Your portfolios in Brief
At the end of last month, we identified a series of market anomalies that triggered an automatic tightening in our risk-management system. Once predefined limits were breached, the system executed a full liquidation of our directional exposures, temporarily shifting the allocation toward cash.
This tactical positioning allowed us to:
• avoid the volatility shock tied to the repricing of rate expectations
• preserve capital in an environment where risk pricing was adjusting
• generate a positive month-to-date performance despite a challenging market backdrop
We now consider the portfolio to be positioned “outside the storm,” meaning the immediate systemic risks have materialized and been absorbed by the markets.
Macro environment: the repricing of rate-cut expectations
Recent market movements have been dominated entirely by a single phenomenon: the rapid decompression of Federal Reserve rate-cut expectations.
OIS curves have now priced in:
• fewer cuts
• cuts pushed further out in time
• an increased risk of a prolonged stay at the terminal rate
This repricing was driven by:
• stickier-than-expected inflation data
• a more restrictive tone from several Fed officials
• the interruption of key economic releases due to the shutdown
This combination resulted in:
• wider risk pricing
• higher implied volatility
• declines across long-duration assets
• a defensive intra-sector rotation
The lack of data: a direct barrier to rate cuts
The shutdown created an atypical macroeconomic situation in which the Fed has been forced to make decisions without access to a complete statistical picture.
For several weeks:
• NFP, CPI, PCE, Retail Sales and GDP reports were delayed or frozen
• the time-series feeding the Fed’s models (FRB/US, DSGE, nowcasts) became less reliable
• uncertainty around the true state of the labour market and inflation increased
As a result, the Fed cannot justify easing:
• without confirmation that inflation is converging toward 2%
• without visibility into labour-market dynamics
• without the data needed to calibrate policy appropriately
A “data-light” environment makes any near-term rate cut extremely unlikely. This explains the sharp correction observed during the repricing phase.
Sector impact of the shutdown
1. Companies exposed to federal spending
Defence, aerospace, public infrastructure, government consulting
• Risk: contract delays, slower disbursements, suspended guidance
2. Consumer discretionary
Weaker household confidence is weighing on final demand
• Risk: reduced spending, higher revenue volatility
3. Long-duration growth equities
Highly sensitive to the trajectory of interest rates
• Risk: multiple compression as rate cuts move further away
4. Real estate and REITs
Reduced relative appeal while short-term rates remain high
• Risk: more expensive refinancing
Conclusion
Markets appear to have absorbed part of the shock associated with the massive repricing of rate-cut expectations, but visibility remains insufficient to justify any major directional repositioning until economic data return to a normal cadence.
Our allocation therefore remains deliberately cautious, flexible, and opportunistic, with a strong emphasis on capital preservation and the ability to re-engage quickly once the macroeconomic and statistical backdrop becomes clearer.
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Markets in brief
Monday
• Dow Jones: +0.81% at 47,368.63
• S&P 500: +1.54% at 6,832.43
• Nasdaq: +2.27% at 23,527.17
• S&P/TSX: +1.35% at 30,316.63
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Canadian dollar
• CAD/USD: US$0.7133
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Macro analysis
• United States: Progress in the Senate toward ending the shutdown reduced political uncertainty and supported risk-on positioning, with strong traction in mega-cap technology names. CPI/PPI releases remain delayed, forcing the Fed to operate with incomplete visibility and increasing the market’s sensitivity to upcoming policy signals.
• Rates and real assets: Slight upward pressure on the US 10-year Treasury; gold holding above US$4,100/oz; WTI crude around US$60.13 at the close.
• Canada: The TSX outperformed via Materials (precious metals), while the loonie tracked the commodity complex and the improving US political backdrop.
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Stocks in focus
• Nvidia (NVDA): +6% — solid rebound after last week’s pullback; the AI thesis remains the key driver of revenue growth and margins.
• Alphabet (GOOGL): +4.0% — positive rerating of growth mega-caps, with an Advertising/Cloud combo that remains a powerful lever.
• Microsoft (MSFT): +1.9% — end of a short losing streak; Azure and AI-related spending remain central to the growth trajectory.
