Inflation Cools, Markets Keep Moving Forward

Week Ending August 14, 2026

It was a relatively quiet summer week for markets, but sometimes the quieter weeks can still tell us something important.

After the strong gains we saw the week before, markets took a bit of a breather. There wasn't one major headline driving investors in either direction. Instead, the focus shifted back to something we have been talking about for quite some time: inflation, interest rates and the health of the consumer.

The good news was that inflation showed some signs of cooling.

The less encouraging news was that consumers appeared to pull back on spending.

Put those two things together and you get a pretty good explanation for why markets finished the week mixed.

Market Overview

Weekly Market Performance

• S&P 500: +0.36%
• Nasdaq Composite: +0.14%
• Dow Jones Industrial Average: -0.56%
• MSCI EAFE Index: +0.26%
• S&P/TSX Composite Index: +0.13%

After a strong rally the previous week, U.S. markets didn't move very far in either direction.

The S&P 500 and Nasdaq still managed to finish higher for the third consecutive week, while the Dow slipped modestly.

And I think that's worth putting into perspective.

Not every week needs to produce a big move to be meaningful. Sometimes markets simply spend a few days digesting what has already happened and trying to figure out what comes next.

Last week felt a little like that.

Inflation Gave Investors Some Encouragement

The biggest story of the week was inflation.

Wednesday's Consumer Price Index showed that U.S. consumer prices increased 0.1% in July and 3.4% compared with a year earlier.

That was largely in line with expectations, which markets welcomed.

Then on Thursday, investors received another encouraging inflation report when wholesale prices came in softer than expected.

Why does that matter?

Because inflation remains one of the biggest pieces of the interest rate puzzle.

If inflation continues moving in the right direction, the Federal Reserve has more flexibility with interest rates. If inflation starts moving higher again, that flexibility becomes much more limited.

We've seen markets react to this relationship over and over again during the past few years.

Lower inflation doesn't guarantee lower interest rates, but it certainly makes the conversation easier.

Technology stocks also found some momentum during the week as enthusiasm around artificial intelligence returned, helping support the broader market.

Then Came the Consumer

Just as investors were feeling a little better about inflation, Friday brought another reminder that the economic picture is rarely perfectly clear.

U.S. retail sales fell 0.6% in July compared with the previous month, while economists had been expecting a small increase.

That caught some investors by surprise and helped take a little momentum out of the market to finish the week.

Retail sales are worth watching because consumer spending is such an important part of the U.S. economy.

If people are still working, earning and spending, businesses generally have a healthy environment in which to operate.

If consumers begin pulling back significantly, however, it can eventually show up in corporate profits and economic growth.

One month doesn't make a trend, so I wouldn't read too much into one retail sales report.

But it is something worth watching.

And once again, we are seeing that balancing act investors have been dealing with for some time.

We want inflation to cool, but we don't necessarily want the economy to cool too quickly along with it.

What About Canada?

Here at home, Canadian investors continue to have a somewhat different mix of things to think about.

Our stock market has much more exposure to financials, energy and materials than the technology heavy U.S. market. That means movements in oil, commodities and interest rates can have an outsized impact on the TSX.

That difference is important.

When we hear that "the market" had a good or bad week, it's worth remembering that there isn't really one single market.

The Canadian market can behave very differently from the S&P 500 or Nasdaq because the businesses underneath those indexes are very different.

Canada also enters this week with inflation back in focus. Statistics Canada is scheduled to release July's Consumer Price Index, following a June reading in which inflation was 2.8% compared with a year earlier.

That report will be closely watched because it gives the Bank of Canada another piece of information as it thinks about where interest rates go from here.

For Canadian households, that matters well beyond the stock market.

Interest rates eventually work their way through mortgages, borrowing costs, savings rates and the broader economy. So when we talk about inflation and central banks, it can sometimes sound fairly technical, but the effects are very real for families.

What the Week Really Meant

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

The inflation picture improved, but investors are still trying to figure out just how strong the economy really is.

And I don't think that's necessarily a bad place for markets to be.

Markets don't require every economic number to be perfect.

What investors generally want to see is an economy that continues growing, businesses that continue earning money and inflation that is gradually becoming less of a problem.

The challenge is that those things rarely move in a perfectly straight line.

One week we'll get an encouraging inflation report.

The next week we'll get a disappointing employment or retail sales number.

Then a company will report better earnings than expected and the conversation changes again.

That's why trying to build an investment strategy around predicting the next economic report can be so frustrating.

There will always be another number coming.

A financial plan should be built around something much more durable: your goals, your time horizon and a portfolio that gives you the ability to participate when markets rise while navigating the inevitable periods of uncertainty along the way.

Quiet weeks, strong weeks and difficult weeks are all part of that process.

Looking Ahead

This week should give us another interesting mix of information.

In the U.S., housing data, industrial production and the minutes from the Federal Reserve's July meeting will all be closely watched.

Those Fed minutes may be particularly interesting because investors will be looking for clues about how policymakers are thinking about inflation, economic growth and the path for interest rates. The Fed held rates steady at its July meeting, although there was disagreement among policymakers about the appropriate direction for rates.

Later in the week, manufacturing and services data will give us another snapshot of how businesses are feeling about the economy.

We'll also hear from some major retailers, including Home Depot, Target and Walmart.

I always find these earnings reports interesting because retailers can give us a slightly different perspective than the economic data.

Numbers like retail sales tell us what consumers did.

Companies like Walmart and Home Depot can sometimes give us more colour on why they're doing it.

Are shoppers becoming more cautious? Are they looking for value? Are they postponing larger purchases?

Those are useful clues when we're trying to understand what is happening beneath the economic headlines.

And in Canada, inflation will be one of the numbers I'll be watching most closely. The July CPI report is scheduled for Monday, August 17.

As always, we don't need every piece of economic data to point in the same direction.

They rarely do.

What matters is the bigger picture and whether the different pieces of your financial plan continue working toward the goals we built them for.

This Week: Key Economic Data

Monday, August 17

• NAHB Housing Market Index
• Canada Consumer Price Index (CPI)

Tuesday, August 18

• Housing Starts
• Import Prices
• Industrial Production
• Capacity Utilization
• Pending Home Sales

Wednesday, August 19

• Federal Reserve July Meeting Minutes

Thursday, August 20

• Weekly Jobless Claims
• Leading Indicators

Friday, August 21

• Manufacturing PMI
• Services PMI

This Week: Companies Reporting Earnings

Tuesday, August 18

• Home Depot
• Keysight Technologies

Wednesday, August 19

• Analog Devices
• TJX Companies
• Lowe's
• Target

Thursday, August 20

• Walmart
• Deere & Company
• Ross Stores

"The secret of happiness isn't found in seeking more, but in developing the capacity to enjoy less."
– Socrates

I never complain no matter where I am led; I go around in circles, yet move straight ahead. What am I?

_{Last Week's Riddle: Buried in wood from one end to the other, my head is exposed while I keep things together. What am I?
Answer: A nail}

A little Pender Island magic: David and Jonathan with Taz and Austin, while a BC Ferry cruises by in the distance. Proof that sometimes the best market views have absolutely nothing to do with markets.

Footnotes And Sources

1. WSJ.com, August 14, 2026
2. Investing.com, August 14, 2026
3. CNBC.com, August 11, 2026
4. CNBC.com, August 12, 2026
5. CNBC.com, August 13, 2026
6. WSJ.com, August 14, 2026
7. CNBC.com, August 12, 2026
8. WSJ.com, August 14, 2026
9. Health.harvard.edu, April 14, 2026. 
10. Sharp.com, July 17, 2026

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