Jeff BlackA Comment -- General Comments From an ExpertA CommentaryN/ASep 25, 2012

It's been a counterintuitive rally, really since Trump got into office last year between tariffs and the war. Most critics are saying that even if the Strait opens, it'll still be a challenge for oil for a long time. That'll mean higher costs. 

Even with lighter GDP data out of the US today, odds are more toward a rate hike than a reduction. So, why are markets rallying as they are? The reason is that earnings growth is still phenomenal. It's supposed to be 24% this year, and companies aren't weakening that outlook despite potential margin pressure.

The picture of NA companies has changed. Input costs of higher oil aren't what they used to be, and companies are able to absorb them. This year still looks good, and we're still looking at 12-14% earnings growth next year.

Earnings growth is overpowering everything else at this point.

Agrees, though the US economy is in slightly better shape than the Canadian one. 

We're very vulnerable to these shocks. What we do have going for us in Canada is this incredible urge to nation-build, which is affecting swathes of our economy. Seeing that in pipelines, infrastructure, oil, construction, and even the banks. For the first time in 15 years, we're seeing foreign money really interested in coming into Canada.

Yes, we have some weakness here with higher rates and an anemic job picture, but we have fund flows finally coming to Canada.

There's an old axiom:  Buy the rumour, sell the news. It's a common pattern. No surprise, banks exceeded estimates. Banks have had a huge run and have gone into a whole new trading range. Markets do make sense if you watch them studiously for 30 years :)

You have to assess the quality of the earnings and what the banks are saying. This time around, yes, you want to buy this dip.

Agrees with the caller who said that AI won't hurt employment, and is going to make us all better at what we do. AI is terrific. Doesn't see AI building these buildings and doing all the complicated computations. These firms will benefit from the AI tools, to lower costs and increase efficiencies.

Yes, a lot of it is that. The first AI phase rewarded the semiconductor and software stocks. The next phase may increasingly reward electricity infrastructure and real assets. The capex spend is broad and has support from many governments around the world.

It's not just software anymore; it's now colliding with the physical economy. AI can't run on enthusiasm alone. Data centres need electricity, transformers, cooling, copper, transmission infrastructure, and so on. Sees the impact broadening out to the physical economy.

We'll have to make investments in mines, plants, and refining to be able to build out the physical infrastructure to provide the electricity for the AI wave that's coming. It'll probably mean structurally stickier inflation. It'll consume a lot of real-world input like energy, labour, materials, and infrastructure.

All that will cause market leadership to broaden to mid-caps, cyclicals, industrials, utilities, and so on.

Investors want to make sure they have some exposure to the areas that are a bit more physical. In Canada, our index tends to skew that way. We have lots of rocks and trees and oil and gas that build our economy.

In the US, the S&P 500 is dominated by technology stocks. Oil & gas represents only about 4% of that index. So the big growth engine in the US is complemented by Canada's resource infrastructure.

Focused on systematic, evidence-based, academic research. Largely out of the Chicago School of Business. Great job trying to harness the different factors -- for example, higher quality, or smaller companies, or cheaper valuation, or higher profitability.

Factor-based strategies can underperform for long periods of time, such as when large-cap technology dominates.

Probably the class act of ETF/fund companies in terms of extracting excess returns from factors.

We forget to look at the positives in the market, possibly: a resolution to the US-Iran war, continued AI investment, continued infrastructure investment amid re-shoring, or an economic boom from AI efficiency, possibly in increased jobs or productivity. Also, possibly good, old-fashioned earnings growth. There's also something to worry about, like geopolitical risk. About 70% of the TSX is financials, commodities and energy, which worked well in 2025, but if say two of those three go sideways, then the TSX could lag other markets. He focuses on growth and momentum, tech and AI. He looks at strong balance sheets, good momentum like 52-week highs and positive cash flow.

He is optimistic in spite of the volatility and is still seeing earnings estimates for the S&P 500 continue to climb and even accelerate a bit in March and April. He hasn't seen the AI parade affected by higher oil prices as well as the consumers too much. Corporations are still doing quite well and AI will benefit many companies throughout the whole economy. He has seen big pullbacks when investors get shaken up regarding the future of AI which presents buying opportunities for trading. The market is expecting a relatively short term for the war with Iran. However if it drags on for a long time this would have an impact everywhere in the economy including a spike of oil to $200. 

Starting to see 30-year US treasury yield above 5%. You could argue that these rates in fixed income are providing some competition for equities. It increases the cost of capital for both businesses and households.

It's no secret that a certain individual wanted to get rid of J. Powell. Warsh is just 1 vote in 12, so it's not that big a difference. Any jeopardy on the independence of central banks would be a bad thing.

Delinquencies on mortgages are rising slowly. Insolvencies are picking up. PCLs could pick up somewhat. We forget that capital markets are cyclical because we've had boom times for several years. Potential softness in the economy.

It's not that the businesses aren't worthy, just that they might not be afforded the same multiple as today.

Not going away anytime soon. Quantum is interesting, as it can upend everything. All players will have to absorb large language models into their offerings.

His firm is more likely to take $$ out right now, rather than put new $$ in. Doesn't feel that $100 oil is sustainable. If prices continue at that level, we'll see demand destruction. We could wake up tomorrow and find that oil is $70 because everything's been resolved.