Canada ‘avoiding the worst, but far from the best', says BMO strategist
BMO Canadian rates and macro strategist Benjamin Reitzes assesses the domestic economy as 'avoiding the worst, but far from the best',
'Despite the ongoing risks to the economy, we're upgrading the outlook for Canadian GDP growth. For 2025, we are forecasting 1.0% growth, up from 0.7% previously. For 2026, we are forecasting 1.2%, up from 1.0% previously. There continues to be extreme uncertainty around the outlook, and we could see significant revisions in either direction over the coming months. Indeed, we are still projecting negative growth for Q2 and Q3 (though a shallower contraction), qualifying as a so-called technical recession. While we're anticipating modestly stronger growth, that likely won't keep the Bank of Canada from cutting rates again at the next policy meeting in early June. The current tariff backdrop is closer to the BoC's Scenario 1 from the April MPR, though auto tariffs amplify additional downside growth risks. In that scenario, inflation is largely benign (in no small part due to the end of the carbon tax), while a small output gap persists. The latter two factors would usually point to a BoC rate cut. We still get April CPI next week, and March/Q1/April flash GDP at month-end, but we continue to lean toward a rate cut in June'
***
Citi head of U.S. equity strategy Scott Chronert sounds downright bearish,
'What stands out this week in the data is that we continue to push the valuation envelope as the macro backdrop underpinning our fundamental outlook weakens. Our market implied FCF growth measure reached a new 15yr high alongside traditional and cross asset valuations all pushing into the top decile. Three important macro inputs to our earnings models released this week have all significantly underperformed our base case assumptions. Earlier in the week, the Fed's Senior Loan Officer Survey showed tightening of credit conditions while banks saw reduced demand for consumer loans. This morning, consumer sentiment fell again with declines in both political party affiliation breakouts. Lastly, import prices increased MoM for April, misaligned with our base case assumption that foreign suppliers will absorb a portion of tariffs by lowering prices. Lags are likely here so we may need another month or two of data to draw a conclusion'
***
Equity markets have been climbing despite negative U.S. profit news which is a bit confusing.
RBC Capital Markets head of U.S. equity strategist Lori Calvasina says there's more negative profit news ahead,
'The big things you need to know: First, the S&P 500 EPS backdrop has stabilized, but we still anticipate further downward revisions for 2025 S&P 500 EPS. After a preliminary model refresh, we are maintaining our 2025 S&P 500 EPS forecast of $258, which is below the bottom-up consensus of $265. Second, we've updated our S&P 500 valuation model to reflect updated RBC house views on key macro variables like interest rates and inflation. It suggests that last week's gap up in the stock market was largely deserved, but that upside from here may be limited without another major step-up improvement in broader macro expectations. Third, we outline our thoughts on the suddenly sour news flow for stocks'.
***
Wells Fargo strategist Austin Pickle recommends selling the rally in emerging markets stocks which is interesting for Canadi9an investors in light of the long term correlation between the (currency adjusted) TSX and MSCI Emerging Markets index,
'The long-term EM equity track record has been uninspiring EM earnings have barely budged since 2007, and index levels remain roughly 15% below their pre-global financial crisis highs. These figures stand in stark contrast to the S&P 500 Index, which has delivered impressive earnings growth and returns over the same period. Meanwhile, a study of volatility reveals that EM experienced nearly triple the number of bear markets defined as drops of 20% or more — during this time. In the case of EM, higher risk has not translated into higher returns these past 18 years. Some core structural issues also help to keep EM a 'show me' story. These include political and economic instability, corporate governance concerns, variable regulatory risks, as well as China's excessive debt, slumping property sector, and slowing growth brought on by the planned shift to a consumer-led economy'.