• Tesla (TSLA): > +3% — improved appetite for growth assets; strategic read-through that goes beyond autos.
• Eli Lilly (LLY): +2.8% — series of supportive headlines (gene therapy deal; TrumpRX pricing framework on GLP-1s) reinforcing cash-flow visibility.
• Paramount Skydance (PSKY): +6% after-hours — cost-savings target raised to US$3 billion, Paramount+ on track to reach profitability and a price increase announced for 2026.
• Airlines (DAL, UAL, AAL): mixed to negative — operational constraints (cancellations, reduced capacity) despite the prospect of an end to the budget stalemate.
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Sector performance
• United States (S&P 500): Information Technology led; Consumer Discretionary supportive; Energy slightly positive; Industrials/Transports held back by operational issues.
• Canada (S&P/TSX): Materials in the driver’s seat (supportive gold/silver); Technology constructive; Energy stable to moderately higher.
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Tuesday
• Dow Jones: +1.18% at 47,927.96 (new record high)
• S&P 500: +0.21% at 6,846.61
• Nasdaq: -0.25% at 23,468.30
• S&P/TSX: +0.31% at 30,409.25
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Canadian dollar
• Exchange rate: US$0.7137 per C$1
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Macro analysis
• United States: The US Senate passed a bill to reopen the government; the file now moves to the House of Representatives. This political clarity triggered a rotation into better-priced names, pushing the Dow Jones to a record high even as the Nasdaq Composite slipped modestly on profit-taking in technology.
• Labour market: Four-week data from Automatic Data Processing (ADP) point to softer private-sector job creation at the end of October, signalling a gradual cooling.
• Bonds: US bond markets were closed for Veterans Day; sensitivity remains elevated to upcoming official indicators once the government machinery is fully back online.
• Commodities: WTI crude around US$61.04 (intraday gain); gold near US$4,116/oz (slight pullback).
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Stocks in focus
• CoreWeave: -16% — full-year guidance came in below expectations and data-center supply constraints weighed; the broader “AI infrastructure” theme felt the spillover.
• Nvidia: about -3% — selling pressure after SoftBank announced the full disposal of its stake (roughly US$5.8 billion) and profit-taking across AI-linked semiconductors.
• Micron Technology: about -5% — sympathy move lower across memory and components.
• Oracle: about -2%; Palantir Technologies: just over -1% — consolidation of the AI theme outside the mega-cap space.
• Advanced Micro Devices (AMD): about +9% intraday — management is targeting roughly 35% average annual revenue growth over 3–5 years, powered by AI data-center chips.
• Paramount Skydance (PSKY): about +10% — higher cost-savings target, announced price increases for Paramount+ in 2026 and an ambition to reach US$30 billion in revenue by 2026.
• FedEx: +5.45% — constructive commentary from the CFO on current-quarter earnings; United Parcel Service followed higher (+2.12%).
• Rocket Lab: about +4% in the morning — better-than-expected results and raised Q4 guidance.
• Maplebear (Instacart): about +6% — analyst upgrade and solid traction in the core grocery business.
• eToro Group: about +10% — upgraded to “buy” on valuation and fundamentals.
• Fermi: -11% — quarterly losses wider than expected; execution caution warranted.
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Sector performance
• United States (S&P 500): Information Technology declined (only negative sector), led by semiconductors and AI-linked software; Health Care led the market with flows into large pharmas (Merck, Amgen, Johnson & Johnson); Industrials and Consumer Staples were positive; Energy supported by higher oil prices.
• Canada (S&P/TSX): constructive bias toward Materials (precious metals) and Energy; Technology more mixed, mirroring the US dynamic.
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Wednesday
• Dow Jones: +0.68% at 48,254.82 (new record high)
• S&P 500: +0.06% at 6,850.92
• Nasdaq: -0.26% at 23,406.46
• S&P/TSX (Toronto): +1.38% at 30,827.58
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Canadian dollar
• Exchange rate: US$0.7140 per C$1
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Macro analysis
• United States: Ongoing progress of the bill to reopen the government supported a rotation into more “traditional” sectors (banks, health care, industrials), pushing the Dow Jones to another record high while the Nasdaq retreated on tech profit-taking.
