Snapback

Good afternoon, everyone. Everyone and their grandmother seemed to be watching Canada take on Morocco in the FIFA World Cup on Saturday. While Canada's historic run ended with a 3-0 loss, experts are mulling over another disappointment: the tournament wasn't quite the economic windfall many had hoped for. Toronto says the city, province, and federal government spent $380 million to host six matches, but its financial impact fell short of Taylor Swift's Eras Tour boost to restaurants and retail (still, that’s some tough competition). For one soccer fan in Toronto, the World Cup represents a different legacy: "The connection, the togetherness, we really needed this." 

In today’s newsletter:

— Leah Golob

The S&P 500 just posted its strongest three-month performance since 2020 and was up about nine per cent this year as of July 5. Yet, Bank of America is warning investors to brace for a pullback, saying "speculation is hitting extreme levels." The bank says hyperscalers are seeing their free cash flow plummet due to enormous spending on the AI boom, essentially eating away at company earnings. It expects the S&P 500 to end the year about five per cent below last week's closing level. 

Canada is decidedly not in a recession, Desjardins economist LJ Valencia reports. The country’s real GDP increased by 0.5 per cent in April, following a dip of 0.1 per cent in March, marking a return to growth. Fourteen of Canada's 20 major industries expanded, led by mining, construction, manufacturing and transportation. The good news may be short-lived, however. Conflict in the Middle East continues, and the U.S. still hasn’t agreed to extend CUSMA.

The long-awaited review deadline for the Canada-U.S.-Mexico Agreement (CUSMA) passed on July 1, with the U.S. declining to renew the trade pact. That doesn't mean CUSMA is over. Instead, the agreement will remain in force and enter a period of annual reviews for up to 10 years. Unfortunately, that doesn’t help with economic uncertainty, which has been hanging over the Bank of Canada’s rate decisions since Donald Trump’s trade war began. If the three countries don’t agree to extend the deal by 2036, it will expire. 

Projected Federal Reserve rate hikes are putting downward pressure on gold, outweighing its appeal as a safe-haven asset. Gold has been on a remarkable run this year as prices climbed over US$5,000 an ounce before sinking to around US$4,000 (still above historical levels). Fund managers say shifting interest rate expectations have led to its decline in recent months. “Gold becomes less appealing to investors when borrowing costs rise because they can capitalize on interest-paying asset classes instead,” the Canadian Press reports.

Could AI help, rather than hinder, job opportunities? A new working paper from Ramp Economics Lab found that companies making the largest investments in AI grew their head count by about 10 per cent over the following two years, while entry-level hiring grew even quicker at 12 per cent. The expansion took six to 12 months to come into effect, and the benefits were largely concentrated among venture-backed firms with higher rates of growth. If you’re a young worker choosing between two similar employers, Ramp recommends joining a company that’s more heavily invested in AI. Of course, Ramp is betting on AI to improve its spend management tool, so take its findings with a grain of salt. 

Tang Trang, Vice President of TDI GI Small Business Insurance, answers our questions about all things small business and insurance: what factors small businesses should think about when buying insurance, the biggest mistakes he sees, what type of insurance small businesses need, and more.

What's the most common mistake you see small business owners make then it comes to insuring themselves?

One of the most common mistakes is treating insurance as a one-time purchase instead of something that should evolve and grow as your business evolves and grows. Owners may set up a policy when they first open, then forget to revisit it as they add equipment, hire staff, expand services, take on new contracts, or change locations. That can create a gap between what the business looks like today and what the policy was built to cover. In some cases, owners may be looking to save money and will choose the minimum level of coverage, without fully understanding the gaps that can create. At TD Insurance, we focus on providing tailored advice based on each business’s needs, so owners have the right level of protection in place when it matters most.

How often should business owners be reviewing their insurance coverage, and what questions should they be asking themselves to make that process as efficient as possible?

At a minimum, owners should review their coverage annually, but they should also revisit it any time the business changes in a meaningful way. That could include moving locations, buying new equipment, hiring staff, expanding into new services, changing revenue levels, or taking on different kinds of clients or contracts. To make the review more efficient, owners can ask themselves a few practical questions: Has the business changed since the policy was last updated? What assets, operations, or liabilities would have the greatest financial impact if disrupted or damaged? Are there any new risks tied to technology, weather, vehicles, inventory, or growth? Those questions can help make the discussion with an advisor more focused and more efficient.

If a small business owner made one change today to be better protected heading into next year, what would you suggest?

If a small business owner makes one change today, it should be to schedule a coverage review and make sure their policy still matches the business they are running now, not the business they were running a year or two ago. Businesses change quickly, and insurance should keep up with that. A simple check-in with a licensed advisor can help identify gaps, update limits or coverages, and give the owner more confidence heading into the next year. It is one of the most practical steps an owner can take to protect both the business and the momentum they have built.

Read the full Smart Money Q&A on our website.