June 2026 - Your Monthly Update

Hi,

 

Hope this note finds you and your family well and enjoying an excellent official start to summer.

 

Your investment portfolio posted strong gains in May. It remains with positive performance over the last twelve months.

 

Let’s spend our note this month distinguishing between short (under a year) and medium-term (3-5 year) trends as they influence our investment strategy.

 

Medium-term trends reflect the sum of many more data points than those measured in the short-term. As a result, we gain important context and perspective as inputs to our decision making process that influences our long-term investment strategy. It cleans up the wider gyrations that can occur in the short-term.

 

As the saying goes, you don’t want to miss the forest for the trees.

 

Broadly speaking, the medium-term economic trends in Canada and the United States (U.S.) are largely unchanged.

 

Overall, the Canadian economy is stagnant which has been the case for some time now. The interest rate environment remains stable, and the Canadian banks continue to build on their strong financial position. They have ample capacity to lend to the private sector as confidence builds at a household level and economic conditions improve.

 

In the U.S., the economy continues to expand at a steady pace. The interest rate environment remains stable, and U.S. banks are building on their strong financial position. They remain willing and able to continue to fuel the private sector and the cycle of productive investment in the industrial base of the U.S. domestic economy.

 

Recently, short-term data points that reflected uncertainty and caused wider than normal movements have been reverting to the medium-term trends we’ve been talking about for the last three or four years.

 

The price of oil is down almost 40% from the short-term spike high and back in line with the medium-term trend of ~ US$70/barrel.

 

The most recent data out of the United States (U.S.) reflects a domestic economy that remains aligned with the medium-term trend of economic expansion.

 

The Institute for Supply Management (ISM) Purchasing Managers Index (PMI) rose to 54 in May, its highest level in four years. Any figure above 50 is an expansion and signals the U.S. business cycle is gaining momentum. May’s result was a fifth consecutive month of expansion. Looking under the hood, it registered solid new orders and low inventory levels. This supports continued demand, future production gains and job growth.

 

Our investment strategy is steady and unchanged. We continue to focus on businesses with exposure to the domestic North American economy. You and your wealth are in a strong position.

 

The view from Brent Joyce, BMO Wealth’s Chief Investment Strategist:

“The stock market isn’t the economy: Equity markets are driven by a variety of factors. While broad economic growth is one important ingredient, it isn’t the only one – equity markets are also where innovation is funded and rewarded. What we have is a decent traditional economy in the world’s largest market (the U.S.), and in many other places economic growth is hanging in. At the same time, the innovation story (all things AI) isn’t particularly beholden to oil or the consumer (yet). AI is still in the buildout, capital-expenditure stage. In some respects, it is still in the discovery phase, too, as it continues to deliver surprises. For investors, the best surprise is spectacular earnings growth, and the spread of that earnings growth to more companies. The most recent example is increased sales and revenue at an expanded set of semiconductor companies. Time will tell if the exponential acceleration in some of these share prices represents a bubble. If it turns out to be a bubble, we currently see it limited to these select companies. We remind investors that neither these companies nor these sectors represent the entirety of the equity market’s opportunity set. We remain vigilant for extreme bubble behaviour.

It's all about earnings, always: Ultimately, equities have enjoyed surprisingly good results because earnings growth has been surprisingly stellar. Some criticize that aggregate earnings of a benchmark index are skewed by the massive amounts of spending happening in the AI rush. Skewed doesn’t mean weakness is masked in all other sectors. Earnings growth is simply good to better at many companies and spectacular in some AI-related areas. Across the globe, estimates are rising for earnings growth. Yes, the biggest bumps are in the AI-related businesses, but it isn’t all AI. Supportive earnings growth is broad based. Consider Canada, where all 11 S&P/TSX sectors saw sales growth; seven sectors posted positive earnings growth, while six logged double-digit growth. For the S&P 500, it was almost a clean sweep: 11 of 11 sectors delivered sales growth and 10 of 11 posted positive earnings. Consider that over half of the S&P 500 companies reported year-over-year earnings growth of 10% or more... Earnings are the lifeblood of share-price growth – and the earnings are delivering. AI juiced, yes; the whole story, no."

Portfolio Strategy – June 2026. BMO Capital Markets.

 

• Stocks in your portfolio that made a new 52 week high this past month: Canadian National Rail*, Costco*, Morgan Stanley*, Qualcomm*, Royal Bank*, S&P500 Index, TD Bank* & United Health

• Stocks in your portfolio that made a new 52 week low this past month: Home Depot*

• The Loonie declined one cent versus the U.S. dollar to $0.725

 

Thank you,

Ian, Gab, Kaitlyn, Naina, and Meeral