It’s a day of mourning in this house after the Jays lost. It feels extra cruel that we have an extra hour of it thanks to the time change. On the bright side, at least we can all start going to bed at a reasonable hour again.
We’ll need our rest. It is a heavy week with 102 companies reporting on the Toronto Stock Exchange, 136 on the S&P 500, not to mention the federal budget and top-tier economic data. Here are five things to watch:
Roost: Since Mark Carney became Prime Minister, there have been billions in spending promises. On Tuesday, we will see how much it will cost Canadians. The Parliamentary Budget Officer forecasts a deficit of $68.5-billion for 2025-26, the largest since 2021-22 and significantly larger than the projected $42.2-billion at last year’s fall economic statement.
Of course, a lot changed in a year. We had an election, a new Prime Minister, and are locked in a tariff war with our closest ally. The source of the new spending shouldn’t come as a huge surprise: personal income-tax cuts, cancelled tax hikes on capital gains, higher military spending, and housing stimulus.
“The pivot to a more expansionary fiscal policy will provide a key source of support to GDP growth into 2026 and beyond,” wrote Andrew Kelvin, head of Canadian and global rates strategy at TD. He believes spending will boost GDP by 1 per cent next year. The key will be how the government plans to offset this spending with promises made to reduce government costs and audit programs to find ways to cut wasteful spending.
Want ads: We will get a sense of how desperately Canada needs fiscal stimulus this Friday with the jobs report for October. Economists predict a modest 2,500 in job losses and the unemployment rate rising to 7.2 per cent. The truth is that the predictions by economists are all over the place, with some expecting 10,000 new jobs and others expecting more than 20,000 in job cuts. Notwithstanding the surge in employment last month, there are other indications that the job market is weak in Canada, warns economist David Rosenberg.
“There are now 3.5 unemployed Canadians for every job posting out there, which is something we have not seen occur in nearly a decade (outside of the pandemic),” he wrote in a note to clients last week.
And with the Bank of Canada signalling that it’s done all it can do with rate cuts, the baton gets handed over to fiscal policy.
In the U.S., investors will be left feeling around in the dark as the government shutdown means that there is a chance we will not get jobs data for a second month in a row.
“We estimate each week of closures reduces annualized quarterly real GDP growth by 0.1-to-0.2 percentage points,” wrote BMO senior economists Priscilla Thiagamoorthy and Shelly Kaushik in a note to clients.
“A four-and-a-half-week shutdown points to a 0.4-to-0.9 percentage-point hit to growth, so far – that includes a recovery when the shutdown ends and employees receive backpay.” If the shutdown goes past Friday, it will become the longest on record.
Heavy is the head: The most valuable company in Canada will report results Tuesday morning. Usually that honour belongs to Royal Bank RY-T, but thanks to a 60-per-cent rally – Shopify SHOP-T now has a higher market cap. The history of a non-bank taking that spot isn’t great (see BlackBerry BB-T, Nortel, Potash Corp, or Valeant).
But the real test of the stock will be its ability to grow sales given how expensive it is. The good news is that it has been delivering. Sales growth this year is the best it’s been since the pandemic. With the stock trading a triple digit price-to-earnings multiple, it’s important that continues.
“This is the most expensive stock we own. It took us a long time to get over it,” said shareholder Nick Griffin, manager of the CI Munro Global Growth Equity Fund, on my podcast back in October. He says integration with platforms like ChatGPT are a big win for Shopify and its merchants, and that should drive growth going forward.
On a diet: How bad is the dining-out situation? After Chipotle’s CMG-N disastrous results last week, investors are nervously anticipating McDonald’s MCD-N results Wednesday. Shares have held on much better than Chipotle or Starbucks SBUX-Q but are still underperforming the broader market.
It’s not all bad out there. Restaurant Brands International QSR-T, which owns Tim Hortons and Burger King, reported better-than-expected sales growth last week. Investors will watch for whether their shift to value, including $5 meal deals, helped to buffet overall sales. Not everyone is convinced.
“Thus far, our analysis suggests that [McDonald’s] significant investments in reducing combo meal prices and increasing marketing spend in September have not meaningfully improved traffic trends,” warned Stifel’s Chris O’Cull in a preview note to clients. McDonald’s could announce further investments in price reduction, but until that produces meaningful sales growth, Mr. O’Cull expects the stock to be range bound.
Kicking the can: MEG Energy MEG-T surprised investors last week when it delayed the vote on the Cenovus CVE-T deal yet again to address a “regulatory inquiry” stemming from a complaint made by a former MEG Energy employee. This will be the third delay on the vote, which is now scheduled for Nov. 6.
It is clear that MEG now has the votes after Cenovus struck a deal to win the support of Strathcona SCR-T by boosting the offer and selling it assets at a discount. The CEO of Cenovus said on a conference call Friday that the company doesn’t expect this inquiry to have any impact on the transaction.
Aside from this, there will be plenty to watch in the patch with Suncor SU-T, Canadian Natural Resources CNQ-T, TC Energy TRP-T and Enbridge ENB-T all reporting this week.
In the Money with Amber Kanwar is Canada’s top investing podcast. New episodes out Tuesday and Thursday. Subscribe now! www.inthemoneypod.com