Today
Markets are reverting to a conflict-driven playbook, with stock futures retreating and oil moving higher following a weekend of back-and-forth between the U.S. and Iran. The U.S. seized an Iranian-flagged vessel after Iran fired on two ships, while Tehran reversed course and again signalled the Strait of Hormuz could be closed. While Trump has pointed to a new round of talks potentially taking place in Pakistan and reiterated threats against Iran’s infrastructure if no deal is reached, participation remains uncertain, leaving diplomacy tentative and markets sensitive to further escalation. The situation remains fragile, with Iran warning it is prepared to resume fighting and reiterating its intention to restrict traffic through the Strait of Hormuz if U.S. pressure continues. The waterway remains a major concern, with sporadic attacks on vessels and confusion over safe passage keeping shipping markets on edge. Although falling oil prices suggest some optimism around a potential deal, key disagreements (particularly around Iran’s nuclear program) remain unresolved.
High oil prices hit home. Inflation in Canada rose to 2.4% in March, driven largely by a rise in gasoline prices following the Iran war, though underlying price pressures remained relatively contained. On a monthly basis, prices jumped 0.9%, with gasoline alone soaring 21.2% (the biggest increase on record), while natural gas prices declined and helped offset some of the energy shock. Core inflation measures, closely watched by the BoC, stayed near target, suggesting broader inflation has not yet extended beyond energy. Still, the data points to rising grocery prices and ongoing cost-of-living pressures which could continue to put a strain on households.
U.S. equities have staged an impressive rebound, driven by easing geopolitical fears and expectations for solid first-quarter earnings. The S&P 500 has risen more than 12% from its late-March low, marking one of the fastest recoveries on record, led largely by mega-cap tech stocks. While earnings are expected to grow around 14% year-over-year, strategists caution that elevated oil prices, inflation risks, and interest rate uncertainty could still weigh on the outlook. Early in earnings season, more companies and analysts are cutting profit forecasts than raising them, with guidance momentum deteriorating to levels historically seen before downturns. Firms are citing uncertainty from the Iran war, tariffs, inflation pressures, and evolving risks like AI as reasons to be cautious. Markets are reacting by penalizing companies that lower or withdraw guidance even when results beat expectations. While first-quarter earnings growth remains solid, the lack of visibility is leading management teams to adopt a wait-and-see approach, suggesting future guidance may stay muted.
Thanks to Big Tech. The recent rally in equities has been heavily driven primarily by rebound in Big Tech, with the S&P 500 reaching new highs as a handful of mega-cap technology companies account for a majority of the gains. The Mag Seven have added roughly $4 trillion in market value in just weeks, reversing earlier declines and reasserting their leadership in the market. This rise has been fueled less by new fundamentals and more by improved positioning, attractive valuations after earlier selloffs, and confidence in long-term AI-driven earnings growth. However, the rally remains narrow and concentrated, raising concerns about sustainability, especially given ongoing geopolitical risks and elevated capital spending on AI.
Capital call. PM Mark Carney is convening a global investor summit in Toronto this September, alongside the Canada Pension Plan Investment Board (CPPIB), to attract large-scale capital into Canada. The initiative targets up to $500 bln in private investment over five years, focused on infrastructure, energy, and economic diversification. It is backed by the Liberals’ pledge to streamline approvals and accelerate major projects, a key step to unlock capital that has historically been slowed by regulatory bottlenecks. The invitation to invest comes amid years of lagging capital spending relative to peers. It is also supported by Carney’s outreach to overseas investors, including targeted visits to major global capital pools. Recent data suggest some traction, with fourth-quarter foreign direct investment rising to its highest level in 18 years. The strategy aims to position Canada as a stable destination for global capital at a time of heightened geopolitical uncertainty. This comes as Carney warns that Canada’s historically close economic relationship with the U.S. has become a vulnerability, as rising trade tensions and geopolitical uncertainty expose the risks of heavy reliance on a single partner. In a recent message, he emphasized that Canada cannot depend on stability from our neighbour and must take greater control of its economic future, especially with key trade negotiations approaching and tariffs already impacting major export sectors like autos and metals.
This isn’t just an issue for Canada though. The global economy is facing stagflation risks as the prolonged Iran war continues to weigh on growth while pushing inflation higher, with upcoming business surveys expected to show broad deterioration across major economies. Early data already suggests a synchronized slowdown in activity from Europe to parts of Asia, even as price pressures remain elevated due to energy costs. Policymakers and institutions like the IMF warn that much of the economic damage is already baked in, meaning growth may stay weak even if the conflict de-escalates. This creates a difficult environment for central banks, which must balance slowing economies against persistent inflation.
Priorities. A welfare check was given to a 91-year-old woman in Ohio after she missed her daily safety calls. When the police arrived they found that she was perfectly fine and just really into her video games. The woman is part of a local “Are You Okay?” program that alerts authorities if participants don’t respond, prompting officers to visit her home when she missed multiple check-ins. When they arrived, she was in her bedroom trying to beat her high score and had simply lost track of time. It seems like it’s not just kids we need to worry about with screen time.
Diversion:
Snack Time
