Two sessions ten days apart delivered the same lesson in opposite directions. On October 9, Statistics Canada reported that the economy lost 68,000 jobs in September and that unemployment had reached 6.5%, and the S&P/TSX Composite rose 1.48% to 35,664.62. On October 19, the September consumer price index arrived at 3.1%, below the 3.2% forecast by analysts polled by Reuters, and the index fell 0.69% to 35,928.63.
Weak data lifted equities, and softer data weighed on them. Neither reaction is irrational on its own terms. Both are what happens when a market is answering one question, whether the Bank of Canada raises its 2.25% overnight rate on October 28, and lets the most vivid recent signal supply the answer.
What the Bond Market Heard on Saturday
The sequence matters. On Saturday, October 17, Governor Tiff Macklem spoke to reporters in Bangkok after the annual International Monetary Fund meetings. The Globe and Mail reported that his remarks suggested high oil prices were becoming a major concern for the Bank of Canada. Scotiabank Economics noted that pricing for an October hike roughly doubled by Monday morning, from about 9 basis points on Friday to about 18 basis points.
Then the data arrived and pointed the other way. Headline inflation rose to 3.1% from 3.0%, but the increase came from gasoline, which was up 27.8% from a year earlier. Excluding gasoline, inflation slowed to 2.2% from 2.4%. The two core measures the Bank of Canada watches most closely also eased, with CPI-trim at 1.8% and CPI-median at 1.9%.
The Globe and Mail reported that bond traders paid closer attention to the governor than to the inflation report, even though the data came in better than expected.
Availability and Anchoring Do the Work
Amos Tversky and Daniel Kahneman described the availability heuristic in 1973: people judge how likely an outcome is by how easily an example comes to mind. A central bank governor speaking on a Saturday is easy to recall. A CPI-trim reading 0.1 percentage point below consensus is not.
The same two researchers documented anchoring in 1974. Once a market holds a number in mind, such as 18 basis points of hike pricing, later information tends to be judged against that number rather than on its own merits. The core readings arrived into a market that already had a new reference point.
None of this means the repricing was wrong. A governor who flags oil as a concern is giving real information about how the committee may weigh a 27.8% gasoline increase. The behavioural question is proportion: whether one speech should move pricing as much as the inflation data the Bank of Canada itself targets.
The Jobs Rally Ran on the Same Engine
The October 9 rally followed the same logic in reverse. After the labour force report, the odds of an October hike fell to about 25% from roughly 40% within hours, according to Wealth Professional. Andrew Hencic of TD Economics wrote that the report would cool near-term hike expectations, and a loss of 68,000 jobs registered as good news for equities because the question in view was the rate decision, not the economy.
Manufacturing lost 13,000 positions in the first full month after a new round of US tariffs took effect against Canada. That detail drew far less attention than the repricing it accompanied, which fits the same pattern.
Prospect theory, introduced by Kahneman and Tversky in 1979, holds that people do not weigh probabilities in a straight line. A 15-point swing in hike odds is therefore not experienced as 15 points, and the emotional weight of each swing can exceed its arithmetic.
Daily changes in the S&P/TSX Composite from September 16 to October 20 show a market that rallied after 68,000 jobs disappeared and slipped after a below-forecast inflation print, with the average session moving 0.69%.
Changes are measured close to close, and October 13 is compared with October 9 because the TSX was closed on October 12 for Thanksgiving. The hike odds cited in the text are market pricing reported by Wealth Professional, not an HDQ estimate.
Why the Pattern Matters Before October 28
The Bank of Canada decides on October 28, and the Federal Reserve meets on October 27 and 28. Reuters reported on October 19 that money markets expect a hold at 2.25% while pricing a 25 basis point increase in December.
Between September 16 and October 20, the S&P/TSX Composite moved at least 1% in six of 24 sessions. The longer-run finding from Werner De Bondt and Richard Thaler, published in 1985, is that investors tend to weight recent dramatic news too heavily. The coming week offers a live test of how much weight a single speech, a single data release or a single central bank decision will carry.