In the Money: 5 Things to Know
Risk on, Canada core inflation cools, KB Home warns, Mastercard joins stablecoin fun, defense under pressure
Yesterday was a milestone day for In the Money with Amber Kanwar. We hit 10,000 subscribers on YouTube. We started just five months ago and I thought maybe we would have a few thousand subscribers by the end of the year. The growth has blown me away and I feel so grateful to everyone who watches or listens to the show, my team who tirelessly churns out two episodes per week, the guests who take time to come on the show and of course our big beautiful sponsors (BMO, Raymond James, ATB Capital, CI Financial) who make this all happen. If you aren’t in the money, what are you waiting for?
Would you trust AI to pick your stocks? On this episode of In the Money with Amber Kanwar we sit down with Noah Solomon, CEO of Outcome Metric Asset Management, to unpack how he developed an artificial intelligence program to systematically pick Canadian dividend-paying stocks. With a track record of beating the index by 2,500 basis points net of fees, Noah breaks down what makes his model so effective and how "paranoia built into the algorithm" has helped him weather market storms. You can listen on Apple, Spotify or here.
Peace in a time of war: Futures are surging after US President Donald Trump announced Israel and Iran had agreed to a ceasefire. Oil is plummeting (-12% in the last two days) as the geopolitical risk premium evaporates. The US dollar, gold and bonds are getting clipped. Futures are also getting a lift from Fed speakers who have put the prospect of a July rate cut on the table (which is much earlier than October which is priced in right now). The dissenters, Christopher Waller and Michelle Bowman, may be auditioning for the job of new Fed Chair given Trump’s displeasure with the current one. Speaking of which, Jerome Powell will be speaking at 10am this morning. In prepared remarks that were released ahead of his testimony in front of Congress, he reiterated that the Fed is in no rush to lower interest rates.
In line: Inflation in Canada came in exactly as expected on both headline and core inflation. Headline inflation advanced 1.7% in May from last year while core inflation decelerated to 3% from 3.1%. “…The Bank of Canada's key core measures of trim and median decelerated notably, which is a step in the right direction for a July cut,” wrote CIBC’s Katherine Judge. There will be another CPI print before the July rate decision in addition to GDP figures which come out this Friday. Under the hood we see various policy measures affecting price growth in this country. Curbs on immigration mean that rent growth, particularly in Ontario, is slowing. Canadian’s continue their travel strike to the US and thus travel tours and air transportation prices are down 10% from last year.
Home inspection: Shares of KB Home are down 1.5% after cutting its forecast for home sales. The homebuilder warned that market conditions have “softened” as revenue in the quarter dropped 11% and new orders dropped by more than feared. Still, the stock has been beaten up over the past year and has been coming off the lows in the pre-market session. Put this one on your list if you are looking for a rate cut trade in the US.
Stabilizing: Shares of Mastercard are perking up after announcing it has teamed up with Fiserv on stablecoin adoption. If you missed the Fiserv announcement you can read about it in yesterday’s newsletter. This is a big relief to shareholders who have been selling credit card companies like Mastercard and Visa on concerns that stablecoins will disrupt their payment dominance. Both are down 7-8% from mid-June on concerns that stablecoins, which enable peer-to-peer transactions without intermediaries like credit card companies will start to chip away at their market share. Wells Fargo is out with a note this morning calling those fears “way overblown.” The analyst recommends buying the dips on stablecoin weakness. “We believe stablecoin weakness will fade. You can’t have the wild west in payments,” wrote Wells Fargo’s Donald Fandetti.
Playing defense: Defense stocks, particularly in Europe, have been the hot trade as Europe opens up the fiscal taps to bulk up their defenses against threats from Russia and the retrenchment of the US. However, there could be signs of fatigue in that trade. Yesterday, Citi cut the sector to sell warning that the best gains have been made and that NATO meetings are unlikely to best current expectations. Then just today, Spain said they will increase their defense spending less than anticipated (2.1% of GDP, not 5%). Peace in the Middle East is also weighing on sentiment this morning which shares of BAE Systems, Rheinmetall and Thales all down in Europe.
