Today
It’s the unofficial start of U.S. earnings season this week, with four of the largest banks among the first to report quarterly results. Citigroup, Goldman Sachs, JPMorgan, and Wells Fargo report before the open today (see co. news below for details). Investors will be watching net interest income, loan growth, credit quality and investment banking activity for signs that higher treasury yields are beginning to affect lending and corporate activity. Financial stocks have trailed the broader market this year, especially over the past few months, as higher interest rates raise concerns about funding costs, weaker loan demand and potential credit deterioration. While higher rates can support bank lending margins, the benefit may be offset by rising deposit costs and pressure on borrowers, as existing debt matures and is refinanced at higher rates. Beyond the banks, attention will turn to whether higher borrowing costs and AI-related capital spending are beginning to weigh on corporate margins. Earnings expectations remain strong, however investors will be looking at forward guidance for signs that profit growth can be sustained into 2027. U.S. stock futures are mixed this morning, while the TSX returns to trading after yesterday’s Thanksgiving holiday.
Investors are entering Q3 earnings season with high expectations, with analysts forecasting nearly 30% year-over-year S&P 500 earnings growth, up from 26.7% at the end of June, raising the bar for companies to deliver positive surprises. Tech remains the primary earnings driver, with profits expected to rise 65%, helped by strong AI-related demand for companies like Nvidia, Micron, and Dell. However, the strength in headline earnings masks a less favourable picture across the broader market. Nearly 38% of S&P 500 constituents are trading at least 20% below their 52-week highs, while eight sectors have seen downward earnings revisions since June. With strong earnings beats already the market’s baseline expectation, companies may need to deliver more than just better-than-expected quarterly results to sustain further gains. Forward guidance for 2027 will be closely watched for signs that earnings growth can broaden beyond tech and withstand pressure from higher borrowing costs and rising AI-related capital spending.
The Fed’s latest Survey of Consumer Finances found that nearly 20% of families in the U.S. were behind on loan payments at the end of 2025, up from 12% in 2022 and the highest level since 2010, while the share at least two months delinquent increased from 5% to more than 8%. The survey also found that close to 9% of households now allocate more than 40% of their income to debt payments, compared with 6.5% just three years ago, highlighting the growing burden elevated inflation and borrowing costs have been on consumers. While the survey covers conditions only up until last year, more recent New York Fed data suggests household financial concerns remain, raising questions about the durability of consumer spending, with the findings pointing to increasing financial strain on households.
More central banks are shifting towards tighter monetary policy heading into 2027, reversing earlier expectations for declining interest rates amid continued inflation, elevated energy prices, and resilient economic activity. Advanced-economy policy rates are expected to rise by 25 bps in aggregate this year, reflecting inflationary pressures stemming from the Iran war, continued AI investment, and expansionary fiscal policies, although rising bond yields are already tightening financial conditions. In the U.S., markets have priced in another Fed rate increase by December, with the ECB is expected to raise its deposit rate to 2.75% by year-end. The Bank of Japan could continue normalizing policy toward 2% by the end of 2027 and the Bank of England faces growing pressure to tighten as inflation approaches 4%. In Canada, the BoC has maintained its overnight rate at 2.25%, but markets now see an 85% probability of a rate increase by year-end as headline inflation remains near 3%, despite trade uncertainty and weakening labour market conditions. Monetary policy is diverging across emerging markets, with China expected to ease rates to support domestic demand, while India and South Korea look to continue tightening.
Canadian equities are beginning to trail U.S. stocks year-to-date, as weakening earnings expectations, trade uncertainty, and declining market breadth weigh on the TSX. Unlike the cap-weighted S&P 500, which continues to benefit from its exposure to large tech companies, the TSX has been more vulnerable to broader equity market weakness. Tech was the only Canadian sector to have positive returns over the past month, but its relatively small weighting in the TSX wasn’t enough to offset losses elsewhere. Canadian companies also face growing earnings pressures from the ongoing trade dispute with the U.S., rising energy costs, and a weakening precious metals rally that threatens profit expectations for mining companies. Although the energy sector remains a big contributor to projected earnings growth, overall profit growth is expected to moderate from last quarter. One potential advantage for Canadian equities is that the BoC faces less pressure to raise interest rates than the Fed, which could help cushion the impact of rising bond yields.
And I can’t even remember what I had for lunch yesterday. Researchers have identified a 16-year-old boy with highly superior autobiographical memory, a rare condition believed to affect fewer than 100 people worldwide. The condition allows him to recall personal experiences with extreme accuracy. The teenager is said to have memories dating back to when he was just three months old and can describe in detail events from about half of the days since August 2022, often triggered by cues such as smells, music, or conversations. Researchers also found that the boy experienced significantly more involuntary memories of past events than normal, while spontaneous thoughts about the future and unrelated mental activity remained within normal ranges. These findings suggest that the condition does not reflect a higher IQ or a better capacity to memorize ordinary information, but only an unusually efficient ability to access personal memories.
Diversion:
Summertime Ski
