Richard Drew/The Associated Press
Ten years of marriage and I’ve learned it is all about compromise. Except for when it comes to doing anything when the Masters tournament is on.
Here are five things to know this week:
I know you are but what am I: If investors were hoping for a tidy resolution to the conflict in Iran, those hopes were dashed after the U.S. delegation led by Vice-President JD Vance walked away without an agreement. U.S. President Donald Trump will now attempt to wrest control of the Strait of Hormuz away from Iran. “Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all ships trying to enter, or leave, the Strait of Hormuz,” Mr. Trump said in a social media post on Sunday.
The strait remains effectively closed and is a key choke point for global crude shipments. Crude oil fell last week on ceasefire prospects, but further constraints on supply could create upward pressure. Mr. Trump himself admitted it was unclear whether prices at the pump would be lower ahead of crucial midterm elections in November. “I hope so, I mean, I think so – it could be. It could be the same, or maybe a little bit higher,” he said on Fox News Sunday morning.
But everywhere you look, the market continues to price in short-lived pain. The S&P 500 is less than 3 per cent from a record-high, oil prices fell last week on peace prospects, rig counts in the U.S. are relatively unchanged since the war began, and oil stocks in the U.S. and Canada are just shy of a 10 per cent pullback from their recent highs.
Earnings season begins: U.S. banks report this week, with Goldman Sachs Group Inc. GS-N kicking it off on Monday morning and JP Morgan Chase & Co. JPM-N, Wells Fargo & Co. WFC-N, Citigroup Inc. C-N, Bank of America Corp. BAC-N and Morgan Stanley MS-N out later in the week. The sector was recently volatile, with investors selling off in the aftermath of Iran war. It has since recovered and is now only down 6 per cent from the record peak. The volatility is likely going to be a boon to capital markets with the trading divisions of the banks benefitting. Aside from that, investors are going to want clarity on the banks’ exposure to private credit.
It is no secret that non-bank financials have been hit by a wave of redemptions because of investors who are nervous about software lending made during the 2021 heyday, before AI came along and threatened business models. Banks have exposure because lending to those non-bank financials has exploded. In 2020, loans to this group were US$695-billion. Today it is US$1.9-trillion.
“Today’s continued rapid growth in (non-bank financials) and Private Credit loans is a bright Red Flag, as rapid loan growth again, often precedes credit deterioration,” wrote RBC Capital Markets analyst Greg Pardy in a note to clients. However, Mr. Pardy believes this is nothing on the size and scale of the financial crisis or the early 2000s. “Our belief that the credit outlook will be more similar to 1995–97 is driven by our expectations of modest-to-moderate economic growth in 2026, 1-2 Federal Funds rate cuts over next 12–18 months, and the fact that bank balance sheets have been de-risked following the Global Financial Crisis.”
Netflix and chill: Ever since Netflix Inc. NFLX-Q bowed out of the bidding war for Warner Bros. Discovery Inc. WBD-Q, its shares have risen 35 per cent. Investors hated the prospect of a deal, with the stock losing more than 40 per cent in value before Netflix walked away. “Netflix without Warner Bros. is a cleaner, higher-visibility, and lower-volatility business with more degrees of freedom and lower financial leverage,” wrote Morgan Stanley analyst Sean Diffley in a preview note.
One of the first areas of focus will be how consumers respond to price increases announced by Netflix on March 26. It’s the first major price hike by the streaming service since early 2025. “Importantly, one of the best times to own NFLX stock has been following announced U.S. price hikes with an average return of +20% in the subsequent 9-months since 2015, as the ARPU tailwind provides better estimate achievability,” Mr. Diffley said.
Fizzled out: PepsiCo Inc. PEP-Q has been a middling investment for years and analysts aren’t expecting anything spectacular this quarter. Both the snack and beverage businesses are struggling to put up meaningful growth. On the snack side, Pepsi has been shifting to value after enjoying a post-pandemic boom. On the beverage side, weakness in Pepsi and regular water business is overshadowing momentum in other brands. Having said that, Pepsi has been working to reinvigorate the brand with innovations such as protein Doritos and prebiotic Pepsi – helping snack junkies everywhere (myself included) justify their midnight cravings.
Health check: Johnson & Johnson JNJ-N has been on a tear, up 65 per cent over the past year as it has shed its consumer drug business to focus on innovative medicines and medical technology. Investors expect high single-digit top-line growth when it reports Tuesday morning. But the company’s chief executive has said there is a line of sight to double-digit growth by the end of the decade. Investors will look for more colour on how to get there. Johnson & Johnson is also expected to increase its dividend.
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