2025-01-15
[Investopedia, USA]: Two big risks threaten a
“resilient” U.S. economy, JPMorgan Chase (JPM) CEO Jamie Dimon said ahead of
next week's scheduled inauguration of President-elect Donald Trump and the
start of his second administration. In a press release today announcing the
bank’s most-recent quarterly results, Dimon noted low unemployment—at 4.1% in
December, per the latest government figures—and “healthy” consumer spending to
finish the year.
He also looked forward to the coming administration,
saying businesses are “more optimistic about the economy, and they are
encouraged by expectations for a more progrowth agenda and improved
collaboration between government and business.”
But Dimon also cited two “significant risks” in his
statement:
·
“Ongoing and future spending requirements
will likely be inflationary, and therefore, inflation may persist for some
time.”
·
“Additionally, geopolitical conditions
remain the most dangerous and complicated since World War II.”
“We hope for the best but prepare the Firm for a wide range of scenarios,” Dimon said.
[BNN Bloomberg, Canada]: U.S. banks/CPI: Stock markets
were poised to open higher this morning after earnings from U.S. banks showed
strength. JP Morgan Chase, Wells Fargo and Goldman Sachs all topped profit
expectations, setting an optimistic tone for the day headed into the release of
the latest CPI number at 8:30 a.m. The annual U.S. inflation rate came in at
2.9 per cent, in line with expectations but higher than the previous month’s
annual pace. Prior to the number, the market was predicting basically no chance
that the U.S. Federal Reserve would cut its interest rate at its next policy
meeting at the end of this month, and the CPI number did little to change those
plans. “Given the strength in the economy we still think it is more likely the
Fed is nearly done cutting rates, with a final move in March possible,”
Bloomberg Intelligence’s Ira Jersey said.
SEC sues Elon Musk – again: The U.S. Securities and Exchange Commission is suing Elon Musk for failing to disclose his growing stake in Twitter in a timely manner. The suit announced Wednesday alleges that prior to buying Twitter, Musk was quietly and methodically buying up shares in the company without disclosing that he had amassed a more than five per cent interest. That disclosure would likely have sent the price of the shares higher but since he did not, “he was able to make these purchases from the unsuspecting public at artificially low prices,” the regulator said. A fight with the SEC is nothing new for Musk, who has had numerous battles with the regulator over the years. In a statement to Bloomberg, his lawyer Alex Spiro called the civil lawsuit part of a “campaign of harassment” against Musk, noting that the complaint boils down to a failure to file a single form, “an offense that even if proven carries a nominal penalty,” he said. Spiro said the case is an admission by the SEC that they cannot bring “an actual case” against Musk because he “has done nothing wrong and everyone sees this sham for what it is.”
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2025-01-13
[BNN Bloomberg, Keith Richards]: The Canadian stock
market may take a turn for the better after 15 years of underperformance
against the S&P 500 Index. Four reasons behind this thought:
A change in the government: In 2025, a fiscally
prudent leader is highly likely to be elected. Over the past decade under
current policies, Canada moved from amongst the strongest economies, to the
weakest country in the G-7 in terms of debt/capita, gross domestic product
(GDP) growth, productivity, and other metrics. That should change with new
leadership.
Valuations: Leading Canadian sectors such as energy
and certain materials and the banks are cheap. The TSX itself is also trading
at a lower multiple than the S&P 500.
Sector rotation: Sometimes the worst performing stocks
and sectors in one year become the best performers in the following year. For
example, the “dogs of the Dow” theory has outperformed markets in most years.
In 2024, utilities, materials, energy and staples were the worst performers.
These sectors represent 36 per cent of the S&P/TSX Composite Index. Plus,
let’s not forget Canadian financials, which represent over 30 per cent of the
composite. They are strongly impacted by how these four sectors.
S&P sector concentration: The S&P 500 Index is
concentrated in expensive stocks. These stocks, nicknamed the Magnificent
Seven, are Apple, Nvidia, Microsoft, Amazon, Alphabet, Meta and Tesla. In 2024,
the group saw a 67 per cent increase in collective stock prices. The Magnificent
Seven represents a ridiculous 35 per cent weighted in the SPX “500” stock
index. While it can be argued that the group of stocks are fundamentally
in-line with average valuations compared to growth, one can also question
whether that growth will continue in the future.
Whatever the case, one could certainly argue that,
although in an uptrend, the Magnificent Seven (MAGS) may have a bit more
downside or consolidation before a return to the trendline. Technically, they
aren’t cheap, for sure.
