This Market Factors begins with stocks chosen for “Perfection amid chaos” by one of my favourite strategists. The next section covers why oil price increases are less dangerous to the economy and I cover my complicated relationship with Keith Moon and The Who in the diversion section.
Equities
’Perfect’ stock picks
Evercore ISI strategist Julian Emanuel believes the U.S./Iran cease fire agreement, fragile as it is, removes the likelihood of escalation and sets the stage for a renewed rally. In his words, “there are reasons for optimism, even Perfection.” The capital “P” points to a list of stocks that he thinks are, well, perfect for current market conditions.
The strategist concedes that AI disruption, credit stress, geopolitical tension and precious metals volatility represent hurdles to higher stock prices. At the same time, he believes the post-ceasefire rally is a sign of things to come. The rally was catalyzed by the widespread unwinding of bearish positioning in stocks, credit and bonds that has room to run.
Mr. Emanuel reminded clients that first quarter S&P 500 earnings are poised to come in strong. Earnings revisions have been positive for the past three months, pushing full year 2026 estimates from US$312 to US$320. The improvement is only partially attributed to energy stocks - profit estimates indicate 40 per cent profit growth for the year in technology and 28 per cent in materials.
Consensus estimates point to 17.2 per cent calendar year S&P 500 profit growth for 2026. The benchmark has been higher 10 out of 11 times when earnings growth has been above 10 per cent. Mr. Emanuel’s S&P 500 target stands at 7,750, 11.2 per one higher than Tuesday’s close.
Mr. Emanuel recommends clients pick stocks from his “Perfection Amid Chaos” list of stocks. These are companies that have produced both earnings and revenues above estimates for the last eight quarters and are expected to continue doing so.
There are 19 stocks on the list presented in order of market capitalization - Nvidia Corp (NVDA-Q), Apple Inc. (AAPL-Q), Microsoft Corp. (MSFT-Q), Morgan Stanley (MS-N), Amphenol Corp (APH-N), Booking Holding Inc. (BKNG-Q), Qualcomm inc. (QCOM-Q), Palo Alto Networks (PANW-Q), Intuit Inc. (INTU-Q), Boston Scientific Corporation. (BSX-N), Adobe Inc. (ADBE-Q), Fortinet Inc. (FTNT-Q), Autodesk Inc. (ADSK-Q), Datadog Inc. (DDOG-Q), Workday Inc. (WDAY-Q), Illumina Inc. (ILMN-Q), Zebra Technologies Corp (ZBRA-Q), Charles River Laboratories International Inc. (CRL-N) and EPAM Systems Inc. (EPAM-N).
Oil rig workers at the Cenovus Energy Christina Lake steam-assisted gravity drainage project in Alberta.Todd Korol/Reuters
Energy
Higher crude prices less of a problem
BofA Securities economist Antonio Gabriel outlined why oil’s ability to cause a recession has declined markedly since the shocks of the 1970s. Stagflation is increasingly unlikely as the developed world requires less oil for each unit of GDP growth.
Mr. Gabriel estimates that in the 1970s, a 10 per cent increase in the oil price caused a 0.9 percentage point increase in inflation. That same oil price increase results in about a 0.25 percentage point rise in consumer prices now. A 10 per cent increase in crude in the 1970s cut U.S. GDP growth by 0.7 percentage points but now that number has fallen to just five basis points.
European economies are more sensitive to energy costs. The same 10 per cent oil price climb would increase the inflation rate by 0.4 percentage points and slice 10 basis points from growth.
U.S. shale oil production is a big reason for the country’s resilience to rising global crude prices. Higher oil prices are negative for the U.S consumer but because the U.S. is an exporter of oil, it helps their trade balance and GDP growth.
BofA has updated their economic forecasts, calling for Brent crude to hover near US$100 per barrel for the rest of the year and falling to US$70 in 2027. Global growth estimates have been reduced by 0.4 per cent of a percentage point to 3.1 per cent for 2026. The U.S. GDP forecast has been cut by 0.5 of a percentage point to 2.3 per cent to reflect the 40 per cent jump in in crude.
Pete Townshend, Keith Moon, Roger Daltry, John Entwistle.Reuters
Diversions
Who am I?
Canadian music journalist Alan Cross’s brilliant Uncharted: Crime and Mayhem in the Music Industry podcast turned its attention to The Who drummer Keith Moon in its latest episode. As Alice Cooper once said, “Everything you’ve ever heard about Keith Moon is true - and you’ve only heard about 10 per cent of it.” One story involves Mr. Moon standing on a window unit air conditioner outside of a 20th floor hotel room.
I have an intense but fractured history with The Who. In my late teens I must have listened to Quadrophenia and Meaty Beaty Big and Bouncy cassettes over 1,000 times back to front. I never liked the more popular Who’s Next album though and have no interest in the music after Keith Moon’s death in 1978.
I saw them twice, once at Exhibition Stadium and also at the concert the day before the alleged last Who concert ever at Maple Leaf Garden in 1982 (no need to do the math on how old I am here).
The Who are front and centre in a discussion I have with my friends about picking a favourite band ever. I always used to say The Who but I don’t go out of my way to listen to them very much because I’ve heard the songs so often. Does that mean they’re not my favourite band anymore? It’s not the most important determination in my life but it’s a niggle that keep reoccurring.
The essentials
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Globe Investor highlights
Sky-high prices for physical barrels reveal the real turmoil in oil markets
Back to square one? Markets bet the Iran war is over
Ken Fisher cautions against falling for the “buy the dip” trap
Quick hits
The Chilean mining sector is suffering from a problem I wasn’t aware could exist - a shortage of sulphuric acid. RBC Capital Markets analyst Sam Crittenden reported that Chinese restrictions on sulphuric acid exports threatens 20 per cent of Chile’s copper production, which is dependent on a hydrometallurgical process called solvent extraction-electrowinning that uses the acid.
Scotiabank mining analyst Orest Wowkodaw expects a choppy earnings season for his sector as higher operating costs offset the positive effects of higher commodity prices. His forecasts for sector EBITDA are roughly 9.0 per cent below consensus and his recommendations for the short term are Champion Iron Ltd. (CIA-T), Freeport McMoRan (FCX-N), Nexa Resources SA (NEXA-N) and Teck Resources (TECK-B-T).
TD U.S. rates strategist Molly Brooks tackled concerns about private equity in a Wednesday research report. Surprisingly, while redemption requests have increased, net inflows have continued. Ms. Brooks notes that pension funds and high net worth individuals tend to be the largest PE clients and they are slow to sell. She sees the risk to broader financial stability as similar to declines in commercial real estate values from the work from home trend, so absorbable.
Read this week’s earnings and economic calendar here