Today
Global stocks are moving higher this morning, including futures for TSX, in what should be a quiet day of trading with U.S. markets closed today for Memorial Day, while markets in London are shut for the Spring Bank Holiday. Elsewhere in Europe, equities are firmly higher, with France and Germany up 1.57% and 1.49%, respectively, at the time of writing. In Asia, Japan’s Nikkei 225 gained 2.87%, while markets in Hong Kong were closed. The optimism follows reports that U.S. and Iran are nearing a framework agreement to reopen the Strait of Hormuz and restore oil flows, helping push Brent Crude down below $100 per barrel once again. Investors appear unwilling to miss the rebound in global equities as enthusiasm around AI-related spending continues to support tech. Bond markets remain cautious, with traders continuing to price in the possibility of another Federal Reserve rate hike this year as inflation pressures remain elevated.
The “Magnificent 7” once again carried earnings season in the U.S. With NVIDIA reporting last Thursday, all seven mega-cap tech companies beat analyst earnings expectations for the first quarter, delivering aggregate earnings growth of 63.2%, the strongest since mid-2021 and ahead of the 17.4% growth reported by the other 493 companies in the S&P 500. According to FactSet, earnings from the group exceeded estimates by 32.5%, roughly double the broader index surprise rate, with NVIDIA, Alphabet, Amazon, and Meta among the largest contributors to index earnings growth. That said, some of the strength was helped by one-time accounting gains and tax benefits by Alphabet, Amazon, and Meta. Still, analysts continue to raise full-year earnings estimates for both the Mag 7 and the broader market, backing up the view that AI-driven spending and mega-cap profitability remain major pillars supporting U.S. equity markets.
The honeymoon phase. Trump publicly said the new Fed Chair Kevin Warsh should operate independently during the White House swearing-in ceremony, attempting to reassure investors that the administration won’t pressure the Fed on interest rates. Warsh, who has promised changes at the central bank including shrinking the Fed’s balance sheet and overhauling its inflation framework, takes over at a difficult moment as inflation pressures reaccelerate and markets price in the possibility of another rate hike by year-end. Despite Trump’s public support for Fed independence, investors remain cautious given the administration’s past criticism of the Fed and pressure surrounding monetary policy. Warsh himself tried to strike a balancing act during the confirmation process, reaffirming the importance of Fed independence while saying that credibility must be earned through effective policy outcomes. The backdrop remains complicated, with rising oil prices, stronger inflation data, and Fed officials warning that rates may need to move higher if price pressures persist.
Loonie squeeze. Your overseas vacation may have just gotten a bit more expensive, unless you’re headed to Japan this summer. Strategists at Deutsche Bank and JPMorgan Chase are bearish on the Canadian dollar, arguing that softer inflation and a weakening domestic economy reduce the likelihood of further rate hikes from the Bank of Canada. Several banks now expect the loonie to weaken toward 1.40–1.41 per U.S. dollar by year-end, making travel to most destinations more expensive for Canadians. One bright spot for some travellers is the yen, which has weakened even more sharply this year, helping offset part of the currency pain for Canadians travelling to Japan. Analysts also note that Canada’s softer inflation backdrop continues to diverge from stronger U.S. growth and inflation data, reinforcing expectations for a weaker Canadian dollar ahead.
Not so private. The private credit industry is entering a new era, seeing secondary trading activity rising in what had historically been an illiquid, tightly controlled market. After years of growth built on the premise of stable hold-to-maturity lending, rising redemption pressures, higher defaults, AI-related concerns around software loans, and tighter financing conditions are now forcing many lenders to actively buy and sell loans to manage risk and liquidity. Large firms like Apollo, KKR, Goldman Sachs, and JP Morgan are participating in secondary private credit markets that were once viewed as almost taboo. The shift is significant because it suggests private credit is evolving towards a structure more like public credit markets, with greater price discovery and liquidity.
Sentiment at all-time low. Consumers are feeling the squeeze as concerns of the U.S.-Iran conflict continue to push oil and gasoline prices higher. The University of Michigan Sentiment Index fell to 44.8 in May, down from 49.8 in April, marking the weakest results on record, and building onto the renewed pressure on inflation. Short-term inflation expectations climbed up to 4.8%, while long-term expectations also moved higher, suggesting price concerns are becoming more prevalent. The weaker sentiment comes during a time where markets remain volatile, with rising Treasury yields and a cautious Federal Reserve, which have not been too keen on cutting rates in the near term. Seems like the stats reflect more tense consumers as rising energy costs feed worries about the economy.
Pawsitive support. Facility dogs are becoming a common sight in children’s hospitals, where they provide comfort to young patients facing stressful procedures. Unlike volunteer therapy dogs that typically visit for short periods, facility dogs are specially trained full-time working dogs integrated into hospital care teams and able to accompany patients throughout their treatment. Research suggests even brief interactions with dogs can help reduce stress (as if we needed research to tell us that), ease pain, encourage movement, and make unfamiliar hospital environments feel more normal for kids. In some hospitals, the dogs have become beloved members of the community, appearing in hallways, on TV, and even receiving letters and drawings from patients. These photos of the dogs hard at work are a reminder that these furry professionals are not just adorable, they are highly trained companions working in sensitive situations and often undergo years of training before entering the workforce.
Diversion: Tic tac toe
