Amber Kanwar's Weekly Setup: G7 summit, Fed decision, Empire earnings and more

Globe and Mail

7 hours ago

It's report-card season for many parents as the school year comes to a close. This year, the Grade 2s studied change and our daughter reflected on the change of getting younger siblings.
'When I was going to be a big sister … I was excited,' she said. 'But now that I am a big sister, I regret the excitement because they are super wild … and they ask me for stuff when I'm not actually free.'
She's going to be really disappointed when she finds out this happens a lot in motherhood, too.
Here are five things to keep an eye on this week:
Markets climb wall of worry: Canadian markets managed to put in a third consecutive weekly gain thanks to higher gold and energy prices. U.S. markets, on the other hand, succumbed to geopolitical tensions and suffered a weekly loss. Stocks tumbled Friday after attacks between Israel and Iran escalated.
It's interesting to note that money continues to come out of equities and into bonds. Equity funds globally have seen outflows for 4 out of the past 5 weeks while bond funds have seen six consecutive weeks of gains, according to data from TD's global rates team. Unsurprisingly, U.S. stocks have seen the brunt of the outflows. It was a different story for crude oil, which surged to a nearly six-month high.
Will this rally last? 'Its ultimate landing point will likely hinge on whether Iran revives the 2019 playbook and targets tankers, pipelines and key energy facilities across the region,' wrote RBC's Helima Croft in a note to clients after the attacks. Key to all of this as well will be the extent to which the U.S. gets drawn in.
Energy stocks were already moving higher even before oil prices advanced. This week on my In the Money podcast, Cole Smead of Smead Capital Management – a U.S. investor who loves Canadian energy stocks right now − called higher oil prices a bonus, not a necessity, for a sector trading at such low valuations.
G7 meeting: The attack on Iran by Israel will no doubt loom large at the G7 meeting in Kananaskis, Alta, which takes place Sunday to Tuesday. Aside from those tensions, investors will be watching for signs of trade deals, tariff relief and possible Russian sanctions. As The Globe and Mail reported, the last time Canada played host to the meeting and Trump was President, it didn't go so well.
The G7 is also becoming a misnomer with eight other countries, including Mexico and India, participating. It will likely be more about what G7+ can accomplish, particularly if there is tariff relief for Canada and Mexico.
For G7 leaders, immense global challenges weigh on agenda overshadowed by Trump
Central banks: This week, we will get interest-rate decisions from a number of central banks including the U.S. Federal Reserve, Bank of England and Bank of Japan. None are expected to change rates this week. However, all eyes will be on the Fed's rationale if it stands pat, given inflation has been coming in below expectations.
'Policy is restrictive by most measures and, with inflation trending downward in the first five months of this year, lowering the fed funds rate 25bp would be a step towards policy normalization rather than policy easing,' wrote Will Compernolle, macro strategist with FHN Financial.
So why isn't the Fed lowering rates? Ostensibly, it remains concerned about inflation. But is inflation-hunting going to be the new recession-hunting?
May's cooler inflation reading despite tariffs is a head scratcher. 'We suspect this may have been a response to weak consumer demand in May and businesses' reluctance to fully pass price increases to consumers, especially since tariff rates are not set in stone and can vary substantially week to week,' wrote Scott Anderson, BMO's chief U.S. economist, in a note to clients. The Fed will have a chance to weigh in here. This meeting will also feature an update of the 'dot plots' – projections of where each Fed member sees rates going.
Paris Air Show: This year's air show may not carry with it the usual pomp and circumstance of major plane makers showing off their wares and making deals. In addition to tariffs looming large, last week's Air India crash is casting further chaos into the mix with investigations into what caused the Boeing Dreamliner to crash. This is the first fatal crash of a Dreamliner, and Boeing BA-N shares lost 5 per cent last week.
This is not just a Boeing problem. One of its suppliers, GE Aerospace GE-N, postponed its Investor Day at the Paris Air Show because of the tragedy. RBC Capital Markets was expecting GE to boost its profit forecast and generally give a bullish presentation. But the delay is 'an overhang on GE and the broader sector for a period of time,' wrote RBC Capital Markets managing director Ken Herbert in a note to clients.
Empire earnings: Shares of Empire EMP-A-T have been consolidating around record highs ahead of quarterly results on Thursday. Profit is expected to rise 23 per cent and analysts expect about a 2.8-per-cent increase in comparable sales, a key metric that tracks sales growth not attributed to new store openings. This would be the fourth consecutive quarter of improving same-store sales. While there aren't a lot of fireworks expected this quarter, it is worth noting that consumer staples like Empire, grocers and Dollarama DOL-T and have been star performers this year.
Empire's U.S. product sales dropping during trade war, CEO says
Tamy Chen, BMO Capital Markets director and equity research analyst, is starting to wonder if that trade is getting 'long in the tooth,' in a preview of Empire's earnings. She also muses about whether the 'buy Canadian trend' is starting to whither. She notes that discretionary stocks like Canadian Tire CTC-A-T and Aritzia ATZ-T have started to take off.
In the Money with Amber Kanwar brings you actionable insights from top portfolio managers to help you make profitable investing decisions. New shows out Tuesday and Thursday mornings. Catch them all at www.inthemoneypod.com