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Hello everyone, and welcome to the weekly roundup. Today, we'll be discussing key topics such as geopolitics, market volatility, and available investment opportunities. Pen and Eva begin by exchanging greetings and commenting on the arrival of spring, noting the pleasant weather and hoping it continues. As the session gets underway, the conversation turns to geopolitics, which appears to be a significant market driver at the moment. Investors are encouraged to distinguish between short-term market noise and more profound structural risks. The discussion highlights the particular complexities of navigating markets during a Trump presidency, observing that this term is more focused on geopolitics than the economy, especially with the ongoing events in Iran. The situation remains highly active, with ongoing missile strikes and heightened tensions. Notably, President Trump has reached out to Zalinski in Ukraine for support, which is seen as somewhat ironic.

The conversation then shifts to the impact of these events on asset prices and markets, specifically gold, silver, the US dollar, and oil, which have all been significantly affected. Equity markets have also shown increased volatility. In light of these developments, there have been numerous discussions about whether to buy oil or take advantage of other market movements. The suggestion is that during periods of market overreaction, such as the current run-up in oil and natural gas prices, it may be more prudent to move in the opposite direction—considering selling rather than buying. The speakers mention that they have sold natural gas holdings and shifted towards emerging markets, emphasizing the importance of assessing global economic environments and identifying where valuations are attractive or where markets might be overreacting. They caution against chasing assets like the US dollar, gold, silver, or oil during such periods, viewing the current reactions as potentially excessive and driven by immediate events rather than long-term fundamentals.

A deeper dive into equity volatility reveals that, despite some market pullbacks related to the situation in Iran, underlying fundamentals remain resilient. However, there are signs of strain beneath the surface, particularly in the private credit market, which has faced notable declines, with major players like Blackstone, KKR, Apollo, and Blue Owl experiencing significant drops from their highs. This is flagged as a potential systemic risk, with questions raised about who bears the liability, though clear answers remain elusive. The marking down of certain Blackstone funds to zero is cited as a concerning example. Despite these risks, the pullback associated with the Iran situation is viewed as temporary, but both issues warrant close monitoring going forward.

When asked about the most compelling opportunities amid uncertainty, the response is that market overreactions can create attractive entry points. For example, during the recent market drop, strong companies that declined by 8–10% presented good buying opportunities. Europe and emerging markets, which saw steep sell-offs, are highlighted as areas worth considering. India, in particular, is noted for its potential, having been down at the start of the year and perceived as less resilient due to economic and geographic factors. However, these setbacks make it even more attractive in the current environment. The software sector, including companies like Microsoft, also saw significant declines, which may represent overreactions—creating opportunities for investors to purchase quality names at lower prices. Companies such as Microsoft and Thomson Reuters stand out as examples of value in this context.

The session also reviews recent charts and visuals, noting the frequency and intensity of geopolitical events over the past five years, as described in the "fourth turning" theory by Neil Howe, which suggests that the world is in a period marked by significant turmoil and change. The ongoing US and Israel strikes on Iran, and their implications for global markets and central banks, are considered critical issues. The loss of oil output from Iran is believed to be manageable, especially given the ability of OPEC to increase output and the fact that most of Iran’s oil exports go to China. The attacks on Venezuela and Iran have had a direct impact on China, but increased output from OPEC could help alleviate pressure on oil prices.

Turning to the Eurozone, there is a suggestion that current inflation levels could allow the European Central Bank (ECB) to wait out the crisis, with recent developments leading to a shift from a likely rate cut to a hold. With headline inflation at 1.9%, there is room for policy flexibility. The Canadian situation appears similar, with no immediate concerns about inflation. The conversation also touches on sector performance, noting that while energy, industrials, and materials have outperformed the S&P 500, the software sector has experienced a sharp downturn, creating potential buying opportunities for those interested in technology names.

The discussion concludes with reminders that the opinions expressed are those of the speakers and not necessarily those of National Bank Financial. Listeners are reminded to consider their own risk tolerance and are encouraged to reach out with questions. Looking ahead, the focus will remain on geopolitical developments, particularly involving Iran, the US, Israel, Ukraine, and Russia, as well as on upcoming earnings reports and central bank rate announcements in Canada, the US, and the ECB. The importance of monitoring market sentiment is also emphasized. Finally, listeners are invited to subscribe to the group’s newsletter, Financial Heartbeats, and to reach out for further discussions or review meetings.