***
Bluesky post of the day:
Diversion: 'The economics of sleep' – Marginal Revolution
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Globe and Mail
19 minutes ago
- Globe and Mail
Element79 Gold Corp Shifts Focus to US Projects and Appoints New VP of Corporate Development
Element79 Gold Corp. (CSE: ELEM | FSE: 7YS0 | OTC: ELMGF), a gold and silver exploration company, has issued a strategic corporate update for the remainder of 2025, highlighting a renewed operational focus on its advanced-stage Nevada projects and the appointment of Michael Smith as Vice President, Corporate Development. In the near term, the Company is accelerating development across its Nevada portfolio, including the Elephant Project—where a NI 43-101 technical report and work plan are being finalized—and the pending acquisition of the drill-ready Gold Mountain Project. These U.S.-based assets represent a shift toward jurisdictions with clearer permitting pathways and near-term execution potential. In addition to Element79 Gold Corp. (CSE: ELEM | OTCQB: ELMGF) keep an eye on other stocks making waves: Wang & Lee Inc. (NASDAQ: WLGS), Dragonfly Energy (NASDAQ: DFLI), NuCana plc (NASDAQ: NCNA), GIBO Ltd (NASDAQ: GIBO) and Power Metallic Mines Inc. (TSXV: PNPN) (OTCQB: PNPNF), as they are moving aggressively in early Trading trading today. To support this growth trajectory and capital markets strategy, Element79 is pleased to announce the appointment of Michael Smith as Vice President, Corporate Development. Engaged under contract, Mr. Smith brings more than 15 years of leadership experience in business development, capital raising, public company operations, and investor relations. As Founder of Lions Bridge Capital, he has advised numerous startups and CSE-listed companies, with expertise in M&A, compliance, and corporate messaging—directly aligning with Element79's objectives in advancing its Nevada assets. The Company has declared force majeure on its Lucero Project in Peru, citing ongoing political instability, regulatory uncertainty, and community access challenges that have delayed exploration activities. While long-term engagement with stakeholders in Chachas continues, internal assessments indicate that material progress on surface rights will continue in the future. Element79 is actively exploring a potential restructuring of its agreement with Condor Resources to position Lucero for future reactivation once conditions stabilize. Element79 Gold remains committed to unlocking shareholder value through strategic asset alignment, stakeholder engagement, and disciplined project advancement. For more information, visit: Disclaimers: The Private Securities Litigation Reform Act of 1995 provides investors with a safe harbor with regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, assumptions, objectives, goals, and assumptions about future events or performance are not statements of historical fact and may be forward looking statements. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties that could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as projects, foresee, expects, will, anticipates, estimates, believes, understands, or that by statements, indicating certain actions & quotes; may, could or might occur Understand there is no guarantee past performance is indicative of future results. Investing in micro-cap or growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor's investment may be lost or due to the speculative nature of the companies profiled. TheStreetReports (TSR) is responsible for the production and distribution of this content."TSR" is not operated by a licensed broker, a dealer, or a registered investment advisor. It should be expressly understood that under no circumstances does any information published herein represent a recommendation to buy or sell a security. "TSR" authors, contributors, or its agents, may be compensated for preparing research, video graphics, podcasts and editorial content. "TSR" has not been compensated to produce content related to "Any Companies" appearing herein. As part of that content, readers, subscribers, and everyone viewing this content are expected to read the full disclaimer in our website.
Globe and Mail
19 minutes ago
- Globe and Mail
KeyCorp's Q2 Earnings Beat Estimates, NII & Fee Income Rise Y/Y
KeyCorp 's KEY second-quarter 2025 earnings per share from continuing operations of 35 cents surpassed the Zacks Consensus Estimate by a penny. The bottom line reflected a 40% jump from the prior-year quarter's actual. Results benefited from a rise in net interest income (NII) and non-interest income. The average loan balance increased sequentially, which was another positive. However, higher expenses and a rise in provisions were undermining factors. Net income from continuing operations attributable to common shareholders was $387 million, up 63.3% year over year. KEY's Revenues Improve, Expenses Rise Total revenues increased 20.9% year over year to $1.83 billion. Moreover, the top line beat the Zacks Consensus Estimate of $1.80 billion. NII (on a tax-equivalent or TE basis) increased 27.9% on a year-over-year basis to $1.15 billion. The net interest margin (NIM) (TE basis) from continuing operations expanded 62 basis points (bps) to 2.66%. Both metrics benefited from the lower deposit costs, reinvestment of proceeds from maturing low-yielding investment securities, fixed-rate loans and swaps repricing into higher-yielding investments, the repositioning of the available-for-sale portfolio in the third and fourth quarters of 2024, and an improved funding mix. These benefits were partially offset by the impact of lower interest rates on variable-rate earning assets, and lower loan balances. Our estimate for NII (TE) and NIM was $1.14 billion and 2.62%, respectively. Non-interest income was $690 million, up 10% year over year. The rise was driven by an increase in almost all the components of fee income, except for corporate-owned life insurance income, consumer mortgage income, operating lease income and other leasing gains, and other income. Our estimate for the metric was $673.3 million. Non-interest expenses increased 7% year over year to $1.15 billion. The rise was due to an increase in almost all cost components, except for operating lease expenses and other expenses. We projected the metric to be $1.16 billion. KeyCorp's Loans Rise & Deposits Slip At the end of the second quarter, average total loans were $105.72 billion, up 1.3% from the previous quarter. We had anticipated average total