• Official data: The White House expects that October CPI and employment statistics will likely never be published due to the government shutdown, leaving the Fed with structurally reduced visibility.
• Bonds: The 10-year US Treasury yield eased to around 4.07%, reflecting expectations of a somewhat softer macro backdrop and the possibility of additional easing in the short-term rate profile.
• Commodities: WTI crude slipped to roughly US$58.49 per barrel; gold moved higher toward US$4,213.60/oz, supported by lower yields.
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Stocks in focus
• Advanced Micro Devices (AMD): +9.00% — management is targeting roughly 60% growth in data-center revenue over 3–5 years; the AI-chip growth narrative remains intact.
• Cisco Systems (CSCO): +3.14% — bid ahead of quarterly results after the close.
• UnitedHealth Group (UNH): +3.55% — key driver of the Dow Jones within Health Care, in a context of rotation into high-quality defensive names.
• Goldman Sachs, JPMorgan Chase, American Express: higher — fresh intraday highs for several financial institutions, reflecting optimism linked to the reopening of the federal government and the normalization of economic data.
• Caterpillar (CAT): higher — positive leverage to the cycle and infrastructure spending, a beneficiary of the industrial reacceleration thesis.
• On Holding (ON Running): +17.99% — third consecutive upward revision of guidance and a “no Black Friday promotions” strategy, signalling strong pricing power and margins.
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Sector performance
• United States (S&P 500): Financials and Health Care led (rotation out of mega-cap technology); Information Technology declined (AI-linked semis and software under pressure); Industrials positive; Energy softer with the pullback in crude.
• Canada (S&P/TSX): base metals and Materials in leadership; Energy mixed; Technology more balanced, echoing the New York pattern.
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Thursday
• Dow Jones: -1.65% at 47,457.22
• S&P 500: -1.66% at 6,737.49
• Nasdaq: -2.29% at 22,870.36
• S&P/TSX (Toronto): -1.86% at 30,253.64 (-573.94 points)
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Canadian dollar
• Canadian dollar: US$0.7134 at the close, down from the prior session, in a context of flight to the US dollar and rising US bond yields.
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Macro analysis
Thursday’s session turned into a sharp recalibration of the AI trade. After several weeks of outperformance, investors cut exposure to large-cap technology, triggering synchronized profit-taking across the entire tech complex. The main US indices posted their steepest decline since October 10, with a pronounced underperformance from the Nasdaq.
The market narrative is shifting from enthusiasm about massive AI capex to a more fundamental question: return on capital. Market participants are increasingly questioning whether the tens or even hundreds of billions of dollars deployed in generative AI will translate, in the short term, into cash flows that match the elevated expectations. This reassessment hit the AI leaders directly, notably Nvidia, Broadcom and Tesla, which were among the biggest decliners of the session.
In parallel, the rates backdrop was a key driver of the de-risking. After a series of more cautious comments from Fed officials, markets dialled back the probability of another rate cut in December. The scenario shifted from “almost fully priced in” to a much more binary 50/50 outcome in futures. That repricing pushed the US 10-year Treasury yield up to around 4.12%, from 4.07% the previous day, exerting mechanical pressure on growth-stock multiples.
On the political front, the end of the longest shutdown in US history (43 days) is now fully reflected in prices. The funding bill passed by Congress and signed by the White House extends the budget through the end of January. What supported markets early in the week is now treated as a textbook “buy the rumour, sell the news” event. Investors remain uneasy with the statistical blackout: several key October indicators (employment, inflation, etc.) will likely never be published, complicating the Fed’s cyclical assessment and reducing visibility on the rate trajectory.
In Canada, the TSX dropped more than 570 points, dragged lower by technology in the wake of Wall Street. The Canadian dollar stayed under pressure around US$0.7134, reflecting both the relative strength of the greenback and softer risk appetite. The stance remains defensive for Canadian assets that are sensitive to the global cycle, even if more defensive TSX sectors partially cushioned the blow.
