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Hello everyone. Welcome to the weekly roundup. Today we will cover monetary policy, oil prices, and earnings releases. Hello Ben. Hi Eva. How's it going? Sunshining, but the temperature isn't warm enough yet. It's perfect. It's literally perfect. Okay, agree to disagree.

Okay, we're going to start off with monetary policy. Rates still look mostly on hold, but we're starting to see a bit of probability creep into hikes and almost nothing for cuts. What does this tell us about where rates are headed over the next six months?

I think that's a great starting point and probably the biggest question or debate around what to do from this point forward. Over the last 18 months, this has been the most volatile period around inflation that I can remember. Even over the past 12 months, we had forward guidance suggesting rates were going up, then coming down, with a huge amount of volatility around it.

Coming into this year, we had the view that rates would come down, but that was before the conflicts that have transpired this year, first with Venezuela and now with Iran. That has changed the forward-looking guidance.

I’ll comment a little bit in the slides around the forward view in Canada versus U.S. inflation, but the key point is that we have a very different dynamic. Inflation is significantly hotter in the U.S. than in Canada, and I think that is really what this question is getting at.

We know there will be a change of leadership, and I think we’ll also see a change in how forward guidance is communicated, which could alter the dynamic. Right now, it looks like rates could move higher in the U.S., but I’d say that’s still to be determined. It really depends on what happens with the Strait of Hormuz and whether continued disruption keeps upward pressure on prices. That could change quickly.

Speaking of the Strait of Hormuz, Iran and the U.S. appear to be getting closer to a deal, and there are talks suggesting the strait could reopen within a month of any agreement. What would the ripple effect be on oil prices and inflation?

I think the impact could be massive, based on what we’ve already seen. I listened to an oil analyst last week who argued that, if the situation were fully reflected, oil could be much higher.

But to answer the question directly, if there is a settlement, it would likely help meaningfully. One important point is that the forward curve is still lower even though front-end prices have risen. That would help consumer confidence, because right now the economy is chugging along mostly on mandatory spending rather than strong discretionary demand.

If the strait reopens, I would expect oil prices to fall by roughly 20% in a short period, potentially more depending on the economy. That would likely pull down related costs such as fertilizers and other inputs as well.

That would probably help next year, because most of the planting for this season is already done and many of those costs have already been absorbed. Ultimately, that supports the view that inflation may prove transitory, leading to a flatter path for rates. Depending on how the economy evolves, we could see rates remain on hold again or even move toward cuts if conditions deteriorate further. So overall, the effects could be very significant.

Yeah. Staying with earnings season, we spoke last week about Nvidia. The Canadian banks are front and center this week. What are the numbers telling us about the health of the consumer and the larger economy?

So their earnings were good. Bank earnings were good, and I guess that's not hugely surprising. Loan loss provisions weren’t as big as expected. All of these things, probably six months ago, we talked about and said that if banks increased their loan loss provisions and then we got a couple of good quarters, that pressure would dissipate — and that's really how it's played out.

I think I said two weeks ago banks are priced to perfection, and I'd still be in that camp. I think they're doing quite well right now.

As for the health of the consumer, if you scratch below the surface, consumer insolvencies are rising. They're not showing in the bank numbers yet because that number is still very small, but the rate of change is increasing in Canada.

So I'd say that's something I'd continue to pay attention to. As that number rises and inflation gets dealt with, these have ripple effects on the Canadian economy. Overall, I'd say the Canadian consumer isn't super healthy at this point.

Yeah, we're not — prices come down.

All right, I'm good. Okay, so just to date this week: we are recording on Thursday, May 28th, around 1:00. So anything that happens between now and next week, we will comment on next week. And we're heading into month end.

All right, let's start off with this.

So this is Canada — major urban centers are bearing the brunt of the changes in population. I think this is a great chart to think about real estate. Obviously there are many factors, but this is the monthly change in population in major centers: Vancouver, Toronto, and Montreal.

As you know, we had major population growth coming out of COVID when borders reopened, and population growth accelerated. Now what we're seeing is that these major centers are seeing population growth shrink.

This is having a material impact on real estate prices. These major centers have been the most negatively impacted, and that has implications for rates and inflation in the short term.

