Toronto Stocks Rally Amid Soft Inflation Data, Rate Cut Hopes

Toronto stocks closed the week green, with soft inflation data boosting hopes for a rate cut. The TSX pulled back from its record high as investors turned their focus to the Jackson Hole meeting. Consumer discretionary shares helped lift the index to a new record high, while energy and financials led gains.

Toronto stocks closed the week green, buoyed by soft inflation data that has fueled speculation of a potential Federal Reserve (Fed) rate cut. The TSX Composite Index (.GSPTSE) pulled back from its record high, as investors shifted their focus to the upcoming Jackson Hole Economic Symposium on August 22, 2025. The consumer discretionary sector, led by Gildan Activewear's (GIL.TO) acquisition of Hanesbrands (HBI.N), helped propel the index to a new record high, while energy and financials also contributed to the gains.

The TSX Composite Index (.GSPTSE) ended the week at 27,993.43, a 0.3% increase from the previous week [2]. The index was lifted by a 11.8% surge in Gildan Activewear shares following the acquisition, as well as a 14.8% gain in Hudbay Minerals Inc (HBM.TO) after the company sold a 30% stake in a copper project to Mitsubishi (8058.T) for $600 million [2]. The financial sector (.SPTTFS) also added 0.7%, while real estate (.GSPTTRE) rose by 1.3% as bond yields declined [2].

The TSX's performance comes on the heels of the July Consumer Price Index (CPI) report from the U.S., which indicated a modest increase in inflation. This data has reinforced expectations that the Fed will cut interest rates in September, supporting economic growth and managing inflation [3]. The TSX index has seen a strong performance this year, outpacing the S&P 500 with a 13% gain [1].

Investors are closely watching the Fed's decision to balance inflation control with growth. Treasury Secretary Scott Bessent has called for a 50-basis-point rate cut at the September meeting to support growth and manage inflation. The upcoming meeting is crucial, as it may influence U.S. monetary policy amidst ongoing discussions about inflation, growth, and regulatory reforms [4].

The Jackson Hole meeting will provide key insights into the Fed's future path, with Fed Chair Jerome Powell scheduled to address the symposium. Powell's remarks are expected to shape both short-term market reactions and long-term policy expectations, given the current mix of inflationary pressures and slowing economic activity [1].

As the TSX approaches its year-end forecast of 30,000, investors are optimistic about the potential for lower borrowing costs and greater clarity on U.S. tariffs. The median prediction of 20 equity strategists and portfolio managers in a Reuters poll is for the S&P/TSX Composite Index (.GSPTSE) to rise 2.3% to 28,553 by year-end, moving above last Wednesday's record closing high and easily eclipsing the 26,250 mark expected in a May poll [4].

References:
[1] https://www.ainvest.com/news/powell-address-jackson-hole-august-22-rate-cut-speculation-rises-successor-debated-2508/
[2] https://www.reuters.com/markets/europe/consumer-discretionary-shares-help-lift-tsx-new-record-high-2025-08-13/
[3] https://www.ainvest.com/news/tsx-hits-record-high-consumer-discretionary-shares-drive-gains-2508/
[4] https://www.reuters.com/world/americas/canadas-tsx-stock-index-predicted-rise-23-by-year-end-trade-certainty-hopes-2025-08-19/