Since the guest has not been on the show for four years there are no past picks. There was a general discussion on the reasons for pension funds not putting much of their money in Canadian stocks. He feels there are low returns on capital for quite few public companies and they can get better risk adjusted returns from outside of Canada. It is hard to find the best stocks. 3.7% is a typical free cash flow yield of U.S stocks. Historically 2.4% of stocks in the U.S. create most of the value.

Last Thursday's monthly non-farm payrolls report is crucial, giving a real read on labour. Labour can predict GDP growth and the direction of the stock market. LW says look at the employment to population ratio. Data from 1948-1973 yielded a 5.5-year cycle that repeated itself. Every upsurge in employment was predicted by this 5.5-year cycle. The chart from 1971-1995 also had the 5.5-year cycle predict upturns in jobs, though it was more muted than the earlier period. From 1994-2020 also showed peaks based on the 5.5 years. The last five years was skewed because of Covid, but has more recently resumed this 5.5-year cycle. Upshot: the ratio should expand starting now through fall 2027.

Market Update:

Canada’s population growth slows in the first quarter of 2025, with almost no growth, marking the sixth consecutive quarter of slower population growth. On the other hand, the U.S. Federal Reserve kept interest rates unchanged in June in the range of 4.25 – 4.5 percent, while keeping a projection for two rate cuts in 2025. The Canadian dollar was 72.85 cents USD. The U.S. S&P 500 ended the week down 0.5%, while the TSX was down 0.2%.

Consumer discretionary and real estate slid by 1.6% and 1.0%, respectively, while industrials and consumer staples gave up 0.7%, each. Materials and financials ended the week mostly flat, while energy edged up by 2.6% and technology gained 0.3%. The most heavily traded shares by volume were National Bank of Canada (NA), Tourmaline Oil Corp (TOU) and Keyera Corp (KEY).
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The U.S. dollar volatility: There's been lots of talk about it. Year to date, the USD is -11%, but in the big picture, this is noise. The USD is basically where it was in the early 1970s. Historically, the USD spiked in the mid-1980s which led to the Plaza Accord to strengthen other currencies which lowered the too-high USD, and in 1999 when the Euro was created. That said, the USD now does matter. The USD's depreciation, plus the inflationary impact of tariffs that's coming will negatively impact inflation. The Fed pausing rates makes complete sense. The positive side: a weakening USD is positive for earnings, particularly for these sectors (many revenues from abroad): tech, materials, communication services and consumer staples. Look for what companies say about inflation and tariffs during earnings season.