Posthaste: Fasten your seatbelts, we could be in for a wild ride in markets this week

Beware the end of the month, say analysts, because events this week are setting the stage for a wild ride in

stock markets. 

Last year the week marking the end of July and beginning of August ushered in the worst market turmoil of 2024, say Deutsche Bank analysts.

“This year, that week looks seriously problematic again from a market perspective,” said Deutsche macro strategist Henry Allen.

At the top of the volatility risks is Donald Trump’s

deadline for tariffs

on Friday.

A

deal announced Sunday

between the United States and European Union that will see the eurozone face 15 per cent tariffs on most of its exports will ease some of that pressure. European stocks  and U.S futures climbed this morning after news of the agreement.

But of the 25 countries Trump sent letters to regarding tariffs, many remain without deals, including major trading partners like Canada and Mexico.

Scotiabank analysts estimate that the United States has imposed an effective tariff rate on its imports of about 17.5 per cent so far, (not including the EU deal), up from 2.3 per cent at the start of the year, the highest rate since 1935.

If Trump goes ahead with all the tariffs that have been announced, but paused, and are under investigation, that rate would jump to 24 per cent, the highest since 1906.

A 50 per cent tariff on copper imports also kicks in Friday.

“Whatever happens this week, the  evolution of the tariff threat is highly unlikely to be anywhere close to being over,” said Derek Holt, Scotiabank’s head of Capital Markets Economics.

The worry, according to Allen, is that markets are not pricing in these higher tariffs.

“It can become a bit of a cliché that markets are ‘priced to perfection’ – but it’s certainly clear that markets aren’t accounting for the tariffs snapping back higher on Aug. 1. So there’s the potential for a large market reaction if it does happen, because investors aren’t pricing that in yet,” he said.

And that’s not the only hazard ahead.

U.S. data on

gross domestic product

for the second quarter comes out Wednesday, followed by the

U.S. jobs report

on Friday, the same day as the tariff deadline.

Weaker than expected economic data (especially jobs) tipped the markets into turmoil last year at this time.

“So if higher tariffs were followed by an underwhelming U.S. jobs report that same day, markets could face a big problem as investors re-assess the economic outlook,” said Allen.

The U.S. Treasury also releases its Quarterly Refunding Announcement this week. On the last day of July in 2023, this announcement included higher-than-expected borrowing needs, and signalled further increases in long-term debt sales, triggering a

selloff in Treasuries

that pushed the 10-year yield up almost a full percentage point.

Within days, Fitch Ratings downgraded the U.S. credit rating.

Long-end bond yields are heading into this week at higher rates than seen earlier this year, so it won’t take much to move them into “problematic territory,” said Allen.

Also on deck are interest rate decisions by the Federal Reserve,

Bank of Canada

and Bank of Japan, among others.

The Fed, like Canada’s central bank, is expected to hold its rate Wednesday, but pressure is growing from the White House to make a cut. A hawkish

Federal Reserve

could push market anxiety up a notch.

If that’s not enough, earnings season hits its peak this week with over 40 per cent of S&P 500 companies and about 60 on the TSX reporting results.

So far earnings have been great for markets, with 80 per cent of S&P 500 companies exceeding profit estimates, according to data compiled by Bloomberg Intelligence.

But heavyweights reporting this week include

Apple Inc.

, Amazon.com Inc. and

Microsoft Corp.

, companies that face mounting tariff pressure as consumer demand slows.

“With a Central Bank tsunami including, coupled with payrolls, the Fed’s preferred inflation gauge, the Treasury’s quarterly refunding announcement, Trump’s trade deadline, and more than 40 per cent of the S&P 500’s market capitalization reporting, I couldn’t imagine a more headline-packed week ahead for the market,” Dave Lutz, macro strategist at JonesTrading, told Bloomberg.

Much is up in the air as we enter the week, but one thing looks certain.

“July is going to go out with a bang, or several,” said Scotiabank’s Holt.

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Ontario and British Columbia households top the charts for net worth in Canada, with both provinces over $1.2 million on average.

But they also have the highest debt-to-income ratios, as they struggle to afford the higher cost of living in these provinces, particularly in large urban centres like Toronto and Vancouver.

More expensive housing means more mortgage debt. In Ontario, the average household mortgage liability amounts to $167,620, while in B.C., it is $162,890.

Quebec saw the biggest gains in wealth, increasing the average net worth by 4.16 per cent to $788,508. Saskatchewan households were not far behind, with a 4.15 per cent increase, hitting $885,350 per household.

Read more on the breakdown of Canada’s wealth here

• Earnings: Celestica Inc., TFI Internațional Inc.

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• Would a new $150,000 limit be enough to protect Canadians’ deposits in case of a bank failure?

At 82, Robert has $55,000 in his RRIF and the urge to travel. He lives fairly frugally on his Canada Pension Plan, Old Age Security and the minimum RRIF withdrawal amount, but wonders if he can draw down more from his portfolio without hiking his taxes.

FP Answers crunches the numbers.

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s

Financial Post column

can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his

mortgage rate page

for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s

YouTube channel

for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at 

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