Your Portfolio in Brief
In our portfolios, Adobe (ADBE) is one of the names where the market offered us an entry point we don’t often see on a company of this quality. In 2025, the stock saw a significant decline, of about 25–27% since the start of the year, trading around US$320 at its most recent low.
It’s at those levels that we decided to buy:
not because Adobe is “in fashion,” but because the pullback in the share price was not aligned with what we are seeing in the numbers.
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What Adobe Actually Does
Adobe is a key player in creative software and digital productivity tools:
• Creative Cloud (Photoshop, Illustrator, Premiere, etc.) for creators, agencies, studios, enterprises;
• Document Cloud (PDF, Acrobat, e-signatures) at the heart of document workflows;
• Experience/digital marketing, with solutions that help companies analyze, personalize, and optimize their campaigns.
The model is almost entirely based on recurring subscriptions (ARR), with high visibility on revenues and a client base that is very attached to the platform. Changing tools, for a creative or marketing team, has a real cost: training, integration, operational risk. That’s what gives Adobe a very defensive position.
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Why The Stock Pulled Back… But The Fundamentals Still Hold Up
The decline in the stock mainly came from perception, not from a collapse of the business model:
• the market got excited about “purer” AI names;
• many investors started to doubt Adobe’s ability to monetize its AI investments;
• some banks lowered their target prices, while keeping positive recommendations.
Meanwhile, on the operating side, Adobe is still delivering:
• revenue growth around 10–11%;
• operating and cash-flow margins that sit well above the average for the S&P 500;
• a solid balance sheet, with controlled debt and a strong cash position;
• share buybacks that support earnings per share.
In other words: the market penalized the stock as if the business model were weakening, while operational performance remains very robust.
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AI: A Growth Driver, Not a Threat
A large part of the pressure on the stock comes from the fear that free or low-cost AI tools will replace Adobe. Our reading is different.
Adobe has integrated AI at the core of its offering:
• Firefly and generative features in Photoshop, Illustrator, Express, etc.;
• automation of repetitive tasks for creators;
• faster content production for marketing, media, and enterprises.
These are not gimmicks: these features make the platform more powerful, stickier, and create opportunities for additional monetization (richer plans, upsell, new types of users). Over the long term, AI strengthens Adobe’s ecosystem instead of eroding it.
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What We’re Watching for Next Quarter
Adobe is set to report its fourth-quarter results on December 10. We see several elements that could support a good quarter:
• ARR growth: recurring revenues continue to move higher, particularly in digital media and modules that integrate AI;
• Momentum in Adobe Express: the app plays an important role in broadening the user base, with a freemium model that, over time, drives conversions into paid offerings;
• Financial discipline: Adobe maintains an efficient cost structure, continues to invest in AI, while still buying back shares;
• Strategic pipeline: the announced acquisition of Semrush, expected to close in 2026, strengthens the digital marketing segment and adds another growth engine for the coming years.
Market expectations are already relatively low after the stock’s pullback. In this context, a quarter that is simply “a bit better than expected” could be enough to trigger a positive repricing.
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Why We Bought After the Last Low
We took advantage of the recent weakness in the stock to build a position, for three main reasons:
1. Attractive risk/return profile
At these levels, we are paying a reasonable multiple for:
o a dominant company;
o high margins;
o a highly predictable subscription-based model;
o an AI strategy already in production, not just on slide decks.
2. Strength of the balance sheet and cash-flows
Adobe generates significant cash-flow, with reasonable debt.
That gives it the flexibility to:
o keep investing in AI;
o fund targeted acquisitions like Semrush;
o support EPS through share repurchases.
3. Gap between narrative and reality
The dominant narrative focused on “AI risk” for Adobe;
the numbers, meanwhile, show a company that continues to grow, generate very high margins, and strengthen its offering.
It’s this gap between narrative and reality that we aim to capture in our portfolios.
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In Summary: Why Adobe Belongs in Our Portfolios
For us, Adobe checks the boxes of a quality growth stock, bought at the right moment in the sentiment cycle:
• a recurring, predictable, long-term business model;
• leadership in digital creation and digital marketing;
• fast and concrete AI integration into products;
• margins and cash-flows that support shareholder value creation;
• and an entry price obtained after a significant pullback, rather than at the peak of enthusiasm.
