The Globe and Mail reports in its Saturday, Aug. 1, edition that the Canadian banking sector is facing challenges, including high stock prices and stretched valuations. The Globe's David Berman writes that the largest banks have limited expansion opportunities, mainly relying on domestic economic activity, population growth, modest efficiency gains, and a widening spread between deposit rates and loan earnings for performance. But this year has been far from dull for investors who signed up for the sector's steady pace. Share prices for the Big Six banks have risen around 30 per cent in 2026, despite a recent dip, significantly outpacing the S&P/TSX Composite Index's gains. Bank of Montreal is a standout, with a gain of 40 per cent this year. The unusual rally has pushed bank stock valuations to curiously high levels. Now, indifference to valuations is harder to defend. Bank stocks traded at 15.3 times estimated earnings in early July, according to Jefferies' John Aiken. That's about 50 per cent above the historical average of 10.3 times earnings and well above the previous valuation peak in 2006. Mr. Berman sees a correction coming if the banking sector doesn't match the market's expectations.