Central bankers from around the world will meet for the ECB’s annual forum from Monday to Wednesday.Wolfgang Rattay/Reuters
The kids are all home, and I don’t know if it’s the heat wave or the chaos of unstructured time, but we are in the throes of seasonal anarchy. We’ve got Frozen 2 playing downstairs while the Grinch Who Stole Christmas plays upstairs. To add to the cacophony of our home, All the Single Ladies is blaring on an iPad somewhere.
Yet somehow it is working, as Elsa, the Grinch and Beyoncé have come together in a co-parenting unit keeping the kids entertained long enough for me to write the newsletter.
Here are five things for investors to know this week:
Back Nine: We are entering the second half of the year with stocks in North America triumphant. The bulls wrestled control of the markets from the bears, allowing the S&P 500 INX to exit the quarter with a gain of nearly 10 per cent. The fact that the S&P 500 also fell 10 per cent this quarter only to exit with a huge gain isn’t just impressive – it’s also rare. That has only happened three times in history.
The TSX TXCX, meanwhile, rallied for a fourth quarter in a row, ending Q2 with a gain of more than 7 per cent - its best showing since the fall of last year. The next test for stocks could come in the form of earnings, but that won’t begin until the middle of July.
While we are in this corporate no-man’s land, investors will look for signs of progress on trade deals. But hopes for one with Canada were dashed when U.S. President Donald Trump posted talks were off over the Digital Services Tax and threatened reciprocal tariffs to be announced “within the next seven day period.”
Stock markets wobbled after, proving that investors still care about getting trade deals done. No doubt hope will reach a fever pitch as investors count down to the July 9 deadline: the day the U.S. is set to increase tariffs on countries it hasn’t reached agreements with. Canadian markets are closed on Canada Day (Tuesday), and U.S. markets are closed on Independence Day (Friday).
Central Bank Euro-Trip: Watch for headlines out of the ECB Forum on Central Banking in Sintra, Portugal taking place Monday to Wednesday. Central bankers from all over the world will meet, and no doubt tariffs will be top of mind. U.S. Fed Chair Jerome Powell is set to appear on a panel Tuesday after an eventful two days of testimony in front of Congress last week.
With rumours of his successor swirling, Mr. Powell doubled down and said now is not the time to be raising rates given tariff uncertainty. Pressure is growing for him to cut rates, as inflation has been undershooting expectations, while the recent read of consumer spending dropped the most since the beginning of the year.
Central banks eye gold, euro and yuan as U.S. dollar dominance wanes
However, JoAnne Feeney, portfolio manager and partner at Advisors Capital Management, said Mr. Powell is doing “exactly what he should be doing.” Ms. Feeney told the In the Money with Amber Kanwar podcast that in theory, tariffs cause only a one-time change in prices. But in practice, companies are likely to increase prices in fits and starts, which is “likely to cause higher inflation, and that’s what the Fed is expecting to happen in this summer and into the fall.”
Help wanted: The U.S. jobs report is set to be released Thursday, and economists are expecting growth to meaningfully decelerate to just 110,000 jobs added in June, the lowest number since February. The unemployment rate is expected to tick up to 4.3 per cent, which is still low but would be the highest since October, 2021. There could be some downside to the numbers after a read of continuing jobless claims also came in the highest since October, 2021. Will bad news be good news for markets cheering for rate cuts?
Sobering up: Constellation Brands Inc. STZ-N is one of the lone corporates reporting results next week. The owner of Corona and Modelo has been on a year-long hangover and is languishing at the lowest level in four years. It has been a favourite punching bag of those looking to avoid tariff-sensitive names.
At the beginning of June, the U.S. announced it was increasing tariffs on aluminum to 50 per cent. It gives new meaning to crushing beer cans. But that’s not the only problem: people aren’t drinking. Correction: young people aren’t drinking, according to a number of recent studies and surveys.
It’s not just a Constellation problem. Shares of rivals such as Molson Coors Beverage Company TPX-B-T, Boston Beer Company Inc. SAM-N and Diageo PLC DEO-N are all struggling, too. The only reason Anheuser-Busch InBev BUD-N is bucking the trend is because they are cutting costs and leaning into the non-alcoholic beer trend.
“Overall, we expect a soft quarter with a potential miss on beer depletions,” wrote Filippo Falorni, director of equity research at Citi, in a preview note to clients.
Big beautiful deadline: In theory, Mr. Trump has set a deadline of July 4 for the proposed budget reconciliation bill. It is also known as the “Big Beautiful Bill” and is a major vehicle for Mr. Trump’s economic agenda. Disputes within the party are still continuing, so it is unclear if it will make it to Mr. Trump’s desk by Independence Day.
“We expect the bill to pass,” wrote TD’s global rates team in a note to clients, but “meeting the 4 July deadline appears uncertain.”
In the Money with Amber Kanwar brings you actionable insights from top portfolio managers to help you make profitable investing decisions. This week’s podcasts feature John Ewing, chief investment officer, Ewing Morris and Sadiq Adatia, chief investment officer, BMO Global Asset Management. Subscribe now www.inthemoneypod.com