Today
U.S. stocks are taking a breather this morning following last week’s record highs for the S&P 500 and Nasdaq, which were again led by tech stocks. Investors are weighing the lack of a diplomatic breakthrough with Iran, while rising oil prices continue to add to inflation worries, and pushing government bond yields higher. Brent crude is up +20% over the last month and is now trading near $110 per barrel. TSX futures, meanwhile, are pointing modestly higher as Canadian markets reopen following yesterday’s Victoria Day holiday. Alongside developments in the Middle East, investors will also be watching the final stretches of earnings season. Home Depot reports today, followed by NVIDIA and Target tomorrow, with Walmart on Thursday. The reports should provide a fresh read on two of the market’s key themes heading into June, the resilience of the U.S. consumer and whether AI-driven spending continues to support technology valuations. Home Depot will also be closely watched as a signal on housing and reno activity.
Canada’s latest inflation report showed a growing divergence between headline inflation and underlying domestic price pressures, giving the Bank of Canada more flexibility than many other global central banks despite rising energy costs. While headline CPI accelerated to 2.8% due largely to gasoline prices and base effects tied to the carbon tax removal, the easing in core inflation measures toward roughly 2% suggests broader inflationary pressures across the economy are continuing to cool. Slowing rent growth, softer grocery inflation, and weakening population growth due to immigration curbs all point toward easing domestic demand conditions beneath the surface. The data supports the BoC’s current wait-and-see stance, as policymakers attempt to distinguish between temporary energy shocks.
The U.S. equity market’s next phase will likely depend on whether leadership can broaden beyond the narrow AI and mega-cap names into cyclicals, value, and economically sensitive sectors. Current market strength remains impressive, but its concentration makes the rally fragile, especially if rising real yields or AI valuation fatigue begins to pressure current leaders. A sustainable expansion likely requires a goldilocks macro backdrop with moderating energy shocks, resilient but non-inflationary growth, and improved investor confidence beyond tech. So, while the bull market likely still has room to run, future upside will depend less on AI alone and more on whether broader economic participation can support the market.
Trump’s decision to delay renewed strikes on Iran lowers immediate escalation risk, but it also shows how fragile the broader geopolitical environment remains. Gulf allies’ intervention suggests regional powers are prioritizing economic and energy stability over military escalation, especially given the severe consequences of prolonged Strait of Hormuz disruption. However, with negotiations still far apart and both sides maintaining hardline positions, markets are likely to continue pricing elevated geopolitical risk premiums into oil and inflation expectations. So, while markets may celebrate the pause, it offers only short-term relief. Without a substantial diplomatic breakthrough, the global economy remains vulnerable to energy shocks and stagflation pressures.
Good not great. The Trump-Xi summit last week appears to have delivered some geopolitical stabilization, although it fell short of providing the substantive economic or strategic breakthroughs markets were hoping for. By reinforcing predictability and reducing the immediate risk of U.S.-China escalation, the summit likely lowers tail-risk premiums for Chinese and broader global assets. However, the absence of major progress on trade, Taiwan, or Middle East de-escalation means investors remain exposed to persistent oil, inflation, and sovereign yield pressures.
The global inflation rally is placing central banks, particularly the Fed, in a riskier position than inflation episodes of the past. With inflation creeping back up, real policy rates are once again slipping into stimulative territory as financial conditions loosen when compared to previous years. Negative real rates during a major energy shock and AI-fueled capital boom risk reinforcing inflation rather than containing it, potentially forcing policymakers into more aggressive tightening down the line. For new Fed Chair Kevin Warsh, this creates an immediate credibility challenge, especially given his prior preference for lower rates. Unless inflation or energy pressures ease, central banks may soon face growing pressure to prioritize inflation containment.
The verdict is in. Elon Musk lost his case against Sam Altman and OpenAI due to his claims against Altman falling outside of the statute-of-limitations. While the dismissal represents a legal victory for OpenAI and Sam Altman, the ruling avoids directly resolving deeper questions around nonprofit governance. Still, by eliminating the immediate legal threat to OpenAI’s for-profit restructuring, the ruling preserves its capital formation model and reduces uncertainty for future investors, partners, and clients. The case highlights how AI competition is evolving beyond pure tech rivalry into governance disputes and antitrust scrutiny, with this likely not being the last time AI powerhouses find themselves in the courtroom.
China’s April data reinforces the growing reality that its recovery remains unbalanced, with export and industrial resilience insufficient to offset deeply embedded domestic demand weakness. While AI-driven manufacturing and external orders continue to provide some support, collapsing retail momentum, weak fixed investment, and ongoing property drag highlight that household confidence and broad internal consumption remain major vulnerabilities. This creates a more challenging policy environment for officials, especially as rising energy costs and geopolitical uncertainty add inflationary pressure without delivering stronger domestic growth.
It was a busy sports long-weekend with a strong “Canadian” tilt. Shai Gilgeous-Alexander, aka known as SGA, took home his second consecutive NBA MVP award after a dominant regular season that saw the Toronto-born, Hamilton-raised star finish near the top of the scoring charts while leading OKC to the league’s best record. Thunder coach Mark Daigneault called him “ruthlessly consistent,” fitting praise for a player now in rare company. Over the last 25 years, only seven guards before Gilgeous-Alexander had won the NBA’s top individual honour, and only Gilgeous-Alexander, Stephen Curry, and Steve Nash have done it more than once. Pretty good company to keep. Staying north of the border, the Montreal Canadiens kept Canadian Stanley Cup hopes alive with a thrilling Game 7 OT win over the Buffalo Sabres. The game was clinched by Alex Newhook, further elevating his clutch reputation after he scored a game 7 winner in last series. The Eastern Conference Final against the Carolina Hurricanes will be another test as the Canes are well rested after sweeping their way through the playoffs.
Diversion: No smoking
