Applied Materials
• Brookfield Corporation

"Music is a higher revelation than all wisdom and philosophy."
– Ludwig van Beethoven

Buried in wood from one end to the other, my head is exposed while I keep things together. What am I?

_{Last Week's Riddle: What wintry thing flies as it is born, lies when alive, and runs when dead?
Answer: Snow}