loans of $105.52 billion. Average total deposits were $147.45 billion, down marginally from the prior-quarter end. The fall was due to a reduction in higher-cost commercial client balances and retail CDs. Our estimate for the metric was $150.58 billion. KEY's Credit Quality: A Mixed Bag The provision for credit losses was $138 million, up 38% year over year. Our estimate for provision for credit losses was $120.2 million. Net loan charge-offs, as a percentage of average total loans, rose 5 bps year over year to 0.39%. However, the allowance for loan and lease losses was $1.45 billion, down 6.5% from the prior-year quarter. Non-performing assets, as a percentage of period-end portfolio loans, other real estate-owned property assets, and other non-performing assets, were 0.66%, down 2 bps year over year. KeyCorp's Capital Ratios Improve KEY's tangible common equity to tangible assets ratio was 7.8% as of June 30, 2025, up from 5.2% in the corresponding period of 2024. The Tier 1 risk-based capital ratio was 13.4%, up from 12.2%. The Common Equity Tier 1 ratio was 11.7%, up from 10.5% as of June 30, 2024. Our Take on KEY Decent loan balances, balance sheet repositioning efforts, strategic buyouts and relatively higher interest rates will likely support KeyCorp's revenues in the near term. Weakening asset quality amid a tough macroeconomic backdrop is concerning. KeyCorp currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Performance of Other Major Banks The Bank of New York Mellon Corporation 's BK second-quarter 2025 adjusted earnings of $1.94 per share surpassed the Zacks Consensus Estimate of $1.74. Also, the bottom line reflected a jump of 28.5% from the prior-year quarter. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.) BNY Mellon's results were primarily aided by increased fee revenues and NII. Growth in the assets under custody and/or administration and assets under management balances supported the results. Also, the company recorded a provision benefit in the quarter, which was a tailwind. Wells Fargo & Company 's WFC second-quarter 2025 adjusted earnings per share of $1.54 surpassed the Zacks Consensus Estimate of $1.41. In the prior-year quarter, the company reported earnings per share of $1.33. Wells Fargo's results benefited from an improvement in non-interest income and lower provisions. However, a decline in NII and higher expenses were the undermining factors. Zacks' Research Chief Names "Stock Most Likely to Double" Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest. This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%. Free: See Our Top Stock And 4 Runners Up Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Wells Fargo & Company (WFC): Free Stock Analysis Report KeyCorp (KEY): Free Stock Analysis Report
CTV News
19 minutes ago
- CTV News
Average Canadian family spent 42.3% of income on taxes in 2024: study
CTV's Scott Hurst breaks down a new report which found Canadian families spent more on taxes in 2024 than on housing, food and clothing combined. An error has occurred during playback. Please try again later. [1000/0] The average Canadian family spent 42.3 per cent of their income on taxes in 2024, according to a new study from the Fraser Institute. The report from the Fraser Institute showed the average Canadian family, which it estimates to have earned an income of $114,289 last year, paid about $48,306 in total taxes to the federal, provincial, and municipal governments. 'At a time when the cost of living is top of mind across the country, taxes remain the largest household expense for Canadian families,' said Jake Fuss, director of fiscal studies at the Fraser Institute in a news release. Researchers said the average tax bill totals more than 35.5 per cent for housing, food and clothing combined. Broken down further, about 22 per cent was spent on housing, 11 per cent on food and two per cent on clothing. The study found the average Canadian Family only spent 33.5 per cent of their income on taxes in 1961, with 56.5 per cent going to basic necessities. The total tax bill In order to calculate the total tax bill, researchers for the institute calculated the various taxes an average Canadian family pays to federal, provincial, and municipal governments. That includes income taxes, payroll taxes, health taxes, sales taxes, property taxes, fuel taxes, carbon taxes, vehicle taxes, import taxes, and alcohol and tobacco taxes. The average Canadian also pays the taxes levied on businesses. Although businesses pay these taxes directly, the cost of business taxation is ultimately passed onto average Canadians. 'While Canadians can decide for themselves whether or not they get good value for their tax dollars, they should understand how much they pay in taxes each year,' said Fuss. Here is a breakdown of the taxes the average Canadian family pays: Taxes In dollars As a per cent of taxes Income tax $15,085 31.2 per cent Payroll and health taxes $10,319 21.4 per cent Sales taxes $6,812 14.1 per cent Property tax $4,111 8.5 per cent Profit tax $6,534 13.5% Liquor, tobacco, amusement and other excise taxes $1,640 3.4% Fuel, motor vehicle licence and carbon taxes $1,470 3.0% Other taxes $1,403 2.9% Natural resource taxes $657 1.4% Import duties $275 0.6% Total taxes $48,306 Total cash income $114,289 Taxes as a percentage of cash income 42.3 per cent Taxes versus necessities Researchers gauged the significance of the increased tax bill on Canadian families by comparing the evolution of the tax rate with the average family's other major expenditures. The study found the average family spent 56.5 per cent of its cash income to pay for shelter, food, and clothing in 1961. In the same year, 33.5 per cent of the family's income went to governments as tax. The spending demands had roughly evened up by 1981 as 40.8 per cent of an average family's income went to governments in the form of taxes, while 40.5 per cent was spent to provide shelter, food, and clothing. The one exception was the COVID-19 pandemic when tax revenues fell and income rose in 2020, which caused the tax bill to decline for average Canadian families. Researchers state declining tax revenues and an increase in family incomes produced an anomaly in 2020 that caused the tax bill to drop temporarily. The years following saw the tax bill increase and exceed pre-COVID-19 levels as government revenues rebounded and the economy recovered. However, since 2022 the tax bill has since dropped back down to levels comparable with those experienced during the 2010s.
