Wednesday Canada Days are kind of tough being stuck right in the middle of the work week. Which weekend do we pick as the “long” one – the weekend before or after? I think we Canadians have come to a consensus that this weekend is it. After all, the kids have just been let out of school and if we delayed the celebrations until the next weekend, well, we would be butting into that ‘other’ anniversary.

So, as we head into the long weekend and the 159th birthday of this country, I thought it fitting to take a step back from the usual macro noise and focus on Canada itself – where we stand, what we are doing about the challenges in front of us, and why. We might be 91 years younger than the cousin to the south but, as Ally and I keep reminding our clients, the Canadian story deserves a lot more credit than it is getting right now.

The Macro Picture – Not as Bad as You've Been Told

If you have been following the financial headlines lately, you would be forgiven for thinking that Canada is in some kind of economic freefall. The narrative has been relentless – tariff threats, slowing growth, a housing market under pressure from mortgage renewals, and a central bank sitting on its hands. And yes, some of those concerns are real and deserve attention. But there is another side to this story that is not getting nearly enough airtime.

Let's start with the labour market. Canada added 88,000 jobs in May, which wasn't just a beat – it absolutely crushed the consensus expectation of a 10,000 gain. That was the strongest single-month job creation print since December 2024. The unemployment rate dropped to 6.6% from 6.9%, the lowest reading since January, and importantly, it is still below where it was at this time last year. Full-time work drove the gains, rising by 154,000, and private-sector employment expanded by 56,000. Construction, transportation, and manufacturing all contributed meaningfully. This is not the picture of an economy that is rolling over.

Yes, there are cracks forming. The ratio of household debt to disposable income has been creeping higher after hitting a low in the third quarter of 2024, and we know that the last wave of pandemic-era mortgage renewals is working its way through the system over the next twelve months. The Bank of Canada left its overnight rate unchanged at 2.25% this week – as expected – and Governor Macklem was appropriately balanced in noting that economic weakness and rising inflation put monetary policy in a difficult spot. Rate cuts remain possible but are not a given. What I take from all of this is that Canada's economy is operating below its potential, which provides a disinflationary buffer even as energy-driven price pressures remain elevated. That is not a crisis. That is a cycle.

Trade – Playing the Long Game

The tariff saga with Washington has been exhausting to follow, but the outcome has not been without its moments of Canadian resolve. Perhaps the most vivid example came back in March 2025, when Ontario Premier Doug Ford threatened to impose a 25% surcharge on the electricity Ontario exports to 1.5 million Americans in Michigan, New York, and Minnesota. The Trump administration — which had been threatening to double steel and aluminum tariffs on Canada to 50% — blinked. The threatened doubling was walked back, and both sides stepped away from the ledge. It was a masterclass in negotiating with teeth rather than just words. And it established something important: Canada is not going to be steamrolled.

That posture has held. Even as Washington continues to find new legal tools to maintain tariff pressure — most recently through Section 301 "forced labor" investigations targeting 60 economies, with some countries like Singapore facing a 12.5% additional levy — Canada has navigated the landscape with more strategic patience than panic. Prime Minister Carney and his government have not lurched from one reactive decision to the next. They have been deliberate. That kind of measured, strategic firmness has been a hallmark of how Ottawa has handled this entire trade war, and it stands in sharp contrast to the reactive, headline-driven approach we have seen south of the border. Moreover, Canadian officials have been busy actively deepening trade relationships beyond its southern neighbour.

This week we heard that Alberta is talking with Japan about increasing crude oil exports to that country as a way to reduce Japan’s reliance on the Middle East. Yes, oil prices have tumbled on this on again, off again deal between the US and Iran, but no one is naïve to the risk of what a renewed conflict would mean to energy supply lines. Also, this week, Canada finalized a $1.75 billion agreement with Australia for an advanced Arctic Over-the-Horizon Radar system – the first overseas sale of Australia's Jindalee radar technology, and the largest defence export deal in Australian history. The project is expected to support 2,270 jobs annually between 2026 and 2033, with the infrastructure rooted right here in Ontario as part of Canada's broader $38.6 billion NORAD modernization framework.