We are not trying to guess the exact short-term move in the stock.
Our thesis is that Adobe remains a central name for the digital economy over the next few years, and that the purchase made near its recent low positions our portfolios well to benefit from a potential market catch-up as results continue to come through.
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This week in the markets
Monday
• Dow Jones: 47,289.33 (−0.9%)
• S&P 500: 6,812.63 (−0.53%)
• Nasdaq: 23,275.92 (−0.38%)
• S&P/TSX (Toronto): 31,101.78 (−0.90%)
The three major U.S. indexes ended a streak of five consecutive positive sessions, in an environment of more cautious risk-taking at the start of December. Small caps underperformed, with the Russell 2000 down around 0.7%, confirming a more selective appetite for risk.
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Canadian Dollar
The Canadian dollar edged lower, trading around US$0.715 (≈ 1.3980 CAD for US$1), down roughly 0.1% on the day.
The currency was penalized by another weak manufacturing indicator at home, while still holding on to part of the gains recorded the previous week.
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Macro Analysis
Monday’s session was characterized by a recalibration of risk after a volatile November and a strong late-month rally. Several drivers overlapped:
1. Crypto Shock and Risk Appetite
o Bitcoin fell about 6–7%, briefly dropping below US$85,000, its worst session since March and more than 30% below its October high (~US$126,000).
o This correction put visible pressure on the “crypto-sensitive” segment, with sharp declines in names tied to trading platforms and the broader digital-asset ecosystem.
o The signal from markets is textbook: in a context where valuations (AI, growth tech) are being questioned, the assets perceived as the riskiest are the first adjustment variable.
2. AI: Digestion Phase Rather than End of Cycle
o On the artificial intelligence theme, we are seeing more of an internal rotation than a fundamental break.
o Broadcom and Super Micro Computer pulled back (more than 4% and just over 1%, respectively), illustrating profit taking in names that have significantly outperformed in 2025.
o Conversely, Synopsys jumped after the announcement of a US$2 billion investment by Nvidia, as part of a strategic partnership on AI chip design. Nvidia finished the session in positive territory, still viewed as a key asset in the AI infrastructure space.
o From a positioning standpoint, sentiment indicators point to an environment that is more constructive than last year, but still far from the euphoria of 2000, which argues for a normalization of forward returns rather than a brutal end of the cycle.
3. Energy: Geopolitical Risk Premium
o The energy sector outperformed, supported by a rebound in crude. WTI traded around US$60 per barrel, up a bit more than 1%, against a backdrop of:
Ukrainian drone attacks targeting Russia’s “shadow fleet” and export infrastructure in the Black Sea.
The decision by OPEC+ to maintain its production quotas in the first quarter of 2026.
o This backdrop supported exploration-and-production and refining names, even in a broadly negative equity session.
4. Gold and Precious Metals
o In this environment combining volatility in risk assets and expectations of further rate cuts, gold advanced, with futures up about 0.4–0.5% on the day.
o Demand for safe havens remains solid, particularly in a context where uncertainty around rate policy and tariffs remains elevated.
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Stocks in Brief
• Bitcoin: about −7%—back below US$85,000, its worst session since March, erasing the weekend rebound and reviving the perception of an asset that is “too risky” in a market that is becoming more selective.
• Coinbase, Strategy and other crypto-related names: −6% to −9%—strong correlation to the drop in Bitcoin, in a context of targeted de-risking in the most volatile segments.
• Broadcom (AVGO): down more than 4%—profit taking in a name at the core of the AI wave after a very strong performance year-to-date.
• Super Micro Computer (SMCI): down more than 1%—same consolidation logic in AI server suppliers after an extended rally.
• Synopsys (SNPS): +7%—the name was boosted by Nvidia’s US$2 billion equity investment, as part of a strategic partnership to accelerate AI chip design.
• Nvidia (NVDA): +1%—modest gain despite volatility around the AI theme, confirming its status as a cornerstone of the ecosystem with exposure to both hardware and software platforms.
• Walmart (WMT), Ulta Beauty (ULTA): new bellwethers in retail—names moving higher, some at all-time highs, supported by a strong start to the holiday season and winning positioning in omnichannel retail.
