Futures perk up, mini-budget day, Bitcoin hits record, Capri looks for deals
We hosted our annual “Friendmas” this weekend. A tradition that is now 14 years strong with friends I’ve had for more than 20 years. Throwing a party for friends you’ve had this long is less stressful because you really don’t have to impress them. We’ve seen each other through messy breakups, poor fashion choices, and now the tumultuous joys of parenting. The kind of people I can say, “I’m going to bed now,” while they continue to hang in my home. Except now that we are a little older I don’t come down to beer cans and bodies laying everywhere, I come down to clean dishes and leftovers packed away in the fridge. And instead of beer cans strewn about, it is empty wine bottles neatly ordered by the door. Same, but different.
Cracks in La La Land: Markets had a rough ride last week, but hope springs eternal and futures are looking at a positive start to the last full trading week of the year. Nevertheless, cracks may be starting to form. “Friday marked the tenth session in a row that more stocks fell than rose within the S&P 500, the longest such run since 1996,” wrote Jim Reid of Deutsche Bank this morning. This comes as we got reminders that inflation is still not totally under control in the US. The bond market is flashing warning signs with the US 10-year posting its biggest weekly jump in yields since October 2023. “Equities are in La La land,” wrote Andrew Brenner at NatAlliance, “Higher rates and a hawkish Fed ease is not the prescription for higher equities.” Speaking of the Fed, they make their rate decision Wednesday. Another rate cut is expected but given hotter inflation, investors expect a pause in rate cuts in January. We also get rate decisions from the Bank of Japan and Bank of England on Thursday. While futures are resilient this morning, oil is struggling as we got signs of weaker economic activity out of China. Retail sales growth and fixed asset investment in China was below expectations. In addition, we saw continued weakness in property investment and residential property sales. A lot happening in Canada today and this week. Tomorrow, we get a read of inflation and this afternoon Bank of Canada governor Tiff Macklem will be giving his year-end address. We get the Fall Economic Statement today at 4pmET (more below).
Debt-date: This afternoon we will get the federal government’s Fall Economic Statement. This mini-budget will give Canadians an update on how deep the deficit path has become. Recall, the last budget showed the deficit for 2024/25 was going to be $39.8 billion, or 1.3% of GDP. However, since then we have seen new measures like the tax holiday and checks being sent out to Canadians who made under $150,000 in 2023. The latter measure is now in question with National Post reporting that Finance Minister Chrystia Freeland will reverse course on those checks in order to stay true to her fiscal anchors. Freeland stated that the deficit would not exceed $40.1 billion. However, economists are skeptical. “Oh, and as for those ‘fiscal guardrails’?,” wrote Benjamin Reitzes, economist at BMO, “When government has an ongoing propensity to break its own rules, they cease to be rules that warrant much credibility.”
Warm embrace: Bitcoin surged to a record high $106,000 before settling down at around $103,000 as of this writing. It got a lift after President-Elect Donald Trump confirmed support for a strategic bitcoin reserve. Bitcoin continues to go more mainstream after the announcement that MicroStrategy would be entering the NASDAQ 100. This is massive because one of the largest ETFs that tracks this index, the QQQs which has $325 billion in assets, will become an automatic buyer. Shares of the bitcoin buyer are up 3% in the pre-market after a whopping 500% return this year. The market may also expect a possible inclusion into the S&P 500 next year. Palantir and Axon Enterprise were also inducted into the NASDAQ 100 while Illumina, Moderna and Super Micro were removed. Super Micro is down 13% in the pre-market after getting turfed by the index as well as reports it is looking to raise fresh capital.
Thank you, next: Shares of Capri Holdings are popping on reports it is considering the sale of its Jimmy Choo and Versace brands. The handbag retailer is up about 3% in the pre-market after Women’s Wear Daily reported the data room is being prepared to provide information to potential buyers. This comes after Tapestry’s bid to buy Capri was blocked by a judge last month. The stock is down about 50% since the deal fell apart.
Boom goes the Dynamite: A bunch of banks are starting to cover newly public retailer Dynamite, mostly with buy ratings suggesting further upside from here. The retailer went public at $21/share last month and the stock has basically hovered around that level. Scotia, RBC and Desjardins are all out with reports calling the stock a buy. Scotia says this can be a $25 stock due to strong same-store sales growth, high margins and attractive valuation. While RBC warns that tariffs are a risk for Dynamite’s business model, they are also more bullish seeing the stock hit $27/share. “(Buy) rating reflects current valuation discount to peers that, in our view, should normalize if (Groupe Dynamite) delivers on the growth agenda and as it establishes a track record as a publicly traded entity,” wrote Irene Nattel of RBC.
