Hello everyone, we are Wednesday, July 15th, 2026. Stéfane, a
pleasure to be here with you again today. So, tell me, are the markets
running out of speed?
Ah, they seem to be. Last time we saw a new record high on global
equities, Nancy, it was the beginning of June. Notice that, you know,
at the beginning of the Strait of Hormuz intervention, we had a
correction, a big rebound stalling. And I think there's some
geopolitics undermining the markets at this point in time.
I think so. So, you know, probably has an impact on the oil price
for sure.
So, it coincides with renewed upward pressure on oil. Notice, Nancy,
that we're still very far from the levels that exceeded $100, but it's.
Going up.
It's quite the rebound in recent weeks with renewed tensions.
And of course, that's mostly related to the Strait of Hormuz.
So, doesn't matter what politicians say. Politicians say, open or
not open, traffic says it's not open. So, if you look at the
underlying data, you can explain what's happening on the oil prices
via traffic in the Strait of Hormuz, which is not reopened. So even
though we put it, is it open? That is the question or not, it's not
reopened at this point in time, hence the pressure on oil prices.
And it also has an impact because there is limited availability of
various products, therefore.
So, there's something important to note. So, there's the Strait of
Hormuz, but there's also a war elsewhere in the world. And what's
happening in Europe where you're seeing destruction of refineries,
particularly in Russia, which accounts for 11% of diesel sales around
the world. You're seeing that refining, the cost of refining oil is
surging because there's less refined capacity at refinery levels. So,
crack spreads, which is one way to look at the price of refined
products if you want, actually exceeds what you saw in 2022 that
started the beginning of the war in Ukraine when crude oil was much
higher. So what that means, Nancy, at the end of the day is like the
economy works on refined products and they're up significantly,
whether it's gasoline, diesel, diesel, and it shows up in a global
supply chain. So yes, crude prices have rebounded. They're still below
where they were before, but gasoline and diesel might hit new all-time
highs in the coming week.
Yeah. And that's what consumers feel when they go to the pump, right?
Yeah. And remember, Russia actually said that they were restricting
exports of diesel for the next month. And if there's more refinery
capacity that's destroyed, probably that will last longer. So, hence
the impact on global transportation costs.
And it will take time before everything goes back to normal, right?
So, politicians say something, betting markets say something else.
So according to betting markets, you're not gonna reopen by the end of
July, 2% probability, end of August 13%, end of September 27%. We're
below 50% until the end of the year. Nancy, what that means is that
you're going to continue to impact the global supply chain. So, I know
U.S. inflation was weaker than expected this month but be prepared for
potential upside surprise.
And obviously, let's say it opens December 31st. The next day,
everything will not be back to normal. We felt that during the
pandemic, it took months before things.
You have to replenish inventories, yes, you're right. So, probably
the key story here is to say global supply chains, you know, the
pressures on global supply chains are the most acute we've seen since
the COVID recession. Historically, that's accompanied with positive or
if you want negative surprise in the sense that inflation is higher
than expected. So, this is why we're still not out of the woods. So,
coming back to your first question, are the markets running out of
steam? Well, the markets are looking at this– How do we assess the
impact on the global economy and earnings in this situation?
And even so, since the beginning of this conversation, we've had,
you know, geopolitical not so good news, not dramatic, but not so
good. But then again, markets expectations are surprisingly high.
So, this does not necessarily show up in terms of earnings
expectation because right now, as we speak, the expectation is that
virtually every large region of the world will deliver more than 20%
earnings per share growth so profitability will increase by 20%. It's
you know, listen, it's possible. I just want to say these expectations
are quite ambitious if you have more pressure on the supply chain in
the coming weeks.
And what's surprising is your graph is that there's no negative,
there's no one single digit.
No, no double digit, minimum double digit. So, as we said last
month, the expectations are still the best earnings per share growth
globally ever seen outside a recession recovery. So, market surprise
for better news, not worse news, hence the need to watch what's
happening on the geopolitical front in the coming weeks.
So, one good news we got this morning is Bank of Canada.
Well, if not moving interest rates is good news, yes, it is because
we're keeping our.
But for our consumers it is.
Well, most of our, you're absolutely right, most of our clients
would appreciate that and we remain in a jurisdiction where interest
rates are lower than the rest of the world. So, that's good news. And
the other good news, Nancy, is the Bank Canada, actually, they stayed
on the sidelines, and they recognized that well we might see a better
rebound in GDP than we expected in the second quarter, remember we had
two negative quarters. Now we're set to rebound 2% in the second
quarter. That's good news.
Yeah. And you have another one about employment.
Oh yeah, so GDP rebound is not very important for me if it's not
accompanied by a jump in employment. And the good news is we seem to
be confirming better news on GDP with the June employment data,
particularly for people age 25 to 54 who are critical for the credit
cycle, right? So, new all time high on employment for people 25 to 54.
Now, Nancy, I know you're going to tell me "Yeah, but you told me
population growth is negative this year", but permanent
immigration is still up and it really has an impact on people 25 to
54. But yes, population will be down because many foreign students or
temporary workers that tend to be younger will be negatively impacted.
But that's good news for the credit cycle and for potential GDP rebound.
Good. So, you have another good for us about the production level
that would be increasing in Canada.
So, people have been talking about trade diversification. It's hard
to do in the short term if you don't tap into natural resources. And
so oil production's on the rise in Canada and the expectation is they
will continue to rise because there was a new pipeline announcement
between Ottawa, Alberta, and British Columbia that seems to be
inclined to provide more oil to the rest of the world. 90% currently
goes to the U.S. and if you want diversification, you need a pipeline.
So, from that standpoint, it's positive news in terms of
diversification and note that from a trade balance perspective, it
will help support the Canadian dollar. So again, there's upside
potential here for oil production in Canada. And if you want to become
an energy superpower, you know, it goes with that title. So again, I
think that this is constructive from a trade diversification
perspective, which the government actually is hoping for.
So, a lot of good news, Stéfane. So even though the microeconomic is
very volatile, I mean, you've brought us a couple of very interesting
news today. So, thank you for that.
Pleasure.
And for all of you, I hope that you will enjoy the summer and that
you will take the time during your vacation to reflect on your
situation and talk to your advisors. And we will see you again in
August. So thank you. Thank you, Stéfane.