• SPDR S&P Retail ETF (XRT): 5-day performance > +6%—the fund outperforms the broad index, reflecting the solid tone in retail around Thanksgiving, Black Friday and Cyber Monday.
• Shopify (SHOP): −4%—pullback after a “partial outage” of the Shopify Admin platform on Cyber Monday, a critical day for online merchants.
• Old Dominion Freight Line (ODFL): +5%—rebound after an upgrade, supported by expectations for a more supportive backdrop in the freight sector.
• DoorDash (DASH): +4%—renewed appetite after a significant share purchase by a leading institutional investor, interpreted as a confidence signal on the business model.
• Disney (DIS): around +2%—supported by the strong box-office performance of “Zootopia 2” over the Thanksgiving weekend.
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Sector Performance
• United States (S&P 500)
o Energy: leading the pack, up about 1.3%, driven by higher oil prices and geopolitical tensions around Russian exports.
o Consumer discretionary–Retail: solid segment, benefiting from a robust Cyber Monday and positive momentum in several large retailers (Walmart, Ulta, XRT strongly higher over the last five sessions).
o Information technology: mixed performance—the main AI winners (Broadcom, Super Micro and certain semis) saw profit taking, partly offset by ecosystem names like Synopsys and a few still-favoured megacaps.
o Small caps: the Russell 2000 underperformed, reflecting more defensive positioning by investors into large-cap quality.
o Health care: relatively stable, in an environment where investors are arbitraging between defensive growth and more cyclical segments.
• Canada (S&P/TSX)
o Information technology: the main drag on the index, following the pullback in U.S. tech megacaps and lower risk tolerance for growth names.
o Energy: supported by the rebound in crude, though not enough to offset weakness in technology.
o Materials/precious metals: a more constructive tone, in line with the move in gold, but only a marginal contribution in a session dominated by broad-based risk reduction.
In summary, Monday session reflects a digestion phase after a powerful late-November rally: a reset of risk exposure, a correction in the most speculative segments (crypto, certain AI names), and a rotating leadership toward energy and retail, all in a macro environment still marked by manufacturing weakness and expectations of further rate cuts over the coming months.
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Tuesday
• S&P/TSX: 31,049.28 (−0.17%)
• Dow Jones: 47,474.46 (+0.39%)
• S&P 500: 6,829.37 (+0.25%)
• Nasdaq: 23,413.67 (+0.59%)
• Russell 2000: 2,464.98 (−0.20%)
The major U.S. indexes recovered part of Monday’s correction, with a clear leadership from the Nasdaq, while the Canadian market consolidated slightly below its recent highs.
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Canadian Dollar
The Canadian dollar appreciated slightly, trading around US$0.715 (about C$1.40 for US$1), a gain of roughly 0.1% on the session.
The currency remains locked in a narrow range as market participants position ahead of Friday’s employment report and the Bank of Canada’s next decision. For now, the market is pricing in a status quo scenario after an easing cycle that brought the policy rate back toward more accommodative levels.
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Macro Analysis
Targeted Rebound in Risk Appetite
Tuesday’s session was characterized by a rollback in early-week stress:
• Bitcoin rebounded by about 6–7%, moving back above the US$90,000 threshold and erasing a good portion of Monday’s decline.
• This normalization gave oxygen back to crypto-linked names and, more broadly, to the whole complex of “risky assets.”
In parallel, megacap technology and the AI ecosystem led the rebound:
• The “Magnificent Seven” were almost all in positive territory, with gains in Nvidia, Alphabet, Apple, Meta and other large names.
• Data-centre infrastructure and high-speed connectivity names outperformed, supported by better-than-expected results and raised guidance (notably in semiconductors and connectivity equipment for AI).
Fed: December Rate Cut Almost Fully Priced in
On the central bank front, the narrative remains very supportive of a rate-cut scenario:
• Futures now embed a probability close to 90% for a 25 bps cut at the December 9–10 meeting.
• The latest indicators point to an economy in a soft patch: slower growth, a somewhat less tight labour market and decelerating inflation, which strengthens the market’s tolerance for elevated multiples on growth names.
