Cover:
-Canada's economy contracted 1.6% in the second quarter due to Trump's tariffs, a major threat to the country. However, under Prime Minister Mark Carney, Canada is shifting its approach to a more conciliatory tone, scrapping most retaliatory tariffs. This is happening as countries hit with tariffs adjust to the reality that the US is erecting new barriers under Trump. As the battles unfold, there is a compelling argument that Canada's economy, rich in natural resources, will weather the storm. However, huge hurdles remain, including a new trade deal with the US. Canada's stock market is attractive as a long-term bet, with investors looking for superior market internals and fundamentals. David Rosenberg, an economist and head of Rosenberg Research in Toronto, expects Canada's market to outperform over the next 12 months.
Interview:
-Lowe's CEO Marvin Ellison is preparing the retail chain for an eventual inflection in demand, insulating the company from the impact of new tariffs and expanding its reach into the professional contractor market. This year, Lowe's announced two billion-dollar acquisitions of companies catering to professionals. Investors believe in Ellison's vision, and Lowe's stock has gained roughly 170% since he became CEO in July 2018. The company's success can be attributed to a strong leadership team and a clear plan for the future, despite the unique economic environment, including the pandemic and housing's doldrums due to elevated interest rates. The company's stock has gained roughly 170% since Ellison became CEO in July 2018.
Tech Trader:
-The USA v. Google ended with Google being declared a monopoly, but it escaped the worst of the government's proposed remedies. The stock soared 9% on the news, but there are significant antitrust dangers ahead of the company that investors seem to have overlooked. U.S. District Judge Amit Mehta skirted the most drastic remedies proposed by the plaintiffs, the U.S. Department of Justice and most of the states, because circumstances have changed since the initial trial. By 2025, Google saw its first real competition in years from ChatGPT, Perplexity, and others. Google's lawyers argued that venture funding in internet search was considered Silicon Valley's "biggest no fly zone," and these companies are now better financially and technologically positioned to compete with Google than any traditional search company has been in decades.
The Trader:
-Elliott Investment Management, a hedge fund with $76B in assets, has taken a $4B stake in PepsiCo, a struggling snack-and-beverage giant. The stake, which accounts for about 2% of PepsiCo's market capitalization, represents an opportunity for a turnaround. PepsiCo's snack-and-beverage segment, which used to be its strength, has been struggling, with beverages losing market share to competitors. Pepsi is no longer America's No. 2 soda, surpassed by Dr Pepper in 2023 and Coca-Cola's Sprite in 2024. The company's packaged-food business, including Doritos and Lay's, has been hit by weak consumer spending, shifting health preferences, and a backlash against ultraprocessed foods.
-Stocks have fallen due to a dragging job market, with a mediocre employment report on Friday pulling the market down from record territory. The report showed only 22,000 new positions added in August, below the expected 76,500. Healthcare was one of the few areas where employment rose, while manufacturing employment fell. June's jobs numbers were revised into negative territory. The S&P 500 index fell 0.3% on Friday, while the Dow Jones Industrial Average fell 0.5% on Friday and 0.3% for the week. The good news is that the Federal Reserve will almost certainly cut interest rates multiple times this year to help prop up the economy. Traders see a 67% chance of three rate cuts this year and a 9% chance of a full-point worth of cuts. However, the economy is faltering, with more unemployed Americans than job openings for the first time since 2021.
Features:
-U-Haul's Class B shares, issued in 2022, are trading around $52, down nearly 20% this year despite recent strength in housing-related stocks. The original voting Class A shares are down 16% year to date and up 50% in the past 10 years. The nonvoting shares are trading at 28 times the $1.89 a share the company earned in the fiscal year ended in March, which was down 40% year over year. Investor Steve Galbraith of Kindred Capital believes that U-Haul's earnings power is understated and that it can potentially earn $5 a share annually. Profits should rise as U-Haul works through the depreciation of trucks purchased several years ago. The auto industry's de-emphasized trucks powered by internal combustion engines in 2022 has now reversed.
-The rising costs of buying a home have made homeownership difficult for many Americans. The White House has suggested declaring a national housing emergency in the fall, but provided little detail beyond suggesting the administration is working on standardizing building and zoning codes and reducing closing costs. Experts argue that such an emergency declaration would be an empty gesture, as there are no simple solutions to the affordability crisis. Andrew Wells, chief investment officer of SanJac Alpha, believes that there are no shortcuts to addressing the issue, as it took a long time to create. He suggests that either mortgage rates or insurance costs must be reduced to avoid red herrings and Band-Aid fixes.
Europe:
-The U.S. and French public finances are facing significant bond market volatility in the coming year. The One Big Beautiful Bill Act, which aims to cut taxes on the U.S. government, is expected to add around $5T to the budget deficit, keeping it above 6.5% of GDP indefinitely and increasing the public debt to a Greek-like 128% of GDP by 2034. The U.S. economy's strength lies in its government borrowing in its own currency, making it unlikely that the government will default on its debt. However, the U.S. is heavily dependent on foreigners to finance its budget deficit, owning around 30% of all outstanding U.S. public debt. Foreigners may be reluctant to continue financing the U.S. government at current bond yields, fearing that the US will resort to money printing to inflate its debt. Trump's efforts to undermine the Federal Reserve's independence, such as pressuring Fed Chair Jerome Powell to lower interest rates and firing Fed governor Lisa Cook, make it likely that the U.S.'s unsustainable finances will come to a stop sooner rather than later.
Emerging Markets:
-Emerging market stocks are outperforming US equities this year due to a weakening dollar and a resurgence of China's stock market. The iShares MSCI Emerging Markets index fund has returned 20.7% year to date, nearly double the 10.5% return for the S&P 500. Emerging markets are not a core holding for most U.S. investors, but they should make up about 10% of investors' stock portfolios, compared to about two-thirds for US stocks. A key factor behind the rally is the slumping U.S. dollar, which has fallen about 7% so far in 2025, one of its worst stretches in decades. A weak U.S. dollar makes foreign goods more expensive for U.S. consumers but also increases the value of foreign company profits and stock prices from the perspective of U.S. investors.
Commodities:
-Oil prices have remained elevated despite a growing risk of oversupply, with oil production set to grow by 2.5M barrels a day in 2025 and demand by 680,000 barrels. Traders have been preparing for a price drop, with their ratio of bearish bets to bullish ones hitting its bleakest level since 2008. Brent crude, the international benchmark oil price, has remained strong, holding above $65 per barrel to end the summer. China has been buying 530,000 barrels a day on average for storage, twice as much as usual, for national security. However, OPEC and allies like Russia are restoring 2.2M barrels a day to the market and could bring back more later this year. Although fundamentals will eventually win out, traders are already set up for a drop, so there's less chance of triggering a major selloff.
Streetwise:
-The US stock market is experiencing a dividend boom, with the percentage of earnings paid out to shareholders hitting a 25-year low. J.P. Morgan predicted a 7.6% payment growth over five years, but the S&P 500 dividends are projected to increase by just 4% this year, well below the 11% growth for earnings. The index's yield is barely 1%. Investors have made great money on things that pay nothing, like gold, Bitcoin, and Nvidia. However, dividend stock indexes have largely underperformed over the past decade, leaving dividend stocks relatively cheap and unloved. The US has returned a hefty 16% this year, while investments in other countries have made twice as much in dollar terms. Dividend stocks look similar due to the current market, with the S&P 500 trading at a lofty 24 times earnings.