All of this to say the TSX may “catch a bid” in 2025.
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2025-01-10
[Investopedia, USA]: The odds of the Federal Reserve
cutting its benchmark interest rate this year fell after a jobs report Friday
showed hiring in December blew past expectations.
·
Strong job growth means less pressure on
the Fed to cut interest rates to save the economy and prevent layoffs.
·
The central bank keeping the fed funds
rate high will drag on the economy and pressure borrowers' budgets on all kinds
of loans, from credit cards to mortgages.
· The Fed's reluctance to cut rates is unlikely to please incoming president Donald Trump, who has said interest rates are too high.
[BNN Bloomberg, Canada]: Canada adds 91,000 jobs:
Canada’s economy added 91,000 jobs last month, Statistics Canada reported this
morning, almost four times better than analysts were expecting. The jobless
rate declined by 0.1 per cent to 6.7 per cent as for the first time in several
months, more jobs were added than people were to Canada’s population. Jobs
numbers in the U.S. were also strong, with payrolls increasing by 256,000 new
jobs and the jobless rate ticking down to 4.1 per cent. Both numbers were
better than forecasts. The market reaction to the news was to lower the odds,
slightly, of a Bank of Canada rate cut later this month – and certainly
increase the likelihood that if they do cut, it won’t be by 50 basis points.
Odds of a 25-point cut on the swaps market fell to coin toss territory after
the numbers came out. That compares with about an 80 per cent implied chance of
a cut this time yesterday.
Shares in Delta Airlines are taking off this morning
after profit at the U.S. air carrier beat expectations in the last three months
of last year on strong demand for domestic and international travel. Even
better for the airline, it forecast that momentum to continue into the first
quarter of this year, which is typically a slow time for the industry. Revenue
is forecast to be nine per cent higher this quarter than it was in the first
three months of 2024. The shares are up by more than seven per cent premarket,
and the optimism is dragging shares in rivals like United, American and
Southwest skyward too, on the assumption their upcoming numbers will match the
performance.
[Investopedia, USA]: Shares of insurance companies are declining in premarket trading amid a soaring damage estimate for the Los Angeles-area wildfires. The total damage and economic loss attributed to the wildfires is estimated at between $135 billion and $150 billion, according to updated AccuWeather figures as of Thursday night, up from $52 billion to $57 billion one day prior. Shares of Allstate (ALL) are 5% lower, while those of Travelers (TRV) and Chubb (CB) are down 4%.
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2025-01-08
[BNN Bloomberg, Canada]: Eh-conomic force. Donald Trump’s claim this week that the U.S. doesn’t need anything Canada provides is flat out wrong. That’s according to Canada’s Energy Minister Jonathan Wilkinson, who in an interview with Bloomberg Wednesday said America would have a difficult time replacing the heavy crude oil, uranium and critical minerals that Canada currently exports to the U.S. The U.S. simply does not produce enough of those products domestically to meet its demand -- or have the capacity to ramp up -- so would have to resort to importing more of them from countries like Venezuela and China. It’s part of the rapidly escalating war of words between the two countries, on the eve of Donald Trump’s inauguration. Ottawa is reportedly looking into what it can do in terms of retaliatory tariffs and is considering levies of its own on things like steel, ceramics and orange juice.
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2025-01-08
[BNN Bloomberg, Canada]: Trump plans to put ‘economic
force’ on Canada: Donald Trump stepped up his rhetoric in his trade war of
words with Canada on Tuesday, telling reporters he would use “economic force”
to compel Canada to comply to his demands on the trade file. The comments are
an escalation of previous talk on the subject, where the notion of the U.S.
annexing Canada was mostly dismissed as a playful ribbing. But Trump’s comments
make it clear he isn’t pleased with the state of economic affairs between the
two countries. He said the U.S. subsidizes Canada to the tune of hundreds of
billions of dollars a year, an apparent reference to Canada’s trade surplus
with the U.S., which is largely due to energy exports. It’s hard to discern
what’s real and what’s just bluster here, but it’s also hard to understate the
impact of a firm economic line from the U.S. toward Canada. More than three
quarters of Canadian exports go to the United States, and innumerable critical
imports come the other way. We’ll get more reaction on this ongoing story
throughout the day.