Yields eased slightly, with the U.S. 10-year holding around 4.1%, which reduces valuation pressure on technology while keeping real rates at still restrictive levels. The next data (employment, PCE inflation delayed by the prior shutdown, and ISM surveys) will be key to validate the scenario of a rate-cut cycle extending into 2026.
Tariffs and 2026: a Latent Risk for Employment
In the background, the theme of tariffs continues to gain traction in corporate surveys:
• Many executives are signalling plans for headcount reductions, supply chain re-engineering, and greater reliance on offshore production to absorb higher costs.
• The environment is gradually shifting from “no-fire / no-hire” toward more structured rationalization scenarios, with a risk that the impact will show up mainly in 2026 on the employment and margin fronts.
Canada: TSX in Profit-taking Mode, Real Assets Stable
In Canada, the S&P/TSX slipped 0.17%, essentially in profit-taking mode after a string of record highs.
• WTI crude remains below US$60, around US$59, reflecting abundant supply and lingering concerns about global growth.
• Gold is trading around US$4,210 an ounce, after having reached new all-time highs earlier this fall, supported by expectations of rate cuts and a more tense geopolitical backdrop.
The combination of a TSX near-record levels, a relatively stable loonie and a Bank of Canada already in an easing phase favours a highly selective approach: investors increasingly discriminate in favour of business models that can defend their margins in a context of higher costs (tariffs, wages, financing).
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Stocks in Brief
• Boeing (BA): up roughly 10%—key driver of the Dow, the stock jumped after the CFO confirmed an expected increase in 737 and 787 deliveries in 2026 and a cash-flow trajectory seen as very robust.
• Intel (INTC): +≈9%—strong contribution to the Nasdaq rebound, as the market continues to bet on its role in the next-generation AI data-centre architecture.
• Nvidia (NVDA): +0.9%—gradual recovery after Monday’s correction, with strategists still recommending staying positioned on the AI theme despite valuations that remain demanding.
• Credo Technology (CRDO): +≈10%—new all-time high after better-than-expected quarterly results and raised guidance; the company benefits directly from demand to connect AI compute clusters inside data centres.
• Astera Labs (ALAB): +≈6%—moved higher in sympathy with Credo, as investors build exposure to second-tier AI infrastructure suppliers.
• Cloudflare (NET): +>2%—supported by a new bullish analyst call highlighting the growth potential of its cybersecurity and edge-computing platform, with a price target that implies nearly 30% annual growth through 2028.
• Coinbase (COIN): +1.3%—benefits from the Bitcoin rebound above US$90,000, which supports trading volumes and improves operating leverage in its revenue model.
• Robinhood (HOOD): +2.2%—supported by a renewed risk appetite among retail investors, coupled with the recovery in cryptocurrencies.
• Beta Technologies (BETA): +≈9%—reacted positively to the announcement of a US$1 billion, 10-year agreement with Eve Air Mobility for motor supply, which enhances visibility on the order book.
• Eve Holding (EVEX): +≈14%—the agreement with Beta gives more substance to the story of progressive monetization of a 2,800-air-taxi backlog, reinforcing the long-term growth narrative.
• Maplebear/Instacart (CART): −>2%—under pressure after Amazon announced it is testing 30-minute “ultra-fast” grocery delivery, increasing competitive pressure on a core segment for Instacart.
• XPO (XPO): −≈6% — The stock fell after the company reported tonnage down about 5% in November and shipment volumes also declining, raising questions about demand dynamics in transportation and logistics.
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Sector Performance
United States
• Technology and AI ecosystems: clear outperformance, driven by semiconductors, data-centre infrastructure and high-speed connectivity solutions. Easing yields are enabling the start of a rerating in names viewed as core AI holdings (Nvidia, Intel, Credo, Astera, etc.).
• Crypto-linked names and brokerage platforms: significant technical rebound in the wake of Bitcoin’s move back above US$90,000; Coinbase and Robinhood are direct beneficiaries.
• Industrials: outperformance thanks to Boeing, whose positive revision of its 2026 delivery trajectory has lifted the entire segment.
• Consumer: more mixed picture; some retailers and consumer brands remain under pressure as results confirm that the U.S. consumer is becoming more selective and more promotion-sensitive, while other defensive names are holding up better.
