Confession: My kids were behind on their shots. It is something I knew in the back of my brain because it felt like a long time since I had been but was forced to the front my brain with all the schools and camps asking for their immunization records. They were all missing at least one shot. Given recent outbreaks, I was eager to correct the situation. Which leads me to my current situation: taking all three kids to get their shots at the same time yesterday and a very cranky Friday for everyone.
WATCH: Earl Davis is optimistic—and that’s rare for a bond investor. In this episode of In the Money with Amber Kanwar, the Head of Fixed Income at BMO Global Asset Management shares why he believes both the U.S. and Canadian economies are stronger than many think—and why fears of an imminent recession are overblown. However, he warns inflation isn’t heading back to 2% anytime soon, and instead may stabilize at a higher range of 4–5%.
Mailing it in: Futures are flat this morning after the TSX and the S&P 500 closed at a record high. Earnings and M&A are helping to drive markets this morning. We are also getting comments from Federal Reserve Governor Christopher Waller who appears to be unabashedly auditioning for Jerome Powell’s job as Chair. Waller is once again calling for a rate cut saying private sector hiring suggests weakness in the economy. He was asked point blank about whether he would do the Fed Chair job to which he responded “If the president asked me to do Fed Chair job, I’d say yes.” Earl Davis of BMO Global Asset Management told us it is a mistake for the Fed to cut rates because inflation is going higher. Below is a long-term snapshot of inflation (courtesy of BMO) in the US and Canada. As you can see, prices never really went back down after the pandemic with US prices up 25% in the last 5 years and up 20% for Canada.
Yawn: Shares of Netflix are down 3% despite solid quarterly results. Chalk this up to buyer exhaustion after the stock doubled in the past year. Total sales increased 16% while profit was more than 50% higher from last year – both much better than expected. The streamer also boosted its profit forecast above street consensus. Operating margins were a record high. See where I am going with this? There were no blemishes on the print. “Given the run up in the equity leading up to today’s release, we are not surprised to see shares trading modestly lower in after-hours trading,” wrote Citi’s Jason Bazinet.
Mmm-good: Shares of 3M are trading up in the pre-market and poised to open at a 4-year high after boosting its profit outlook. Quite a turn of fortunes for a stock that just last year was languishing at a 10-year low. The increased profit outlook is especially impressive when you consider that it includes the impact from tariffs. More than one year into the job, 3M’s CEO is demonstrating good progress in mitigating tariffs and reducing costs. 3M also said the tariff impact will be smaller than previously thought. I bought this one at the low (one of my toxic traits) but sold it for a small gain too early (the other toxic trait).
Love is in the air: Chevron has won a battle against Exxon which sought to block it’s purchase of Hess. Chevron announced the $53 billion deal to buy Hess in October 2023 but then Exxon stepped in and said it had the right of first refusal to buy one of the assets that Chevron would be getting. After years of brawling, Exxon lost and Chevron has finally closed its deal. Chevron is up 4% in the pre-market while Hess is up 7%. Closing the deal removes a major overhang Chevron which has lagged since the deal was announced. I’m also watching the rails on reports that Union Pacific is exploring an offer for Norfolk Southern. This would be a major test of consolidation of the railways under US President Donald Trump. “The election of Donald Trump may have opened an earlier window toward establishing American transcontinental
superhighways – with the view of ‘repatriating’ US bound freight that was making its way to the Midwest via a Canadian corridor via Vancouver or Prince,” wrote RBC’s Walter Spracklin. He says CSX and and Burlington North Sante Fe would be at a disadvantage if the deal goes through.
Bad behaviour: Shares of Sarepta are plunging 25% in the pre-market. Yes the same Sarepta that surged 30% yesterday. Recall, Sarepta makes key drugs for a rare form of muscular dystrophy that affects children. Yesterday, it announced a major restructuring and that their drug would remain on the market despite two deaths in patients who can not walk. Today it announced there was a third death. Hard to believe they didn’t know that when they were throwing themselves a parade yesterday. Eden Rahim of NextEdge Capital, a very smart biotech investor, told me he wouldn’t touch it here. “Management is taking a major credibility hit today…” he wrote in an email, “Balance sheet wise, SRPT has a big $1 billion convert that comes due in a couple of years. So that will have to be restructured, which likely results in huge dilution,” he warned.
