The Weekly Setup: What every investor needs to know about tariffs, Aritzia and job numbers
Here are five things to watch for this week:
Want ads: Economists estimate Canada added zero jobs in June. That's not a typo. The consensus estimate for net job growth in a country of 20.7 million workers is 0.0. The unemployment rate is expected to advance to 7.1 per cent – the highest since the pandemic peak, or, apart from that, since April, 2016. Tariffs provide ample reason for pessimism. The manufacturing sector could post a third straight month of job losses, notes Benjamin Reitzes, Bank of Montreal managing director for Canadian rates and a macro strategist. 'U.S. steel and aluminum tariffs doubled in June, which will hit those already struggling sectors even harder,' Mr. Reitzes wrote in a note to clients. The data will be key for the Bank of Canada, which is set to make an interest-rate decision at month's end. The central bank has held rates steady at 2.75 per cent for two consecutive meetings, but the market is pricing in only a slight chance of a rate cut. If payrolls disappoint, this could sway the odds in favour of another cut.
Let's make a deal: The deadline for deals with the United States on tariffs is fast approaching. President Donald Trump set July 9 as the deadline for country-based tariffs to begin on trading partners without deals in place. With the deadline days away, deals have only been hammered out with Vietnam and Britain. Although the U.S. and China have agreed to a truce, which involves cooling it on reciprocal tariffs and lowering export controls, Canada has promised a deal by July 21. Does a deal matter to markets? The S&P 500 INX and the TSX TXCX are at record highs. So far, tariffs aren't hitting inflation; does that mean companies are absorbing them at the expense of margins? Could margins be the undoing for investors? BMO chief investment officer Sadiq Adatia says tariffs may actually increase a company's profitability. 'Let's say a 10-per-cent tariff is imposed on goods crossing the border,' he said on my podcast. 'Most consumers think prices will go up by 10 per cent. But only 40 per cent of the product's cost comes from raw goods. So, 10 per cent on 40 per cent is only a 4-per-cent tariff. Companies know people expect 10 per cent, so they might raise prices by 7 per cent and say, 'We're doing you a favour. We're not doing 10.' But they've increased their profits by another 3 per cent.'
High fashion: Someone forgot to tell Aritzia Inc. ATZ-T there's a consumer slowdown. The stock hit a record high last week, creating an interesting set-up for quarterly results due Thursday after markets close. Aritzia is expected to show a 150-per-cent rebound in profitability and a nearly 15-per-cent jump in same-store sales. In this economy? Apparently. With the stock trading at a hefty premium to peers (UBS estimates it at 48 per cent) it will make the quarterly results a nail-biter. Will Aritzia continue to buck the trend of weak consumer growth? Can it continue to manage around tariffs? As with most companies, it may come down to the outlook it provides. 'We believe the 'bar' for the event is ATZ maintains its FY26 operating guidance and provides a 2Q26 outlook supportive of the Street's C$0.37 EPS forecast,' Mauricio Serna of UBS wrote in a preview note. Jamie Murray of Murray Wealth Group flagged Aritzia as a winner on my podcast back in February. It promptly went straight down before recovering and reaching new highs. He's still holding. 'They've beat quarterly guidance by at least 5 per cent the past 3 quarters and we expect a similar result,' he wrote in an e-mail.
Hungry for change: Shares of MTY Food Group Inc. MTY-T have been grinding lower for years, and this week investors will get to assess if catalysts for the stock remain elusive when it reports results on Friday. MTY is known as a food-court purveyor of such brands as Manchu Wok and Mr. Sub, but it has diversified and has many free-standing restaurants. It is also known for its growth-by-acquisition business model – except recently it hasn't been growing or acquiring. Its last deal was in 2022 for Wetzel's Pretzels. While sales of that brand are strong, other brands haven't fared as well and same-store sales have struggled for five consecutive quarters. Even so, it is worth pointing out that MTY is a cash-flow machine reliably spitting out more than $100-million a year. Bank of Nova Scotia's John Zamparo wondered out loud, in a June note to clients, if this makes MTY an attractive takeout candidate. 'MTY's valuation is overly punitive,' he wrote, noting that MTY owns 90 brands but only three are interesting to investors (Wetzel's, Cold Stone, sweetFrog). 'Strategic buyers typically want simpler businesses … which leads to private equity as the likeliest acquirer,' Mr. Zamparo said.
Turbulence: Delta Air Lines Inc. DAL-N reports Thursday and will give investors a sense of travel demand. Between tariffs, geopolitics and a spike in gas prices, not to mention generally lower travel into the U.S., there was no shortage of volatility for airlines. We will see how all of this plays out. The airline is poised to report a 7-per-cent drop in revenue and 12-per-cent drop in earnings per share.
In the Money with Amber Kanwar brings you actionable insights from top portfolio managers and business leaders. New episodes out Tuesdays and Thursdays.
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