• Small caps (Russell 2000): underperformance with a decline of around 0.2%, indicating that the rebound is still concentrated in large, liquid names rather than across the broader market.
Canada (S&P/TSX)
• Index: mild consolidation (−0.17%) after a sustained run-up, in a context of tactical profit taking on several cyclical names.
• Resources: energy and metals names operate in an environment of still elevated but more volatile prices; managers remain highly selective, favouring strong balance sheets and high-quality assets.
• Technology and financials: act as stabilizers in domestic portfolios, backed by solid balance sheets and a favourable sensitivity to a yield curve that gradually normalizes as the Bank of Canada moves along its easing cycle.
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Wednesday
• Dow Jones: 47,882.90 (+0.86%)
• S&P 500: 6,849.72 (+0.30%)
• Nasdaq: 23,454.09 (+0.17%)
• Russell 2000: 2,512.14 (+1.9%)
• S&P/TSX (Toronto): 31,160.54 (+0.36%)
U.S. markets extended their upward trend, driven by an aggressive repricing of expectations for a rate cut as early as next week. The strong signal of the session: the clear outperformance of small caps, a sign of renewed risk appetite beyond the usual cluster of mega caps.
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Canadian Dollar
The Canadian dollar appreciated, trading around 1.3945 CAD per 1 USD (about US$0.717 per 1 CAD), up roughly 0.2% on the day.
The loonie benefited from a crude + productivity combo: higher oil prices and a positive surprise on Canadian productivity in Q3, which reinforces the perception of a domestic economy that is a bit more resilient despite slowing demand.
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Macro Analysis
1. ADP: A Jobs Shock That Reinforces Rate-cut Expectations
The core catalyst of the session was the ADP private-sector jobs report:
o 32,000 jobs lost in November, while consensus was expecting around +40,000.
o Weakness came mainly from small businesses (fewer than 50 employees), while large organizations continued to add jobs.
For markets, the read-through was immediate:
o the cooling of the labour market is continuing.
o The Fed now has even more room to cut rates next week.
Implied probabilities for a rate cut climbed toward 90%, which supported more cyclical financials such as Wells Fargo and American Express, which tend to benefit from a more supportive credit environment when the cost of capital comes down.
2. U.S. Services: Slowdown, But No Growth Break So Far
In parallel, the ISM services index printed at 52.6 in November, slightly above expectations and October’s reading.
o Above 50, the economy remains in expansion territory.
o The combined message from ADP + ISM services is that the U.S. economy is slowing without stalling, with a labour market that is easing while the service sector continues to run.
Several economists at major U.S. institutions now view the coming months as a period of slower growth, with job creation at an “uncomfortably low” pace, but still enough to justify a series of rate cuts in the near term before a longer pause.
3. Tariffs and Political Risk: Background Noise for 2026, not the Driver of the Day
The tariff file remains in the background of the 2026–2027 narrative:
o Washington keeps reminding markets that the White House has several legal levers to rebuild a tariff framework even if some elements are challenged in court.
o Politically, the administration insists that weak job creation is more about the government shutdown and mass deportations than about tariffs.
For markets, this maintains a high level of uncertainty on global trade, but it is not what dictated flows during the session. The focus of the day was clearly the Fed and the labour market.
4. Canada: TSX Higher, but Domestic Indicators Are Mixed
In Canada, the session was positive for equities, but the macro backdrop remains nuanced:
o the S&P/TSX advanced 0.36%, supported by energy and some cyclical sectors in the slipstream of the U.S. rally.
o At the same time, the services PMI in Canada fell clearly below 50, signalling a contraction in activity in services and a tougher environment for companies exposed to domestic demand.
This is a classic late-cycle configuration:
o an equity market supported by the prospect of lower rates.
o Activity indicators pointing to modest growth and an economy lacking traction.
