Editor’s note: An earlier version of this episode was uploaded this morning with the incorrect audio. This has now been fixed!
On this episode of In the Money with Amber Kanwar, Andrey Omelchak, President, CEO & CIO at LionGuard Capital, breaks down one of the biggest shifts happening in markets right now. As AI fears hammer software valuations and once-untouchable names get cut in half, small and mid-cap stocks are quietly catching a bid. Andrey explains why he believes the market has overreacted in parts of software — but also why select small caps, defense plays, and “Build Canada” beneficiaries may offer stronger risk-adjusted returns from here.
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Here are five things to know:
360: After a stunning reversal yesterday in which US markets finished in the green along with the TSX, futures are back where they started indicating a sharply lower open. European markets are a sea of red down between 2.5-4%. Bonds are also selling off across the board as oil prices surge another 7%. The cause is Iran. The war is escalating, energy infrastructure is being hit, and the Straight of Hormuz is closed. The commander of Iran’s Revolutionary Guard said any ships who tried to cross the Strait would be “set on fire.” Higher oil prices are inflationary and so the market is pricing that in with the bond selloff and bets that interest rate cuts are less likely. In the case of Canada, the market is pricing in a rate *hike* by December. “The BoC usually reacts hawkishly to a sustained rise in energy prices given the terms of trade pass through to domestic incomes and related spending,” wrote Scotia’s Derek Holt. In the US, the market has also reduced the magnitude of rate cuts because of oil price spikes. One might think that the central bank would look through a temporary spike in oil prices, however it is not happening in isolation. “Instead, it comes after industrial commodity prices (e.g. steel, aluminum, copper) have moved higher,” wrote Citi’s Andrew Hollenhorst. We spoke about the sell off on the podcast with Andrey Omelchak who said: for long term investors, this sell off was a buying opportunity.
Bullseye: Shares of Target are a bright spot this morning rallying 4% after earnings beat expectations and its forecast was surprisingly upbeat. Sales fell 2.5% in the quarter, which was slightly worse than expected but its forecast suggest 2% growth in 2026. The wind has been at Target’s back recently thanks to a rotation out of expensive stocks and into cheap stocks. Target is up 16% so far this year and has a new CEO trying to turn the business around after years of under performance.
Bongo: Shares of Mongodb are plunging 27% after its profit and sales forecast fell short of expectations. The database software company is reviving anxieties about whether AI can eat into its business. To be clear, sales growth was still a robust 26%, but the big question is whether that pace of growth can continue with the threat of AI. With a new CEO three months into the job, investors seem impatient for answers. “The database layer has endured through multiple technology shifts over the past 60 years, and it is even more critical in this AI shift,” said CEO CJ Desai on the conference call last night. MongoDB also announced a raft of management changes. This is likely spooking investors as well said Citi’s Tyler Radke. Nevertheless, he continues to like the stock here saying forward looking demand indicators strengthened. “For investors who missed the prior rally, we see the pullback as an attractive opportunity to add exposure, with expectations reset and fundamentals intact,” wrote Radke.
Grounded: Watch shares of Propel at the open after it missed sales and profit expectations. The subprime lender, which operates mainly in the US, says it was negatively affected by the government shutdown. Propel said things picked back up in December but as a result of those higher originations they had to take higher upfront provisions and deal with the cost of acquiring the new business which weighed on profitability this quarter. They said the revenue will be earned over future periods. To prove that, the forecast for revenue this year actually came in higher than expected. It’s unclear how much that can support the stock, investors are nervous about this space and shares of Propel are down 47% from their peak last summer. Andrey Omelchak said on the podcast he would buy the dip here explaining the company is doing the right thing by tightening up originations amidst an uncertain macro backdrop. He would not, however, buy GoEasy which often gets lumped into the same category but is a different business. Tune in to find out why!
Notable call: Scotiabank is being downgraded by Mario Mendonca at TD Cowen on valuation and growth concerns. “While BNS has made significant strides in improving its ROE, we are increasingly concerned that Scotia will lag its peers as investor focus shifts toward (balance sheet) growth,” wrote Mendonca in the downgrade. “Although we understand management’s emphasis on value over volume (client primacy), loan and deposit growth remain soft, particularly in Canadian commercial & personal lending, and international banking,” he said, “We had expected a faster, clearer inflection following optimization efforts, but recent trends suggest progress is slower than anticipated.”
Don’t miss our next episode all about energy! Email your questions to questions@inthemoneypod.com
