The week of August 31 brought two defining stories for markets: a deepening rift between Canada and the United States that may signal a structural realignment rather than a temporary standoff, and a Federal Reserve chair who used his first Jackson Hole platform to deliver a steady, if mildly hawkish, message. Sadiq Adatia, Chief Investment Officer at BMO Global Asset Management, addresses both — along with Nvidia's blockbuster quarter — in his weekly commentary dated August 311.
Beyond the TACO Moment
Canadian markets have shown remarkable resilience in the face of President Trump's 50% tariff on $28 billion of Canadian goods. Some observers have read this as a prelude to a familiar pattern — a TACO moment, shorthand for the administration's track record of retreating from its most dramatic tariff numbers. Adatia rejects that framing. The tariff, he argues, is "a sign of a more fundamental shift in the relationship between the two countries."
That distinction matters. Even if future negotiations bring the tariff number down from its current extreme level, President Trump's view on Canada appears to differ from some members of his own party in Congress, many of whom support few or no tariffs on Canadian goods. The fracture, in other words, is not simply bilateral — it runs through Washington itself.
Prime Minister Mark Carney's announcement of retaliatory tariffs, set to take effect after Labour Day, introduces a further escalation risk. Canada would become only the second country, after China, to impose retaliatory tariffs on the U.S. Given Trump's documented tendency to respond to opposition with further escalation, the asymmetry of that posture carries real risk. The one moderating factor is timing: the retaliatory measures do not take effect until September 8, leaving a narrow window for negotiators to return to the table, if both sides are willing.
Adatia is measured but clear on positioning: "We are taking a wait-and-see approach to the Canada-U.S. trade dispute, preferring to see some kind of resolution before we get more optimistic about Canadian equities. That said, we view it as a positive for Canada that Mark Carney refused to sign a bad deal."
These trade tensions are likely to be a drag on consumer sentiment and add uncertainty to Canadian businesses. While the Canadian economy is not always closely correlated with Canadian stock market performance, the trade situation may also impact investor confidence, especially if it drags on. That logic explains BMO GAM's existing underweight to Canadian equities — a position the team is not yet ready to reverse.
Warsh at Jackson Hole: Steady, Not Spectacular
Fed Chair Kevin Warsh delivered his first-ever remarks at the Jackson Hole Economic Policy Symposium, emphasizing that the Fed still has "work to do" on inflation, noting that all indicators show it running above the 2% target, and stating that "the Fed's predominant focus right now should be on prices."
Warsh also elaborated on his well-known distaste for forward guidance, saying its role should be "limited and circumscribed" — or else it risks creating confusion, limiting the Fed's freedom to make the right calls, and muddling the economic and financial indicators on which the Fed bases its decisions.
In the immediate aftermath, the implied probability of a September rate hike rose to 50% from 36% before the remarks — a meaningful move that signals markets read the speech as slightly hawkish even where Warsh appeared to occupy the middle ground. Adatia's read is characteristically grounded: "While a September rate hike appears slightly more likely after Kevin Warsh's Jackson Hole address, the speech otherwise offered few surprises."
One mild curiosity: Warsh did not say more about the U.S. Treasury Department's recent intervention in the bond market — an omission notable precisely because the speech seemed otherwise designed to avoid headline-grabbing news.
Nvidia's Quarter and the Limits of Momentum
Nvidia's Q2 earnings solidly beat projections and painted a rosy picture of expected revenue growth — the first time in four quarters that an earnings beat has actually resulted in a significant stock lift, representing the second-largest single-day gain by market value of any stock in history. Forward guidance pointed to 70% income growth in 2027, with demand reportedly exceeding even that figure, constrained only by current capacity limits.
Yet the surge did not spread. While Nvidia stock surged 8.7%, the NASDAQ as a whole was up just over one percent, and the momentum did not continue through Friday. Typically, a result of this magnitude would produce a sector-wide rally in the 2-3% range. It did not. Adatia attributes this to lingering concern about broad AI and technology valuations, and potential competition from Chinese AI firms. "Nvidia's Q2 results show that earnings are still important, even if they did not provide the broad-based boost to Tech that some may have expected."
The expectation is that investors' desire for diversification will pick up, with rotation occurring not only from U.S. to China, but also from U.S. Tech to names in other sectors — resulting in continued market volatility.
Five Key Takeaways for Advisors and Investors
- The Canada-U.S. tariff dispute is structural, not tactical. BMO GAM views the 50% tariff as a sign of a genuine relationship shift, not a negotiating feint — advisors should not assume a quick resolution.
- A September Fed rate hike is now a coin flip. Warsh's Jackson Hole address moved implied hike probability from 36% to 50%, reinforcing a higher-for-longer posture that has direct implications for duration positioning.
- Maintain a cautious stance on Canadian equities until clarity emerges. Consumer sentiment, business uncertainty, and the risk of further escalation all argue for patience. BMO GAM's underweight to Canadian stocks remains in place.
- Nvidia's results confirm AI earnings power — but not a sector-wide tailwind. The lack of a broad Tech rally suggests the market is discriminating more carefully between winners and the rest. Diversification across sectors is a more credible strategy than concentration in the Magnificent Few.
- The retaliatory tariff window of September 8 is a critical signpost. Whether negotiations resume before that date will be a material indicator of whether the trade situation stabilizes or worsens — advisors should watch it closely.
Footnote:
1 Adatia, Sadiq. "The Canada-U.S. Rift Widens. Now What?" BMO Global Asset Management, 31 Aug. 2026, https://bmogam.com/ca-en/insights/weekly-commentary-august-31-the-canada-us-rift-widens-now-what/.