5. Bitcoin, Oil and Gold: Adjustment Across “Macro” Assets
o Bitcoin rebounded strongly, trading back above US$93,000, after its worst session since March earlier this week. The move highlights the asset’s extreme volatility and the rapid return of speculative appetite once visibility on the Fed improves.
o WTI crude stabilized just below US$60 per barrel, up about 1%, supported by a still-tense geopolitical context and more favourable expectations for demand if the Fed eases policy over the coming months.
o Gold traded around US$4,240 per ounce, edging higher. Investors are maintaining a layer of protection in portfolios, despite the equity rally, to hedge against a scenario where the Fed has a harder time engineering a soft landing.
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Stocks in Brief
• Microsoft (MSFT): −2.5%—under pressure after a report suggesting reduced AI-related sales quotas. Management denied the information, which allowed some intraday recovery, but the stock still finished in negative territory.
• Nvidia (NVDA), Broadcom (AVGO), Micron (MU): lower, following Microsoft. The market continues to sort through the AI theme, with more attention on leverage levels, data-centre visibility and each business model’s ability to generate sustainable shareholder returns.
• Marvell Technology (MRVL): about +8%—strong positive reaction after better-than-expected earnings and a strategic acquisition aimed at consolidating its position in AI infrastructure. The stock is being rewarded on the back of a very solid data-centre growth pipeline.
• American Eagle Outfitters (AEO): about +14–15% — the retailer raised its fourth-quarter guidance, citing a strong start to the holiday season. It was one of the top performers of the day in consumer discretionary.
• Genius Sports (GENI): +8%—sharp move higher after laying out 2028 ambitious targets, particularly around sports data monetization and cash-flow generation.
• Netflix (NFLX): −5%—profit taking and some nervousness around M&A speculation in the content and streaming ecosystem. Investors are being more selective in a segment that has already delivered strong performance in 2025.
• Oracle (ORCL): modest gain supported by a new overweight rating and a higher target price. The market is still betting on a second leg of the story as AI and cloud-related workloads ramps up.
• Macy’s (M): slight decline despite better-than-expected results and upgraded full-year guidance. The stock remains penalized by a more selective consumer environment and intense competition, which keeps investors cautious.
• American Eagle Outfitters (AEO), again: beyond the percentage move, the name is a good illustration of the current retail narrative—retailers that combine a targeted offering, disciplined pricing and effective digital channels are clearly being rewarded in the market.
• CrowdStrike (CRWD), Okta (OKTA) and other cybersecurity/SaaS names: notable intraday swings around quarterly results and commentary on AI, but relatively contained closing moves. The market is increasingly focused on cash-flow quality and revenue recurrence rather than paying solely for the AI theme.
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Sector Performance
• United States (S&P 500)
o Financials: leading the pack, helped by lower bond yields and the increased probability of rate cuts, which improves visibility on credit and loan demand.
o Small caps: via the Russell 2000, clear outperformance versus the large indexes. The market is starting to broaden the rally to more domestic, cycle-sensitive names, which is typical of phases where investors anticipate a lower-rate environment.
o Energy: positive tone supported by firm oil prices and a persistent geopolitical risk premium. Large integrated and independents generally finished higher.
o Consumer discretionary/retail: solid dynamic, driven by names such as American Eagle and other retailers benefiting from what is so far seen as an encouraging holiday season.
o Information technology: mixed performance—on one side, pressure on some of the big AI-exposed mega caps (Microsoft, certain semis); on the other, clear winners like Marvell, which is riding demand in data centres.
o Communication services: tougher day, notably with weakness in Netflix, in a market that is becoming more demanding on valuation and cash generation.
• Canada (S&P/TSX)
o Energy: positive contribution, in line with the move up in WTI and renewed appetite for resource-linked names.
o Information technology: more constructive tone than at the start of the week, in the slipstream of the rebound in some U.S. growth names, even if volatility remains high.
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Thursday
• S&P 500: 6,857.12 (+0.11%)
• Nasdaq Composite: 23,505.14 (+0.22%)
• Dow Jones: 47,850.94 (−0.07%)
Markets ended Thursday’s session in Fed-watch mode, with very limited moves on the major U.S. indexes.
In summary, Thursday’s session is part of a year-end rally driven by the Fed, but with market leadership becoming more diversified
• less exclusive dependence on the big tech names;
• more room for banks, energy, discount retailers and small caps.