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Stocks in focus
• Disney (DIS): -7.75% — the stock was heavily punished after a mixed quarter: earnings per share beat expectations, but revenue landed slightly below consensus. Streaming growth was not enough to offset weakness in legacy TV and a lukewarm performance from the studio business, reinforcing the narrative of a longer-than-expected transformation.
• Cisco (CSCO): +4.62% — one of the rare winners of the session. The networking group posted a stronger-than-expected quarter and raised its full-year outlook, highlighting accelerating demand for AI-driven networking and large contracts with hyperscalers. The market sees this as further validation of Cisco’s positioning as a critical infrastructure provider behind the AI cycle.
• Tesla (TSLA): -6.64% — one of the steepest drops in months, pushing the stock back into negative territory year-to-date. Beyond the broad tech sell-off, Tesla is dealing with a string of company-specific headwinds: senior management departures, product recalls in its residential energy segment and weaker sales of China-built vehicles. The name is increasingly viewed as one of the weak links within the “Magnificent Seven”.
• Nvidia (NVDA): -3.58% — the pullback is part of a digestion phase after an exceptional run. Investors are recalibrating expectations around the group’s ability to sustain its current growth pace as competition intensifies and some customers start to rationalize AI budgets.
• Alphabet (GOOGL): -2.89% — decline aligned with the broad rotation out of mega-cap technology. The stock, which had strongly benefited from the AI and digital advertising narrative, is mainly undergoing a multiple reset in an environment where investors are temporarily favouring more defensive sectors.
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Sector performance
United States (S&P 500)
The sector pattern clearly reflects a rotation out of tech:
• Information Technology and Communication Services led the declines, dragged down by large AI and entertainment names (Nvidia, Tesla, Alphabet, Disney).
• More defensive pockets such as Health Care and parts of Consumer Staples held up better, as flows shifted toward business models perceived as more resilient late in the cycle.
• Rate-sensitive sectors, including some Financials and Utilities, also felt the pressure from higher yields, although the move was less pronounced than in technology.
Canada (S&P/TSX)
The sector snapshot on the TSX was consistent with the US move:
• Information Technology amplified the index’s decline, reflecting contagion from the Nasdaq.
• Materials and some gold producers provided a partial buffer, but not enough to offset the drag from growth names.
• Energy traded in a more defensive mode, as investors weighed slowing-growth fears against ongoing supply discipline.
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Disney: revenue below consensus, but streaming and parks hold the line
Disney delivered a quarter with a split profile: adjusted earnings per share came in ahead of expectations, while revenue missed slightly. The market focused on the weaker box-office performance and the ongoing erosion of traditional TV, leading to a negative reaction. Operationally, the pivot toward streaming and experiences (parks and cruises) continues to create value and clarifies the medium-term trajectory.
In media, pressure persists on linear TV: advertising is contracting and distribution remains choppy. The film slate did not fully offset this weakness. By contrast, streaming is gaining critical mass. Price increases, the integration of Hulu into the Disney+ app, the ramp-up of the ESPN app and tighter cost discipline are all driving operating income higher. Disney+ added 3.8 million subscribers, bringing the total to 131.6 million. Management will stop disclosing subscriber numbers, signalling a pivot toward profitability and value per subscriber rather than pure scale.
The Experiences segment remains the stabilizer of the business model. Parks and cruises are posting higher revenue and margins. Bookings are up, per-capita spending is rising and the cruise fleet is expanding while filling quickly. New capacity, including Disney Destiny and Disney Adventure in Asia, represents a tangible monetization lever that is less sensitive to the volatility of theatrical releases.
On capital allocation, the message is clearly shareholder-friendly. Management plans to increase the dividend, double the buyback program for 2026, and lift the content budget to US$24 billion. The announced 2026 pipeline including Zootopia 2, Toy Story 5, the live-action remake of Moana and Avatar: The Fire and the Ashes, is designed to re-energize box-office performance and feed the streaming ecosystem, reinforcing the integrated franchise strategy.
