In the Money: 5 Things to Know
Futures higher, inflation in Canada, banks beat, J&J fails to impress, Prairie Sky miss
I’m solo parenting this week and I’m getting the newsletter done with a little help from Alexa this morning. Her patience as the kids scream “play the meowing APT song” over and over again is a master class in parenting. For your reference it is APT by Bongo Cat. Don’t look it up.
A new episode of In the Money with Amber Kanwar just dropped. We spoke with James Davolos of Horizon Kinetics. He had one of the best funds in 2022 when the markets tanked. He also runs an ETF meant to outperform when inflation runs high and it is doing just that over the past year. His says markets are entering a new era - and its not really just about tariffs. He’s and American investor, but two of his best three ideas are Canadian! Tune in! Listen on Apple, Spotify or here.
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Rubik’s cube: Futures are modestly higher as better earnings and the prospect of tariff relief spark tentative enthusiasm. This morning we got earnings from Bank of America, Citi and Johnson & Johnson (more on that below). Mid-day yesterday, US President Donald Trump floated the idea of delaying or pausing auto tariffs. Car makers like General Motors, Ford and Stellantis all surged. Make no mistake we are still in the thick of tariff concerns. Boeing is falling in the pre-market (-3%) after China told its airlines to stop taking deliveries of Boeing jets. Investors are adding up reports like that and coming up with bearish outlooks for US stocks. A record number of investors plan to reduce exposure to US stocks according to Bank of America’s fund manager survey. The S&P 500 has bounced since the April 9th low, but the rally reflects a cautious tone with gold, consumer staples, utilities, and real estate leading since then.
Before the storm: Headline inflation in Canada unexpectedly cooled to 2.3% vs the expected rise from 2.6% to 2.7%. The average of two core measures also decelerated. Lower gas prices and airfare helped to bring overall inflation lower as passengers avoided trips to the US. This comes on the eve of the Bank of Canada rate decision. Right now it is a coin toss whether the central bank will cut rates for an 8th meeting in a row or pause to assess the impact of tariffs.
Make trading great again: Bank of America is popping in the pre-market after earnings beat expectations as stock traders brought in record revenue. This isn’t just a flash in the pan for the trading desk, that part of the business has now grown for 12 consecutive quarters. While volatility has been a boon to the trading desk, the investment bankers are taking their lumps in the form of lower dealmaking. Investment banking revenue fell 1%. In terms of outlook, the CFO says they don’t see a recession. Citi is also benefitting from elevated trading activity helping it beat profit expectations. Shares are modestly higher in the pre-market.
Health check: Investors aren’t sure what to do with Johnson & Johnson after it beat profit expectations and maintained its profit outlook in the face of looming tariffs. J&J shares have been volatile as investors figure out what tariffs mean for the global pharma and medical device company. Yesterday, the US announced an investigation into drug imports. The CFO said the investigation should centre around cheap generics flooding the market and may actually insulate the “innovative therapies” sold by J&J. Investors aren’t convinced, the stock has turned negative in the pre-market.
Prairie Sky: Watch shares of Prairie Sky at the open after the energy royalty company reported lower slightly lower production volumes and cash flow per share than expected. “While we continue to believe the company is positioned to benefit from consistent leasing activity in its core growth areas…” wrote Raymond James’ Luke Davis, “…We now think oil-weighted producers are likely to temper development plans for the balance of the year given the pullback in pricing, which presents potential downside to our near-term outlook,” he wrote. If there is weakness, James Davolos of Horizon Kinetics said he would buy the stock. It was one of his Pro Picks.
Send in your questions for our next episode: all about healthcare stocks! Email us: questions@inthemoneypod.com
