For years, U.S. markets felt unstoppable. Now the script is flipping. On this episode of In the Money with Amber Kanwar, Matthew Strauss, SVP, Portfolio Manager & Lead – Global Equities at CI Global Asset Management, makes the case for rotating into global and emerging market equities. After years of American dominance, Matthew argues that stretched U.S. valuations, crowded positioning, and a shifting growth differential are finally pushing investors to look abroad.
The kids are 8, 6, and 4 and I’ve had the realization that we are living the good old days right now. We are in the time before texting, before relationships with friends become more important, before hormones, before fights over homework and grades. Savouring this time when life is more about snack time and less about Snapchat.
Here are five things to know:
Spin me right round: US futures are in the red this morning on a few negative headlines. Yesterday’s Fed minutes were interpreted as a bit hawkish with references to raising rates. However, no Fed speakers are currently talking about that as the preferred policy direction. There is also the prospect of war between the US and Iran. Oil prices are rallying with West Texas Intermediate prices at a 6-month high. In Canada, the prospect of a general election grows dimmer everyday with another Conservative defecting to the Liberal Party leaving Prime Minister Mark Carney with just three seats shy of a majority. Tech is generally lower, but there are some tertiary tech stocks that are rallying. Etsy (+18%) and eBay (+6%) are soaring are inking a deal to sell Etsy’s Depop (social selling) business to eBay. Earnings are also a consideration with Walmart weighing on sentiment (more on that below) and 17 companies reporting on the TSX today including Canadian Tire, Cenovus and Teck Resources (more below).
Retail therapy: Walmart is under pressure after profit beat expectations but its outlook was worse than expected. A conservative outlook is actually pretty typical from Walmart who likes to under promise and over deliver. Sales in the quarter grew more than expected propelled by e-commerce which increased 27% vs consensus at 20%. It also boosted its dividend. The stock isn’t cheap and so a worse outlook than expected makes it ripe for punishment. New CEO John Furner is coming at a pivotal time for the stock. As I wrote in my Globe and Mail preview, investors want to know how AI will transform the shopping landscape and e-commerce in particular. Its part of the reason Walmart switched from the NYSE to a NASDAQ listing. An example of this trend is Loblaw this morning announcing they are partnering with Google to allow customers to shop through AI Mode and Gemini. Canadian Tire also reported this morning with profit higher than expected and significantly higher same-store sales across the board. “Strong end to a challenging year,” wrote RBC’s Irene Nattel of the quarter.
Bet the farm: Shares of Deere are poised to open at a record high following significantly higher sales and profit. The tractor and heavy equipment maker also lifted its profit outlook on hope farm conditions will start to improve. Soybean prices have been rising and if farmers get more money for their crops they can spend more on farm equipment. Overall, Deere still expects sales to fall 5-10% but boosted its outlook for specific business lines like small agriculture and turf. Deere has also been benefiting from the rotation trade away from tech and into AI-proof areas of the market (we all gotta eat even if AI takes our jobs!). If the farm economy is improving, someone forgot to tell Nutrien. The fertilizer maker missed profit and sales expectations and its outlook was also weaker. “Culprits included weather, (phosphate) softness, crop protection, and higher expenses — partially offset by improved proprietary product margins,” wrote Scotia’s Ben Isaacson of the quarter.
Resourceful: Teck Resources may come under pressure despite beating expectations after spending plans surprised higher. The higher spending plans related to extending mine life and for new studies and permitting. Desdjardin’s Bryce Adams calls the results mixed but notes the upcoming catalyst of the merger with Anglo American. Cenovus reported results showing significantly higher profit than expected aided by higher production. Shares are slightly higher in the pre-market.
Used car salesman: Shares of Carvana are plunging 10% after profit missed expectations due to higher costs. The online platform for selling used car has been in the sightlines of short-sellers which recently alleged undisclosed counter party relationships. The CEO hit back on those allegations in the conference call saying they don’t sell loans to related parties. The troubles this quarter were due to the company’s expansion plans. Hiring new people, buying cars and new dealerships all weighed on the bottom line. “We remain convicted in the growth story,” wrote Daniela Haigian of Morgan Stanley, “…Post-mkt pullback offers ~45% upside to $450 PT and attractive risk-reward skew.”
Is ESG Investing dead? If you’ve got questions, Amber Fairbanks has answers! Email questions@inthemoneypod.com