Prorogation throws capital gains tax plan into chaos: Of all the fallout from Monday’s announcement by the Prime Minister that he will be stepping down, there’s perhaps no more interesting angle for Canadian businesses and investors than the impact on the capital gains tax changes proposed in last April’s budget. After carving the plan to raise the threshold out of the budget, the Liberals tried to move the legislation through on its own, but prorogation has now seen that law die on the vine. Tax authorities and planners, however, have been operating under the assumption that the new plan would see the light of day, leading to a nightmare headed into tax season with lack of clarity on the rules. The Canadian Federation of Independent Business didn’t like the plan in the first place, but says the current chaos is even worse. In a social media post, CFIB president Dan Kelly called the situation “untenable” and urged tax authorities to revert back to the old system. “This is deeply unfair and disrespectful to Canadians that have important transactions ahead, not to mention those who rushed to sell businesses or assets in advance” of the rules ostensibly coming into force last June, he said.
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2025-01-07
[BNN Bloomberg, Canada]: Canada’s trade surplus to the
U.S. widens: Canada’s trade surplus with the United States narrowed in
November, Statistics Canada reported this morning. Exports to the U.S. rose by
6.8 per cent during the month, eclipsing a 4.1 per cent increase in imports and
widening the surplus to $8.2 billion. While Canada continues to have a trade
surplus with the U.S., which is responsible for three quarters of all trade,
the country’s economy continues to be in a large deficit position with the rest
of the world. Overall, imports outpaced exports and the deficit came in at $323
million during the month. That’s down from $544 million the previous month.
Toronto home sales dip in December: Toronto home sales fell in December, down 18 per cent from November, the first monthly decline since July. December is not typically a busy month for home sales, but the figure came in below the level of the same month last year. The average selling price was down by almost two per cent compared to last year to a little over $1.06 million.
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2025-01-06
[News]: Canadian Prime Minister Justin Trudeau announced on Monday his intention to step down as leader of the ruling Liberal Party and, consequently, as prime minister.
[BNN Bloomberg, Canada]: Loonie rallies on Trudeau
report: Ottawa is all atwitter about media reports that the Prime Minister is
making a decision about his future in the coming days, likely ahead of a caucus
meeting on Wednesday. We’ll leave the politics to the experts, but one of the
initial market reactions was a rallying in the Canadian dollar, which gained a
half a cent on Sunday evening. A lot of that is broad weakness in the U.S.
dollar, which is weaker against a basket of its global peers. But whatever the
reason, if it holds through the day, it would be the biggest one-day jump for
the loonie’s value since May 2023.
Trump team floats reduced tariff plan: The Washington Post is reporting that aides close to incoming U.S. President Donald Trump are exploring a revised tariff plan that would see levies expanded to more countries, but only on certain critical goods. The move is a rollback of previously announced plans on tariffs of up to 25 per cent on goods from certain countries, but also opens the door to expanding tariffs to target individual products instead of countries.
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2025-01-03
[BNN Bloomberg, Canada]: CPP sells stake in four
Chinese malls. The Canada Pension Plan Investment Board is selling its 49 per
cent interest in four real estate joint venture projects to an affiliate of
Dajia Insurance Corp. The pension giant says the sale, which will include four
retail malls in Shanghai, Suzhou, Chengdu and Chongqing, will bring in about
$235 million Canadian.
Chinese bond yields slump to record low. China’s bond market beat the performance of most global peers last year as an economic slowdown prompted expectations of more rate cuts to come. That rally in prices has sent yields down to their lowest level on record, with the 10-year dipping below 1.6 per cent for the first time ever yesterday. The “relentless decline” in Chinese yields is a clear sign the market is worried about deflation, something that has not been a concern in China basically ever, Lombard Odier strategist Homin Lee told Bloomberg News. “There is a risk that China’s 10-year bond yields start testing one per cent before the end of this year,” Lee said.
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2025-01-02
[BNN Bloomberg, Canada]: Natural gas price spikes in
Europe: The price of natural gas in Europe has jumped to its highest level in
more than a year, just shy of 50 euros per megawatt-hour. That’s about double
what the going rate was as recently as February, and the catalyst seems to be
Russian gas deliveries across Ukraine being halted after the expiry of a
transit contract between the two warring nations. Russia is a major supplier of
natural gas to Europe, so limiting supply at a time of peak demand during cold
winter months has many feeling anxious. Officials are doing what they can to
stress that there is plenty of gas in storage, but it’s playing out in the
market price. Last week, Russia turned off the gas taps to Moldova because of a
dispute over unpaid bills.
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