In the background, the Russell 2000 once again outperformed at 2,531.16 (+0.8%), confirming the return of small caps to the front of the pack. In Canada, the S&P/TSX advanced 317.03 points to close at 31,477.57, supported by the big banks and energy.
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Canadian Dollar
The Canadian dollar remained well anchored around C$1.3945 per US$1 (about US$0.717 per C$1).
The loonie is holding near a five-week high, supported by:
• WTI trading just below US$60 a barrel;
• a Canadian market that is outperforming, particularly via financials and the energy sector.
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Macro Analysis
1. Employment: More Restructurings, but a Labour Market That Is Still Solid
Two key signals shaped the day’s narrative:
• The firm Challenger, Gray & Christmas puts announced layoffs in the U.S. at roughly 1.17 million positions in 2025, up a bit more than 50% versus last year, at the highest level since 2020. Drivers cited include restructurings, AI integration and cost rationalization in a context of tariffs and macro volatility.
• At the same time, weekly jobless claims fell to 191,000, well below expectations and at a more-than-three-year low.
For the market, the message is nuanced:
• companies are tightening their cost structures and repositioning their teams;
• but the labour market remains tight enough to avoid, at this stage, a confidence shock on the consumer side.
2. Fed: A Rate Cut Already Priced Into the Market
Despite this mix of data, the base case scenario remains a 25-basis-point cut at the Fed’s December 10 meeting:
• rate markets are embedding a probability around 87–90% for a cut next week;
• the implicit message is that, barring a major surprise, the Fed will deliver what the market is expecting.
As a consequence:
• the news of a rate cut is largely priced into the indexes;
• near term, the most likely pattern is a sideways consolidation phase rather than a new leg higher before year-end;
• the focus is shifting to the 2026 trajectory (how many cuts, at what pace, how the Fed communicates).
3. Data to Come: Inflation, Consumption, Confidence
Investors are in close-monitoring mode for the next datapoints:
• the PCE index (the Fed’s preferred inflation gauge), published with a delay after the shutdown;
• household income and spending, to gauge the real strength of consumption at year-end;
• the University of Michigan confidence index, which will give a signal on consumer sentiment heading into 2026.
While waiting for those releases, portfolio management is mainly about positioning:
• taking partial profits after a strong rally in November;
• keeping equity exposure high as long as the Fed’s message remains supportive;
• adding defensive layers (cash, gold, higher-quality credit) to hedge against a potential misstep in the central bank’s communication.
4. Europe: More Constructive Sentiment on the Geopolitical Front
Major European markets (Paris, Frankfurt, London, Milan) ended in moderate positive territory, helped by a slightly more positive tone around a potential de-escalation in Ukraine.
Even though several capitals remain very cautious about the U.S. strategy in discussions with Russia, the market is playing a scenario where:
• a lasting easing of tensions would reduce the geopolitical risk premium;
• the euro area would have a better starting point for 2026 growth;
• and volatility in energy prices would be a bit better contained.
5. Canada: Banks and Energy Back in the Lead
In Canada, the strong move in the TSX is mainly driven by:
• better-than-expected results from several large banks, with risk metrics still well under control;
• a positive contribution from energy, with WTI around US$59–60, a very profitable level for many Canadian producers.
We are seeing a classic late-cycle pattern:
• the Canadian market catching up versus the U.S.;
• a return of more traditional banks + energy leadership in domestic portfolios.
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Stocks in Brief
• Meta Platforms (META): ≈ +4%
The stock moved higher after reports that management is considering cutting metaverse investments by up to 30% in 2026, in order to redirect part of the capital toward artificial intelligence projects. The market is validating this refocus on initiatives seen as more profitable and better aligned with current demand.
• Salesforce (CRM): ≈ +4%
Adjusted earnings came in well above consensus and revenue guidance was raised. Salesforce continues to position itself as a central enterprise AI platform, with a clear message on cost discipline and margin improvement.
• Five Below (FIVE): > +3%
Quarterly results came in well above expectations, both on sales and earnings. The stock is a good illustration of the discount retail theme, as consumers look to stretch every dollar without fully cutting discretionary spending.
• Dollar General (DG): ≈ +6.5%
The company raised its full-year guidance and the market reacted strongly. Low-price convenience chains remain a budget anchor for many households, which strengthens the investment case for this segment.
