Global Equity Weekly

June 19, 2026 | 16:06

No Dove at First Sight

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Equity markets rose again this week on the back of a U.S.-Iran peace deal, but gains were tempered by a blunt and somewhat hawkish Federal Reserve. The S&P 500 rose 0.9%, led by renewed strength in technology and communication services. After a bit of a hiccup in recent weeks, technology is again leading the pack with a 21% rally year-to-date, or more than twice the 9.6% gain in the broad S&P 500. Large caps have also begun to claw back into the game, outperforming with a 16% gain over the past three months, although still lagging at 7.5% on the year. Last week’s massive SpaceX IPO seems to have rekindled retail interest, while the AI trade booms on.

Meantime, the TSX was little changed on the week as the energy sector sold off more than 4%. The apparent U.S.-Iran deal pulled oil prices down sharply, with WTI sitting below $77 late Friday. That’s the lowest level since early March, and down almost 30% from a month ago. No surprise then that the Canadian energy sector, which was on a torrid run, has faded to the back of the pack in recent weeks.

As the oil shock fades, investors turn their attention back to underlying fundamentals, which remain bullish. That is, solid U.S. economic growth, robust earnings, an AI story for investors to buy into, and central banks firmly on hold in North America. The Bank of Canada said as much last week, so all eyes turned to the Federal Reserve this week, and Kevin Warsh’s first go as Chair.

Source: Bloomberg. As of 3:30 pm Friday

The message was blunt—certainly not dovish, and arguably more hawkish than the market had expected. First, the press statement came in at a tight 130 words, a purposeful paring down from recent norms in the 230-to-260 range under Powell, and with more changes to simplify communication likely coming. Meantime, anyone hoping for a dovish bias was let down. In fact, the press statement tilted slightly hawkish, saying that “productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little”, but “inflation remains elevated relative to the Committee's 2 percent goal”, and “the Committee will deliver price stability”. For now, the Fed is firmly on hold, and that’s fine for equity investors. But the bond market has gone ahead and priced in almost 50 bps of tightening by next spring.

Major Index Performance

North American Sector Performances

(% change over period)

Table 1 - S&P 500 Sector Performance

Source: BMO Economics, Bloomberg

Table 2 - TSX Sector Performance

Source: BMO Economics, Bloomberg. As of 3:30 pm Friday

TSX Relative Sector Performance

(relative to the index, year-ago = 100; dashed line = 200-day m.a.)

S&P 500 Relative Sector Performance