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Friday
• Dow Jones: around -0.9% (drop of just over 400 points)
• S&P 500: roughly -0.4%
• Nasdaq Composite: close to -0.3%
• S&P/TSX (Toronto): in negative territory, with Toronto extending Thursday’s slide, still driven lower by technology names
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Canadian dollar
• Canadian dollar: around US$0.71 (≈ 71 US cents), still under pressure against the greenback.
The loonie remains stuck in an environment where the US dollar is the preferred safe haven: a combination of risk aversion and uncertainty around the Fed’s next rate move keeps the Canadian currency anchored at the lower end of its recent range.
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Macro analysis
Friday’s session is a logical extension of Thursday’s sell-off: the market is running a true stress test on the AI theme and on expectations for a rate cut in December.
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Stocks in focus
• Nvidia (NVDA): down about 2%
The flagship AI chipmaker continues to correct after a spectacular run. Investors are effectively testing how far they can push the name down before long-term buyers step back in. The core question: can the growth trajectory realistically keep up with the level of capex now embedded across the ecosystem?
• Tesla (TSLA): pullback of more than 2%
The name is caught between the rotation out of tech and its own specific challenges (margins, competition, governance). In a market that is cutting exposure to the most crowded trades, Tesla is one of the preferred levers to reduce risk.
• Alphabet (GOOGL): down roughly 1–1.5%
Alphabet is a textbook example of multiple compression on mega-caps: the business model remains solid, but the premium investors were willing to pay for AI- and advertising-driven growth is being recalibrated.
• Cidara Therapeutics (CDTX): surge of more than 100%
The stock is soaring after the announcement of its acquisition by Merck for roughly US$9.2 billion. This is a classic large control premium scenario in biotech, with the offer price immediately re-anchoring the share to a new, higher level.
• Merck (MRK): slight decline
The buyer is trading modestly lower, which is typical when a large pharma group acquires a specialized target: the market prices in the cost of the transaction and the execution risk, even if the strategic logic is viewed positively over the medium term.
• StubHub (STUB): drop of about -23%
The ticket-resale platform is being heavily punished after management declined to provide guidance for the current quarter. In a more volatile market environment, the absence of guidance is a clear red flag for investors, especially for a company that only recently went public.
• Walmart (WMT): down in the -1.5% to -3% range
The retailer is trading lower after announcing that its CEO will retire next year. Even with a planned succession, this type of headline typically pushes investors into a more cautious stance until the next set of results confirms strategic continuity.
• Bitcoin: decline of 3–4%, slipping back below US$100,000
The crypto asset is extending its series of negative sessions. In a context where markets are reassessing risk around AI and the expected path of rates, the most speculative asset classes become the adjustment variable.
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Conclusion
In retrospect, this trading week was dominated by a twin dynamic: a broad reassessment of valuations across the AI/technology complex and a reset of expectations around the Fed. The week started like a market still fuelled by the narrative of the end of the shutdown and fresh highs on certain indices, but the subsequent price action quickly brought investors back to fundamentals: the price paid for future growth and the reality of the rate path.
The two-day correction, led by mega-cap technology names, clearly fits into a repricing exercise after several months of heavy inflows into the AI theme. On the rates front, the Fed’s messaging effectively broke the illusion of an “automatic” cut in December. Markets have moved from near-certainty to a much more balanced probability profile, which has a direct impact on growth-stock multiples and risk appetite more broadly. Combined with the data void created by the prolonged budget standoff, this has produced an environment with reduced visibility and sharper price adjustments, as seen this week on both Wall Street and the TSX.
The volatility observed over the past few sessions is typical of a mid-cycle stress test: uncomfortable in the short term, but potentially a source of attractive entry points in high-quality names.
Ultimately, the week was a reminder that markets do not move in a straight line, even with powerful themes like AI in the backdrop. Our stance remains unchanged: disciplined risk management, a long-term investment horizon, and opportunistic reallocation when market noise creates dislocations between price and intrinsic value. It is precisely in these kinds of sequences that the gap between speculation and professional portfolio management becomes most visible.