• UiPath (PATH): ≈ +8–9%
The name traded higher after a better-than-expected quarter and solid guidance. UiPath remains a key name in the AI-driven automation theme, with a model built on recurring revenue–exactly what investors want to see in high-growth software.
• Snowflake (SNOW): ≈ −8%
Despite a top- and bottom-line beat, more cautious guidance on product revenue growth triggered a correction. In a high-multiple context, tolerance for any deceleration in the growth trajectory remains very low.
• Kroger (KR): ≈ −6–7%
Revenue and gross margins came in slightly below expectations. The stock reflects the current reality in grocery: cost pressure, intense competition and extremely price-sensitive consumers.
• Science Applications International (SAIC): ≈ +17%
Strong move after earnings per share came in well above consensus and guidance for 2026–2027 was raised. The market values the high visibility associated with government contracts and management’s ability to turn that pipeline into higher margins.
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Sector Performance
United States (S&P 500)
• Technology: mixed performance. AI-linked names remain volatile, but the market is increasingly focused on cash-flow quality and revenue visibility rather than the AI label alone.
• Communication/digital platforms: supported by the move in Meta, which benefits from the strategic pivot away from the metaverse and tighter investment discipline.
• Discount consumer discretionary: very strong momentum, with Dollar General, Five Below (and American Eagle earlier in the week) confirming that low-price retail remains a clear winner at this stage of the cycle.
• Small caps: another day of outperformance via the Russell 2000, as investors rotate into more domestic, more cyclical names in anticipation of a lower-rate environment in 2026.
Canada (S&P/TSX)
• Financials: the big banks set the tone, supported by solid results and better visibility on the path of policy rates.
• Energy: moved higher in line with WTI near US$60, still a very comfortable level for well-positioned Canadian producers.
In the background, Thursday’s session confirms a year-end rally still driven by the Fed, but with market leadership being rebalanced:
• less hyper-concentration in a handful of big tech names;
• more contribution from banks, energy, discount retailers and small caps in driving performance into quarter ends.
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Friday
Indexes–Friday session (in progress)
Midday Friday, Wall Street is extending its advance, supported by an inflation print seen as “reassuring” and rate-cut expectations for next week that are almost locked in:
• S&P 500: around +0.1%, on track for a 4th straight up day and very close to its record high
• Nasdaq Composite: +0.2%
• Dow Jones: +0.2%
The core PCE for September came in at 2.8% year-over-year, slightly below expectations (2.9%), with a monthly increase contained at 0.2%. Combined with a better-than-expected University of Michigan survey, the message is clear:
inflation continues to cool without breaking demand, and the market now sees close to a 90% probability of a 25 bp Fed cut on December 10.
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Names in Focus Today
• Netflix/Warner Bros Discovery: the market is still digesting the announcement of Netflix’s acquisition of WBD’s film and streaming assets (a transaction valued at more than US$70B). WBD is trading higher, while Netflix is oscillating between profit taking and strategic rerating, against a backdrop of regulatory skepticism in Washington.
• Paramount Skydance: trading lower after losing the race for WBD, as investors remove the takeover premium.
• Southwest Airlines: the stock is pulling back after a downward revision to its 2025 guidance, but the carrier points out that bookings have already returned to normal after the shutdown.
• Ulta Beauty, Dollar Tree, other retailers: a number of consumer names are still holding up well, confirming that, at year-end, the consumer remains selective but is not shutting off spending.
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Weekly Conclusion
On a weekly basis, the message is constructive:
• S&P 500: about +0.4%
• Nasdaq: close to +1%
• Dow Jones: around +0.6%
• Russell 2000 (small caps): about +1.3%, still ahead of the large-cap indexes
In short, we close the week with:
• a year-end rally that is holding up,
• a Fed heading into a more accommodative early 2026,
• market leadership that is broadening: less centered on a handful of mega-cap tech names, more room for banks, energy, small caps and selected retailers.
The end-of-week message is straightforward:
the backdrop remains supportive for equities, but the game is gradually shifting away from an “all-in on AI” trade toward a more balanced positioning, focused on balance-sheet quality and the ability to generate cash-flow in a more moderate growth environment.
