TSX ends higher, inches closer to record high

Global equity markets, including Canada's S&P/TSX and major U.S. indices, closed higher on Thursday, buoyed by easing Middle East tensions following an Israel-Iran ceasefire, which simultaneously reduced demand for safe-haven assets like gold. Attention now shifts to U.S. economic data, particularly Friday's PCE inflation report, for Federal Reserve policy insights, as Chairman Powell's cautious stance on rates draws renewed criticism from President Trump, who is reportedly considering his early replacement. Meanwhile, crude oil prices climbed on robust U.S. demand evidenced by significant inventory draws, while platinum surged to a decade-plus high.

Analysis

Global equity markets are exhibiting a clear risk-on sentiment, driven by an Israel-Iran ceasefire that is alleviating geopolitical tensions. This is evidenced by Canada's S&P/TSX Composite rising 0.7% to approach its all-time high and U.S. indices posting significant gains, with the Dow Jones, S&P 500, and NASDAQ climbing 0.94%, 0.85%, and 0.97% respectively. The shift is causing a rotation out of traditional safe-haven assets, with gold prices declining despite a weaker dollar. With geopolitical risks subsiding, investor focus is pivoting towards U.S. economic fundamentals and monetary policy, making Friday's Personal Consumption Expenditures (PCE) price index a critical upcoming catalyst. This is compounded by political uncertainty surrounding the Federal Reserve, as President Trump's public criticism of Chair Powell and reported plans to name a replacement early could undermine the central bank's authority. In the commodities space, crude oil prices are strengthening on robust demand signals, highlighted by a 5.8 million barrel draw in U.S. inventories, while platinum is surging to a decade-high on tight supply and strong demand fundamentals, showing a clear divergence from gold.

Key Decisions for Investors

• Given the market's risk-on reaction to easing geopolitical tensions, consider overweighting equities, particularly U.S. growth and technology sectors, while potentially reducing exposure to safe-haven assets like gold.
• Investors should closely monitor Friday's U.S. PCE inflation data, as it is a key catalyst for Federal Reserve policy and could introduce significant volatility, especially amid heightened political pressure on Fed leadership.
• Recognize the divergence in commodity markets; strong U.S. demand fundamentals support crude oil, suggesting continued strength, whereas gold's outlook is dampened by the current risk-on environment, warranting a selective approach to commodity exposure.