During the third quarter, the S&P500 total return was +8.12% in U.S. dollars. Adjusting for currency, the S&P500 returned +10.47% in Canadian dollars, as the Canadian dollar depreciated 1.65 cents during the quarter to $0.7184. The TSX total return was +12.50% in the third quarter.

Following its September Federal Open Market Committee (FOMC) meeting, the Federal Reserve (Fed) lowered the federal funds rate by 25 basis points, bringing the new target range to 4.00%–4.25%. This was the first interest rate cut since December 2024. The move signals the Fed’s growing concern over a weakening labor market, even as inflation remains above its 2% target. The decision underscores the difficult balancing act the Central Bank must perform in managing its two key goals: achieving maximum employment and maintaining price stability. While the Fed acknowledged slower job growth and a higher unemployment rate, a dovish signal, it also noted that “inflation has moved up,” which is a hawkish acknowledgment of recent price increases. According to the Fed’s latest Summary of Economic Projections (Exhibit 1), GDP growth is expected to be slightly stronger in 2026 and 2027 compared to 2025, while both unemployment and inflation are projected to be lower. The Fed’s yearend 2025 targets—4.5% for unemployment and 3.0% for PCE inflation—are notably higher than the most recent August figures, which showed unemployment at 4.3% and inflation at 2.7%. The recent interest rate cut and the forecast for two more cuts by the end of the year, demonstrates a quicker pace of cuts compared to the 2 cuts that the Fed projected in June for the second half of 2025. It suggests the Fed is prioritizing the labor market outlook over its inflation concerns.