The broader theme is that metropolitan areas are shrinking, with people moving to other regions. This is affecting the economy. During the COVID recession, if we look historically, slowing economic activity would normally push this lower, but changes to immigration rules had a significant impact on how these numbers evolved.

Next is the view on lower inflation. This is Canada versus the U.S.

These are key factors in what happens in Canada. On the left is headline inflation. The U.S. is showing around 7.3% on a three-month basis, which is contributing to rate market expectations staying high. There’s concern driven by memories of COVID-era inflation, though I don’t think we’re in that same environment now.

On an annualized basis, the U.S. is around 3.8% and Canada around 2.8%. From Canada's perspective, inflation is within the target band. So nothing to be overly concerned about. The U.S. is slightly above its band but not dramatically so.

Excluding food and energy, central banks tend to focus on these measures. On a three-month basis, Canada barely moved while the U.S. is higher. On a 12-month basis, the U.S. is within range and Canada is actually below its lower band.

So inflation is a concern, but materially less so in Canada.

Finally, Canada's jobs update (May 2026). Jobs are the missing piece we hadn’t discussed yet, but they matter greatly for rates.

Year to date, Canada has lost 112,000 jobs — the worst start since 2009. Only 38% of sectors are growing. Manufacturing has been hit hardest due to our relationship with the U.S., but weakness is broad-based.

About 12% of jobs are tied to the U.S., so trade matters. Quebec alone is down 87,000 jobs, which is significant. Unemployment is rising toward the higher end of the range.

This feeds directly into Bank of Canada thinking. Inflation is up slightly but not materially, while employment is weakening. That suggests the economy is on shaky ground.

So I wouldn’t be overly concerned that rates will rise as much as suggested in the general media.

As always, the opinions expressed do not necessarily reflect those of National Bank Financial. Everyone has their own risk tolerance. If anything discussed today applies to you, please reach out — we’d be happy to discuss.

Thank you, Ben.
Yes, you're welcome.

So what's on the agenda for next week?

We are into month end. Most Canadian earnings are now out, following the usual U.S. first, then Canada sequence. We’ll continue to monitor that.

As we move into month end, it’s important to assess positioning. Similar to last year’s tariff tantrum, markets reacted strongly, sold off, then rallied. This year we saw a sell-off around the Iran conflict, followed by a rally in April and May.

So the key question is positioning after this major rally, especially in tech. We didn’t even touch on AI today, but those stocks continue to surge — Micron, for example, has grown dramatically in market cap.

We’ll also watch whether a potential Iran-U.S. settlement becomes a “sell the news” event.

Great. Thank you everyone. Remember to visit, subscribe, and follow us on YouTube and LinkedIn at Heart Investment Group. The link to our daily financial heartbeats will be in the caption of this video and in your email inbox if you're subscribed.

For our clients, please reach out if you have any questions or would like a review meeting. Thank you again for listening, and enjoy the rest of your day. Bye. Thanks everybody.

Hello everyone. Welcome to the weekly roundup. Today we will cover possible trade agreements, inflation, and earnings releases. Hello Ben.

Hi Eva. How’s it going? Going good, sun shining, happy day.

When the sun is out, it’s a happy day. It always is.

So we’re going to pick up from last week’s meeting when President Trump and the Chinese president met. Did anything material actually come out of it? And with talks between the Chinese president and Putin also revived, where are all these geopolitical dynamics headed?

Well, it’s become a very interesting and unique dynamic. President Trump and Xi are friends and not friends. That meeting was good in the sense that it showed they are going to continue trying to work together. It’s hard to think that President Xi fully trusts Trump. A lot of actions the US has taken this year, such as against Venezuela and Iran, have had an immediate negative impact on China.

Coming into the meeting, they were somewhat hostile externally, but since they came out with a united front, did anything actually happen? I think the answer is no. President Xi effectively reiterated that Taiwan remains the most important issue for China. Both also said they wanted the Iran conflict to go away, but that doesn’t really change much for either side at this point.

The reason Taiwan continues to be a major issue is that China still considers it part of its country, while the rest of the world largely disagrees. This is critical because most advanced semiconductors come from Taiwan. Without semiconductors, we wouldn’t have modern technology. So this remains a key focus.

