This Market Factors starts with the potential for insolvencies to stall the rally in bank stocks and moves on to the media’s [misguided in my opinion] distrust of AI. The diversion combines Chinese car design and a lament for developed world economic momentum and there’s quick hits as always.
Financials
Rise in insolvencies shouldn’t affect bank stocks. For now
One prominent bank analyst is concerned that increasing media focus on Canadian consumer insolvencies could upset the recent rally in bank stocks, causing institutional investors to sell expensive bank stocks and send the proceeds back to insurers.
The Report on Business was among media outlets this week detailing a rapid increase in insolvency filings in the first quarter of the year. The 8.5 per cent year-over-year rate is the fastest since 2009.
TD bank analyst Mario Mendonca believes that a strong earnings outlook justifies current average bank stock valuations well above historic average. He is concerned, however, that sentiment could deteriorate with more focus on domestic consumer finances.
Mr. Mendonca emphasized that mortgages, which are a big part of bank loan books, are less involved with weakening consumer balance sheets. He notes that insolvencies and loan delinquencies are concentrated on younger, lower income consumers less likely to hold mortgages. Further, the unemployment rate for Ontario’s 15-24 age group is just under 18 per cent compared with 6.4 per cent for 25-54.
Mortgage holders have delinquency rates below 50 basis points for auto loans, credit cards and lines of credit while the rate for non-mortgage holders is three times higher generally and seven times higher for auto loans specifically.
The analyst is focusing closely on discretionary consumer spending, credit cards and auto loans for signs of consumer stress that will crimp banking sector profits. These data points will weaken ahead of mortgage book weakness as home loans are the last household expense to get cut.
As it stands, Mr. Mendonca believes that fee income (for account service, transaction, and wealth management for example) and capital markets activity will be strong enough to offset the rise in insolvencies and support profit expectations. Further consumer weakness (I will be watching retail sales data closely) may result in valuation contraction and weaker stock prices.
TD has “buy” ratings on BMO, CIBC and RBC.
The future
Media and finance have wildly different views on AI
Most of the media despises AI. Here are three headlines I saw just today: Large Study Finds That Replacing Workers With AI Is Backfiring Badly, AI Is Giving Your Boss Tools to Be More Monstrous Than Ever Before and The Creators of Hacks Really, Really, Really Hate AI.
Presenting AI in a negative light is near-ubiquitous in major media. At the same time, the finance industry is positive to the point of fawning.
Here’s an excerpt from a Morgan Stanley report from Monday called Agentic AI - The Surge Begins: “The ‘agentic economy’ is scaling faster than initially anticipated. This shift is already showing up in valuations … in 2Q26, the debate is no longer about the potential of agentic AI, but about the speed of its integration … Our base case total server CPU TAM [total addressable market] rises 25 per cent to US$125-billion by 2030.”
The opposing points of media and finance views have self-serving motivations. Journalists are worried about being automated out of work and stock analysts want to sell more stock.
You might think I side with media but I don’t. I think the pessimism of most media members is not only self-serving (I actually think they have less to worry about than many believe) but signals a lack of imagination. I’ve been using AI - it’s really, really powerful. It’s still early days.
A Li Auto L9 Livis is displayed on the opening day of the Beijing Auto Show in Beijing on April 24, 2026.-/AFP/Getty Images
Diversions
China like U.S. in early 20th century
Wired magazine featured the highlights from the recent Beijing Auto Show and the clear vibrancy of design and engineering was immediately depressing as it far exceeded North American auto markets. I imagine my feelings are similar to those of Europeans and Brits as they watched the Americans begin to dominate the global economy in the 1920s.
Chinese engineers have been busy. The Denza Z9GT is an EV that recharges in 10 minutes. Laser-based sensors for driver assistance are available for cars selling for the equivalent of less than US$15,000. The Xpeng GX SUV uses four proprietary AI chips to facilitate autonomous driving. Geely has developed a minivan with self-driving capabilities so sophisticated that the vehicle has no pedals or steering wheel.
It’s not just the engineering either, the design is also confidently forward-looking. The Li Auto L9 looks like what Rolls-Royce or Bentley might accomplish a decade from now. The Freelander 8, a joint venture SUV between Jaguar Land Rover and Chery Automobile gives off a similarly futuristic vibe. BYD’s Denza Z Convertible is just drop dead gorgeous, with three electric motors providing over 1,000 horsepower.
A wondrous auto show does not make China a place I’d want to live. The lack of freedoms stemming from autocratic leadership, overcrowding, widespread poverty despite the massive improvements of the previous few decades and environmental negligence are just the problems that pop to mind immediately. There’s many more.
Still, the Chinese have momentum that the developed world lacks even if the costs are too high by our standards. Politics in China is brutal - today I woke up to a BBC report on a massive purge of military leaders that’s ongoing - but it is not stagnant as it is in the current developed world. The auto show helps make this comparison stark.
The essentials
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Globe Investor highlights
CIBC chief market technician Sid Mokhtari suggests a bank stock to buy this month while offering a cautionary view of where markets head from here
Sizzling semiconductor trade at risk of cooling - and stalling U.S. stocks rally
The relentless rise in long-term government borrowing costs is showing no sign of abating
Quick Hits
Morgan Stanley economist Seth Carpenter remains constructive on global growth but is increasingly concerned about the inflationary impact of oil prices. He notes that a jump to US$150 per barrel would result in many recessions across the world. Mr. Carpenter’s colleague, chief U.S. investment strategist Michael Wilson, is a lot more bullish, emphasizing median earnings per share growth and the earnings surprise ratio at four-year highs.
Hydrogen energy specialist Bloom Energy ramped higher again Wednesday and this is a source of grave distress for me. I wanted hydrogen exposure three years ago and had to choose between Bloom (BE-N) and Plug Power (PLUG-Q). I picked the one down more than 50 per cent at this point.
Citi analysts led by David Chew track 83 separate investment themes in search of sustainable outperformance. The most recent monthly update saw hydrogen, greening the home, artificial intelligence enablers, wearable technology and green mobility as the top themes. Worst performers were agricultural demand, medical tech, generic drugs and biosimilars, food innovation and biotech.
Read this week’s earnings and economic calendar here