Hello everyone, and welcome to the weekly roundup. Today’s discussion will cover tariffs, interest rates, and earnings releases. After a brief greeting with Ben and Eva, the conversation quickly shifts away from weather talk and dives right into the main topics.

The session begins with an analysis of the US Supreme Court’s decision to strike down President Trump’s Supreme tariff. There is widespread uncertainty in the markets following this announcement, which has coincided with earnings week in the US and among some Canadian banks. Global leaders appear to be signalling a desire to move forward without dwelling on past tariffs, suggesting what’s paid is paid. However, the future remains murky, as the situation has led to another round of negotiations—something markets generally dislike due to the volatility and unpredictability it brings. The removal of tariffs has led some leaders to question the enforceability of previous deals, further complicating matters. The prospect of refunds for countries and companies that paid the tariffs could be a significant positive surprise, particularly for capital markets, potentially leading to a weaker US dollar and boosting markets. However, the overall direction remains uncertain, with the possibility that affected parties may simply refuse to pay going forward. This uncertainty is contributing to market volatility, as evidenced by recent corrections in gold and silver prices. It’s anticipated that this chaotic environment may persist into the coming year, especially leading up to the US midterm elections.

The conversation then shifts to the fourth quarter US GDP, which posted a modest 1.4% growth, falling short of expectations. Despite this, inflation remains stubborn. The Federal Reserve’s challenge is to balance supporting economic growth against the risk of persistent inflation. The consensus is that the current Fed Chair will likely hold off on making rate cuts, prioritizing his legacy as the central banker who tamed inflation. However, the US economy is slowing and consumers are under pressure from high interest rates, record-high debt, and credit card balances. The next Fed Chair is expected to cut rates, which could help consumers and boost certain stocks and bonds. Until the new chair is in place, a wait-and-see approach is likely to prevail.

Attention then turns to Canadian banks, which have reported strong results. The primary drivers of this success appear to be capital markets activities such as loan syndication and new issuances, as well as gains in wealth management. Improved net interest margins—essentially the spread between borrowing and lending rates—also contributed positively. Nevertheless, there are concerns about the underlying health of the Canadian consumer, with similar pressures seen as in the US. The Canadian housing market has been in decline for several months, and while loan-to-value ratios on mortgages remain healthy, there are signs of broader deterioration. The banks’ strong performance is notable, but their future prospects are closely tied to real estate and equity market trends. For now, they appear fairly valued, but their sensitivity to these sectors warrants ongoing attention.

The discussion then reviews recent movements in interest rates across Canada, the US, and Europe. This year has seen significant fluctuations, continuing the volatility experienced last year. In Canada, the probability of a rate cut at the upcoming March meeting is rising, influenced by economic data and expectations of softer inflation. In the US, expectations for multiple cuts have moderated due to persistent inflation, while the European Central Bank now appears poised for several rate cuts in the coming months. These trends reflect broader attempts by central banks to smooth out economic cycles and avoid recessions, with aggressive rate cuts playing a central role in the current narrative.

Next, the focus shifts to the US 10-year bond, a key indicator of economic health. The 10-year yield has climbed significantly since the lows of 2020, and speculative positioning remains balanced. The consensus is that long-term rates may fall, easing pressure on both the US economy and consumers. Monitoring these trends will be crucial going forward.

The session concludes with a review of S&P 500 earnings. With 86% of S&P companies reporting, 76% have beaten expectations, 8% met them, and 17% missed. Misses are spread across materials, industrials, energy, and consumer staples, while information technology—a large component of the index—has also seen some underperformance. Assessing whether these results are systemic or one-offs is key for future investment decisions. The discussion emphasizes the importance of forward guidance and looking for opportunities in stocks that may have overreacted to the downside but have strong future prospects.

As always, it’s noted that the opinions expressed are personal and do not necessarily reflect those of National Bank Financial. Listeners are encouraged to consider their unique risk tolerance and to reach out with any questions or for further discussion. The team also teases upcoming topics, such as artificial intelligence and developments from the US State of the Union, including a proposed 401k matching program that could benefit both individuals and markets. With month-end approaching and more economic data on the horizon, the team will continue to monitor inflation, unemployment, and GDP numbers closely. The meeting wraps up with thanks to the audience and reminders to subscribe for further updates and to reach out for personalized advice.