AI, Inflation and the Next Phase of Market Growth

In the following 5-minute video, Blair Setford, AVP, Product Management, Canada Life Investment Management Ltd., discusses the themes shaping markets today and what they could mean for investors as we move into the final quarter of the year and look toward 2027.

Blair notes that the third quarter of 2026 was a reminder that markets can continue moving higher even when the economic backdrop becomes more challenging.

Global equity markets reached new record highs despite renewed inflation pressures, rising bond yields, geopolitical uncertainty and increasing concerns about government debt. Much of the market's strength, and some of its volatility, continued to be driven by artificial intelligence as businesses invested heavily in the infrastructure, software and technologies supporting the next stage of AI adoption.

While technology remained a key market leader, investor interest broadened across other sectors, reflecting a more selective and balanced market environment. History tells us that transformative innovations can create opportunities far beyond the companies receiving the most attention today, and he believes that remains an important theme for long-term investors.

Another key development during the quarter was the return of inflation concerns. Higher energy prices and ongoing geopolitical tensions contributed to inflationary pressures that prompted central banks to maintain a cautious stance. Expectations for interest rate cuts faded as the U.S. Federal Reserve and European Central Bank signalled that further rate increases may still be necessary.

Bond markets also felt the impact. Long-term yields moved higher as investors adjusted to the possibility that inflation and interest rates could remain elevated for longer. While higher yields have weighed on bond prices, they have also improved income opportunities and restored a level of fixed income attractiveness not seen for many years.

Closer to home, Canada's economy continued to show resilience, although trade tensions, softer growth and employment concerns created a more challenging backdrop. In contrast, the U.S. economy remained relatively strong, supported by healthy business investment, a solid labour market and continued AI-related spending.

Looking ahead, our portfolio management team remains constructive on the global outlook, but increasingly focused on selectivity. Corporate fundamentals remain generally healthy and the AI investment cycle continues to support growth. At the same time, inflation, interest rates and fiscal pressures remain important risks to monitor.

Blair concludes by recommending that investors with concerns about their portfolios should consult their financial advisor.

The views expressed in this commentary are those of Canada Life Investment Management Ltd. as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Prospective investors should review the offering documents relating to any investment carefully before making an investment decision and should ask their financial security advisor for advice based on their specific circumstances.

This material may contain forward-looking information that reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of October 2, 2026. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

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