Regarding Putin and Xi, they are close partners and support each other. Russian oil is flowing to China as quickly as possible to meet demand. Their relationship continues to evolve, and they are aligned in a complex global environment.

Moving on to inflation, it seems to be coming back into focus with increasing discussion that the Fed could be behind the curve and may need to hike again. How do you see this playing out?

I think that’s probably the biggest risk in the world today. If this conflict continues like the Ukraine-Russia situation, which has lasted years, inflation could become a real challenge. That conflict didn’t affect global energy as much, but here the risk is higher.

If this situation lasts one or two years, inflation will be a major issue. The challenge is that we already had a slowing economy, and now we may see upward inflation pressure. The worst-case scenario is stagflation: a slowing economy with rising inflation. That’s a nightmare for central banks, because unemployment rises while inflation rises at the same time.

This is very negative for consumers. Markets are not fully pricing this risk in. China, which has been experiencing deflation, might begin to see inflation, which could actually be positive for them by improving margins and asset prices. But for the rest of the world, inflation remains a concern.

Markets currently view inflation as temporary, but if this persists another three to six months, it will become a government-level issue because central banks alone won’t be able to manage it.

My last question: earnings season became more interesting with Nvidia’s results. Nvidia is the poster child for the AI-driven market rally. What did the numbers tell us and what should investors watch?

Nvidia has led the AI space. They developed chips originally for gaming, which positioned them ahead when AI demand exploded. Their latest earnings were excellent, and their forward guidance was strong.

However, the market reaction shows how sensitive it is to their performance. Markets were up and down, and today the NASDAQ is slightly lower, with semiconductors down as well.

It’s an important indicator to watch. We are in a tech-driven run-up that could resemble a bubble. The question is whether it continues and for how long. Nvidia’s reporting also shifted metrics slightly, so it will be important to see how other tech companies adapt.

We’re recording around 1:00 on Thursday, May 21st. If anything significant happens before next week, we’ll comment then.

The first chart shows that the current shock goes beyond crude oil. Materials like helium, which is essential for semiconductors, are also affected. If supply is constrained, it impacts production. Energy products like crude oil and liquefied natural gas are also affected, as well as fertilizers such as sulfur, ammonia, and urea.

This won’t impact the current growing season much, but if disruptions continue, it could affect the next one, creating further inflation risk. Petrochemicals, used in many everyday products, are also impacted.

Supply chains are more resilient than in 2020 due to higher inventory levels, but if this situation lasts several months, it will negatively affect the economy and push inflation higher.

The next chart shows a surge in U.S. imports driven by AI-related categories like computers, semiconductors, and telecommunications equipment. These have risen sharply, while the rest of the economy has declined.

This divergence is unusual and typically seen during recessions. Some believe it reflects a structural shift toward AI, while others think it will eventually normalize. The key question is how far this divergence can extend.

Another chart shows U.S. households increasing exposure to the stock market. A larger share of household wealth is tied to equities, which means the economy has become more sensitive to market fluctuations.

In contrast, countries like China have much lower exposure, so stock market changes have less economic impact. In the U.S., however, a significant market correction could have a substantial negative effect on the economy.

As always, these opinions do not necessarily reflect those of National Bank Financial. Everyone has different risk tolerances, so feel free to reach out if you’d like to discuss your situation.

What’s on the agenda for next week?

There will be a lot of economic data in the U.S., which will influence the central bank’s decisions ahead of its June meeting. Energy markets will remain volatile, and geopolitical developments between the U.S. and Iran will be important to watch.

If tensions escalate, markets could come under pressure. If there is a ceasefire agreement, markets could rally. Meanwhile, some sectors are reaching all-time highs, and it may be worth considering reducing risk in certain areas.

There’s an old saying “sell in May and go away,” and we’ll see if that holds true this year.

Thank you everyone. Remember to visit, subscribe, and follow us on YouTube and LinkedIn at Hard Investment Group. The link to our daily financial updates will be in the caption or sent by email.

Clients, feel free to reach out if you have questions or would like to schedule a review meeting.

Thank you for listening and enjoy the rest of your day. Bye.