What if the biggest risk to the S&P 500 isn’t a recession, rates, or geopolitics — but the way we invest? Amber Kanwar sits down with Michael Green, Portfolio Manager & Chief Strategist, Simplify Asset Management , to unpack a provocative — and deeply unsettling — idea: under certain conditions, the S&P 500 could theoretically go to zero. Not because every company fails, but because market structure breaks.
My husband is going on ski trip with his pals. I encouraged the trip because he works so hard with little time for himself. I now see that was a mistake. He hasn’t skied in over 15 years and can barely walk across a room without sustaining an injury let alone come down a mountain. Thankfully the west coast seems to have donated all their snow to southern Ontario so hopefully there is more apres than ski.
Here are five things to know today:
Man on the inside: The US markets are indicated lower while metals are getting hammered after US President Donald Trump revealed the next Chair of the Federal Reserve would be Kevin Warsh. “He will never let you down,” Trump said in a post announcing his decision. Despite Trump wanting lower interest rates, up until recently Warsh was known as “hawkish” (ie concerned about inflation and wanting higher interest rates). Warsh is no stranger to the central bank having served as a Fed Governor from 2006 to 2011 which means he had a front row seat to the Great Financial Crisis. In the past he has been very critical of the Fed’s large balance sheet. During his time at the Fed he was seen to be “hawkish” warning about the risks of higher inflation. But this new Kevin Warsh has argued publicly for lower rates in the past year. Perhaps he better understood how to get the job after Trump passed him over in 2017 in favour of Jerome Powell. “The market is trading Warsh hawkish with rates higher, yield curve steeper, stock futures lower, and dollar higher in overnight trading,” wrote Evercore’s Krishna Guha, “But, we advise against overdoing the Warsh hawkish trade across asset markets…because he has a hawkish reputation and is seen as independent, he is better placed to bring the FOMC along with him to deliver at least two and plausibly three cuts this year than some rivals.”
Heavy metal: The US Dollar is firming on the back of the Warsh pick and that is weighing on metals. Gold is down 3.5%, silver is plunging 11% and copper is pulling back 2%. This comes after a volatile session yesterday where gold plunged from $5,500/oz to $5,100/oz wiping out $2.5 trillion in value in 30 minutes. “Are we surprised? No, we’re not,” wrote Ipek Ozkardeskaya of Swiss Quote, “Price action in metals was impressive, but it could be expected just by looking at the rising stress through the lens of the gold volatility index.” This could force prices even lower argues Ozkardeskaya. “A major spike there has been telling us a lot about the building stress behind such an impressive rally, which lately became driven more by speculation than fundamentals. That means we could see a meaningful pullback of 8–10%, toward the $4’600–4’800 per ounce range, to relieve some of that stress.”
Crosshairs: Bombardier could come under significant pressure this morning after the US threatened to decertify the plane maker and all other aircraft made in Canada because we haven’t certified the new Gulfstream models. In theory, this is a quick fix because the new models are awaiting Transport Canada approval. Both aircraft are already certified in the US and the EU. Still, given the eye watering rally (1-year +183%) and skittishness around the stock (two downgrades in a week) the stock could be ripe for selling this morning. “While the headlines are unsettling, will introduce uncertainty for BBD customers and could pressure BBD shares at the open tomorrow, we view this threat as empty and unlikely to be enforceable in practice,” wrote Desjardins’ Benoit Poirier. But the mere threat could be enough to put the stock in the pentalty box argues Tim James at TD Cowen. Bombardier has 3,000 employees in the US and gets 64% of its revenue from US customers, said James. In a worst case scenario where tariffs are implemented and there are no offsets we could see a $1.2-1.4 billion hit to profitability. While that it is not his base case, it is now a consideration for investors. “Even if actions threatened by President Trump are averted, we believe there will be heightened and potentially drawn-out investor sentiment and valuation multiple pressure on Bombardier, and other Canadian aerospace companies that export to the U.S., including CAE and Magellan,” he said in a note this morning.
An Apple a day: Apple is down 1% despite record sales, better profit, and a strong showing in China. Investors appear worried that the rising cost of memory chips is going to take a bite out of the bottom line later this year. This is overshadowing a forecast that was also better than expected. The stock is doubling down on iPhones and one has to assume the lack of AI announcements is deliberate at this point. Unlike peers which are pouring hundreds of billions in to AI development, Apple is content to just use Google’s Gemini. Who knows, that might be the smart play. They didn’t invent Instagram or X but we all need phones to be on them. Indeed, sales of iPhones were a record this quarter. Still, memory looms large. A surge in Sandisk +24% this morning is keeping the issue fresh in our minds. The maker of memory cards posted knockout results with profit coming in 77% ahead of expectations and sales topping by 13%. That is no small feat considering the stock is up 1,400% in the last year.
Choo-choo: Watch shares of CN Rail after it beat profit expectations and raised its dividend. Almost all business lines performed better than expected except for forest and coal products.
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