AI Stocks Surge, Banks Deliver, and Canada’s Recession
Strong Market, Soft Economy: Canada’s Mixed Month-End Recap
Hope you had a wonderful weekend, and welcome to June!
May ended with a bit of a split-screen moment for Canadian investors: the TSX pushed higher, bank earnings looked strong, and tech stocks helped lift the market… but Canada’s GDP report showed the economy may be weaker than expected.
So the big question is:
Are markets looking ahead with confidence, or ignoring warning signs underneath the surface?
Let’s break down what moved markets last week, and what it means for your money in Canada: 👇
📈 Market Pulse: TSX Ends May Higher
🇨🇦 TSX Composite (34,769.14 | +2.4% for May): Canada’s main stock index ended Friday at 34,769.14, up 0.7% on the day, and finished May up 2.4% (marking its second straight monthly gain).
Earlier in the week, the TSX also hit a new record closing high as investors reacted positively to peace deal hopes in the Middle East, strength in tech, and gains in metal mining stocks.
The biggest Friday boost came from technology, which rose 4.7%, helped by a strong move in Celestica.
What it means:
Even though Canada’s economy is sending mixed signals, investors are still finding pockets of strength; especially in tech, banks, and materials. But this is not an “everything is amazing” market. It’s a selective one.🇺🇸 U.S. Markets: Records Keep Rolling: U.S. markets also extended their record run, helped by strength in tech and optimism around a possible U.S.–Iran deal. Wall Street’s May rally was powered by AI and tech again, but this time, it wasn’t just Nvidia.
Micron was one of the biggest winners, jumping 87% in May as demand for AI memory chips surged. The stock briefly crossed a $1 trillion market value, showing investors are betting on the full AI supply chain, not just the headline names.
Semiconductors helped drive the move, with the S&P 500 Information Technology sector up 15.9% in May.
💵 The Loonie (around $0.725 USD): The Canadian dollar edged lower Friday after weak GDP data, trading near 72.5 cents U.S.
For the week, the loonie still managed to gain slightly, but the GDP miss reminded investors that Canada’s economy is not exactly firing on all cylinders.
📊 GDP: Canada’s Economy Disappoints
The biggest economic story of the week was Canada’s GDP report.
Canada’s economy unexpectedly contracted at an annualized rate of 0.1% in Q1, following a revised 1.0% contraction in Q4.
That means Canada posted two straight quarters of annualized decline, something some economists call a technical recession.
But here’s the important part:
Not everyone agrees that Canada is in a full recession, because on a quarterly basis, GDP was flat in Q1, and an early estimate suggested the economy may have grown 0.4% in April.
So the story is more nuanced than “Canada is doomed.”
It’s more like this: The economy is weak, but not collapsing.
Tariff uncertainty, weaker business investment, and slower spending are weighing on growth. But there are still signs that the second quarter may look better.
What this means:
The Bank of Canada has a tricky job.
If the economy is slowing, the BoC may want to stay supportive. But if inflation stays sticky because of energy prices or tariffs, it may not have room to ease too quickly.
This is why every GDP, inflation, and jobs report highly matters right now.
🏦 Big Bank Earnings: Strong Results, But Watch the Fine Print
Canadian banks were a major focus last week, and overall, the results were stronger than expected.
All of the Big Six beat profit expectations, but the quality of those beats varied. Strong capital markets, wealth management, and better-than-feared credit losses helped most banks.
But the most important detail was credit quality.
Most of the Big Six reported lower or better-than-feared loan loss provisions (basically, the money banks set aside for loans that might go bad). That’s a good sign because it suggests banks are not seeing borrower stress get worse as much as investors feared.
But CIBC was the notable exception.
CIBC reported rising Canadian consumer losses, which reminded investors that some households are still feeling pressure from high debt, mortgage renewals, and everyday costs.
Why this matters: Loan loss provisions are like a bank’s “rainy day fund.”
If provisions are rising, banks are preparing for more borrowers to fall behind. If provisions are falling, it suggests credit conditions may be stabilizing.
For investors, this is important to watch, because financials make up a huge part of the TSX. When the banks are healthy, the Canadian market gets support. But if consumer credit starts weakening again, it can quickly become a warning sign for the broader economy.
Simple takeaway:
Bank earnings looked solid, but the fine print still matters. The Big Six are holding up better than feared, but Canadian households are not completely out of the woods.
💻 AI and Tech Powered May’s Rally
May was a strong month for markets, and tech did a lot of the heavy lifting.
The rally was not just Nvidia anymore. AI optimism spread across semiconductors, software, servers, and data-centre infrastructure.
Major winners included:
Micron ($MU | +87% in May): surged as investors piled into AI memory stocks. High-bandwidth memory is becoming crucial for AI data centres, and Micron joined the $1 trillion club as demand for AI memory chips exploded.
AMD ($AMD | +45% in May): jumped after a strong outlook boosted confidence that AI infrastructure demand is still strong. The move helped spark a broader rally across global semiconductor stocks.
Dell ($DELL | +100% in May): surged after strong results showed its AI server business is becoming a major growth engine. Dell shares jumped over 30% on Friday as AI server demand helped power its first quarter results.
ServiceNow ($NOW | +40% in May): had its best month since its 2012 IPO, as fears around AI disrupting software faded and investors warmed back up to enterprise AI tools.
In short: AI is no longer just about one company. Investors are betting on the full AI supply chain: chips, memory, servers, cloud tools, networking, and software platforms (i.e. the “picks and shovels” of the AI economy).
Simple takeaway: The TSX ended May strong thanks to banks, tech, and materials, but the global rally is still being powered heavily by AI. That can create opportunity, but it also means expectations are high.
🕊️ Peace Deal Hopes Helped Sentiment
One reason markets felt more optimistic last week was hope for an extended ceasefire in the Middle East.
Investors were watching for signs of a U.S.–Iran deal that could include opening the Strait of Hormuz and limiting nuclear risk.
When geopolitical risk cools, markets often breathe a little easier.
But this is still a fragile situation.
If talks improve, oil could stay calmer and inflation pressure may ease.
If talks break down, oil prices could move higher again, which would matter for gas prices, inflation, and the Bank of Canada.
📝 Month-End Takeaway: Strong Market, Soft Economy
May ended with a strong TSX, solid bank earnings, and record highs, but the economy didn’t exactly give us a clean green light.
GDP disappointed. Business investment remains weak. Trade uncertainty is still weighing on Canada. And the Bank of Canada has to balance a slowing economy with inflation risks.
That’s why this isn’t a simple “bull market” or “recession” story.
It’s a mixed-signals market.
Stocks can rise while GDP disappoints. Banks can post strong earnings while households feel stretched. The loonie can weaken even while the TSX climbs.
That’s why looking under the hood matters.
A strong index doesn’t mean every sector is strong.
A weak GDP report doesn’t mean every company is struggling.
And one good month in the market doesn’t mean you should throw your plan out the window.
The lesson stays the same:
Stay diversified. Watch the data. Don’t let one headline make your financial decisions for you.
Markets can feel confusing, but your money plan doesn’t have to. I’m back from my Europe trip now, so I’ve opened up a few more 1:1 coaching calls this month.
So if you’re trying to invest, save for a big goal, clean up your budget, or understand how these market moves affect your real life, let’s turn the noise into a clear plan.
📲 Click Here to Book a 1:1 Investment Strategy Call
Stay calm, stay diversified, and keep compounding.
Cheers 💫
Your Wealth Coach,
Finance Femster