I can tell how stressful the morning is by the number of sighs I hear coming from downstairs. There were just four in a row. I better get down there.
WATCH: Value stocks are back and Canadian equities may finally be getting the recognition they deserve. In this episode of In the Money with Amber Kanwar, 40-year market veteran Kim Shannon, founder of Sionna Investment Managers, shares why she believes Canada and value investing are poised to outperform in the next decade, despite the market’s obsession with AI, growth, and U.S. mega caps.
Rate cuts are coming: Today the Federal Reserve and the Bank of Canada are set to deliver rate cuts. For the Federal Reserve, this will be the first cut in 9 meetings and investors will be keen to understand the rate path from here. We will also be watching for the number of dissenters. Recall the last meeting had two Board of Governor dissenters for the first time since 1993. This meeting could see dissention from both sides: those in favour of a bigger cut than 25 basis points and those in favour of no cuts. One of those dissenters is likely Stephen Miran, who was appointed by US President Donald Trump and confirmed just in time to attend meetings for today’s decision. Ultimately, Fed Chair Jerome Powell is in charge but it signals how fractured the Fed is becoming and how political involvement is seeping in. The Bank of Canada will have the cover it needs to cut rates this morning after inflation rose less than expected. With a 100,000 job losses in the last two months, the central bank will also telegraph whether more cuts are coming.
Pulse: Rate cuts are coming while the markets are trending near record highs. The US dollar is flirting with a three year low and gold is near it’s high point. This morning US futures are flat, the calm before the central bank storm. If you are looking for a vibe check: IPOs are back. This morning Netskope (history doesn’t repeat, but it rhymes) increased their offer price seeking to raise $900 million. The cybersecurity company has been unprofitable for the last 13 years. The upsized offer shows demand is high for cybersecurity plays amidst heightened threats stemming from AI. StubHub is set to start trading today after raising $800 million, valuing the ticket platform at $8 billion. This marks the busiest period for IPOs since 2021 (ah, the good old days). For Canadian markets, it remains an IPO desert with companies more likely to go private than go public.
Crunch: General Mills reported better than expected profit, but the stock is down 2% this morning. Full disclosure, I own this one as a sucker for low valuation, high dividend paying stocks. The problem is that sales are still falling. General Mills said more people are eating at home as inflation takes a bite, which is helping to support their rice, beans and soup sales. However, consumers are still being cautious and opting for fewer items and/or no-name brands. The stock can’t catch a bid and is trading at the lowest level since March 2020. Investors are likely disappointed that the company maintained it’s forecast calling for 10-15% declines in profit this year.
Qatar on Line 1: Watch shares of Ivanhoe Mines after Qatar’s sovereign wealth fund announced it will acquire a $500 million stake in the copper producer. This will give it 4% ownership in the Robert Friedland-backed miner. The share sale was a 9% discount to yesterday’s closing price at $12/share so the stock will likely be under pressure. The stock has been an underperformer after flooding at one of it’s key mines earlier this year forced the company to slash its output forecasts. If Qatar’s stake rises above 10% they would have the right to a board seat according to the deal, suggesting that perhaps there could be more purchases after this transaction.
Notable Call: Scotia is upgrading TMX Group and putting a street-high $70/share price target on the stock. The owner of the Toronto Stock Exchange is down 8% from record highs. Scotia’s Phil Hardie says investors are underestimating the durability of TMX’s earnings momentum. TMX is a “compounder” that is currently a little less expensive than usual, argues Hardie. “The stock has come off its highs after a period that saw its valuation represent a modest premium to NASDAQ, and we estimate that it now trades at a ~10% discount.” Hardie says if there were to be periods of uncertainty, the volatility would benefit TMX Group which also boasts a big derivatives business. “We think TMX is well positioned for the evolving environment and should be on the radar for investors looking for ideas that could help weather a potential period of elevated uncertainty and market volatility.”
Don’t miss our next episode on technical analysis!