To put it plainly – Canada just signed a major strategic and economic deal with a trusted ally, building critical defence infrastructure on home soil, and it didn't involve Washington at all. But let’s take a step back and look at what we are buying. As much as Canada is working towards diversifying where it sells its goods and services, a decline in the share of US products in Canada’s total import package continues. The chart below shows the share of US imports over almost 40 years. At the start of this year, that share reached almost 55% - twenty points below where it stood in 1998.

TSX Keeping Pace, But Watch the Oil Story

Here is a question worth asking as you head into the long weekend: if US corporate earnings have been stronger, and US economic fundamentals have appeared more resilient, why has the TSX been running neck and neck with the S&P 500 this year? Coming into 2026, the TSX had already put in an extraordinary 2025, delivering total returns of around 31% – its best showing in over fifteen years. The index hit an all-time high above 33,000 in January and has continued to push higher, with year-to-date gains that have kept pace with – and at points exceeded – what we have seen out of the S&P 500. As of mid-June, the TSX was trading around the 34,900 level, not far off its recent highs.

The engine driving that performance for much of the year has been energy. The TSX energy sector gained approximately 35% through the first five months of 2026, powered by oil prices that spent much of the year in the $80-100 per barrel range as the Iran war created acute supply concerns around the Strait of Hormuz. Canada’s major producers generated significant free cash flow in that environment, and the Big Six banks benefited too, as analysts noted the knock-on effect of higher energy production feeding into lending activity.

But this is where I want to offer a word of caution. The recent Iran-US memorandum of understanding has sent oil prices sharply lower, with Brent crude falling to below $75 a barrel this week – the lowest level since late February. Energy stocks have pulled back as a result, and that has weighed on the TSX relative to the S&P 500, which has been cheering the prospect of lower inflation and relief for the US consumer. My personal view – and Ally and I have been sharing this with clients this week – is that the market has gotten a little ahead of itself on the Iran deal narrative. This is a memorandum of understanding, not a peace treaty. It does not resolve the nuclear question. It has a 60-day window for the more substantive negotiations to take place, and the history of these agreements is not encouraging. Brent was trading below $60 a barrel at the start of this year. Even at current levels, we are still up more than 20% from those January lows. The supply picture is not as simple as the headlines suggest, and the risk of a resumption in hostilities – or a breakdown in talks – is not zero.

What this means for Canadian equity investors is that the TSX's energy-driven tailwind has faded in the near term, and we need the financial sector to pick up the slack. So far, it has. The Canadian banks remain well-capitalized, earnings have been solid, and the Bank of Canada's decision to hold rates rather than cut has actually helped maintain interest margins. The financials sector is the bedrock of the TSX, and right now it is doing its job. Despite some pullback in the commodities sector, the TSX maintains an outperformance margin against the S&P 500 compared to this time last year, as the chart below shows.

Younger but More Mature

Which brings me back to where we started – Canada Day and the title of this week's commentary. Canada is a younger country than most of its G7 peers. Turning 159 this Wednesday is practically adolescence by the standards of European nations. And yet, watching how this country has responded to an extraordinarily disruptive period – a trade war with its largest partner, two active global conflicts affecting energy prices and supply chains, a complex domestic mortgage renewal cycle, and the ongoing challenge of building a more diversified, sovereign economy – I am struck by how mature the response has been.

Think about what Canada is doing right now through the lens of a well-run company facing a difficult external environment. It is not lurching from one reactive decision to the next. It is not letting emotion drive strategy. It is negotiating new partnerships, investing in long-term infrastructure, maintaining fiscal guardrails, and allowing its institutions, like the Bank of Canada and Statistics Canada to function with credibility and independence. That is exactly what good leadership looks like, whether you are running a country or a portfolio. Ally and I spend a lot of time reminding clients that the right response to uncertainty is not to abandon the plan – it is to stress-test it, reinforce it where needed, and stay focused on the long-term objective. Canada, as a whole, seems to have internalized that same philosophy right now.

So, as you fire up the barbecue this weekend and watch the fireworks, we take a moment to appreciate what is actually being built here. Not just the radar infrastructure planned for here at home or the trade relationships being forged in Canberra, Brussels and Tokyo. But the quiet confidence of a country that knows who it is, knows what it stands for, and is making decisions accordingly. I’d say that is worthy of a few fireworks.

On behalf of the Pyle Wealth Advisory team, have a wonderful Canada Day weekend.

Andrew Pyle