Morning Markets for Friday, April 24, 2026

Key Concepts

• Market Sentiment: Bullish long-term outlook despite near-term volatility driven by geopolitical tensions and policy transitions.
• Earnings Growth: Strong corporate performance, particularly in the Energy and Technology sectors.
• Retail Resilience: Canadian consumer spending remains cautious but resilient, with a focus on value-based retail.
• AI Infrastructure: The shift from GPU-centric AI focus to the necessity of CPU capacity; emergence of "Quantum as a Service" (QaaS).
• Geopolitical Impact: Middle East conflict affecting oil prices, supply chains, and market volatility.

1. Market Outlook and Economic Strategy

Phil Orlando (Federated Hermes) maintains a bullish long-term stance, citing a 14% compound annual growth rate (CAGR) for corporate earnings.

• Current Performance: Q1 earnings show revenues up 10% and earnings up nearly 30% year-over-year.
• Portfolio Strategy: Currently holding a 6% overweight position in equities (66% stocks, 34% fixed income/cash). Orlando advises a "defensive" posture due to the U.S. Federal Reserve leadership transition and the volatility typical of a midterm election year.
• Sector Preferences: Favors international, value, and small-cap stocks, noting that "Magnificent Seven" valuations are currently stretched.

2. Energy Sector and Geopolitics

The conflict in the Middle East has introduced significant volatility, impacting oil prices and global supply chains.

• Energy Dynamics: West Texas Intermediate (WTI) oil prices, which spiked 80% during the conflict, are currently stabilizing in the $90–$100 range.
• U.S. Positioning: The U.S. is the world’s largest energy producer (13.7 million barrels/day), providing a buffer against global supply shocks compared to Europe and Asia.
• Corporate Impact: Companies like Baker Hughes and Phillips 66 are showing resilience. Phillips 66, in particular, is benefiting from higher refining margins and improved operational efficiencies.

3. Canadian Retail Sector

Kim Furlong (Retail Council of Canada) reports that February retail sales rose 0.7%, slightly below the 0.9% forecast.

• Consumer Behavior: Consumers are "stretching every dollar," favoring value-based brands and grocery discounts.
• Market Pressures: Retailers face heavy pressure from fuel surcharges, supply chain disruptions, and cross-border logistics challenges.
• Surveillance Pricing: Furlong clarified that "surveillance pricing" (adjusting prices based on individual data) is not a standard practice in Canadian retail. Instead, data is used to provide targeted discounts to drive foot traffic.

4. Technology and AI Developments

• Intel: Shares hit a record high following a strong Q2 forecast. The market is re-evaluating the importance of CPUs alongside GPUs for AI workloads. Intel is currently addressing capacity constraints and reclaiming its position as a manufacturing leader.
• Amazon & Meta: A multi-billion dollar deal was announced for Meta to rent Amazon’s AI chips, highlighting Amazon’s $20 billion sales target for its AI chip business.
• SAP: CFO Dominique Asam reported a 27% increase in cloud revenue. The company is transitioning toward a consumption-based pricing model for AI agents, which they argue will be a gradual expansion opportunity rather than a source of margin volatility.

5. Quantum Computing: The Next Frontier

Tony Sierra (Caldwell Asset Management) discussed the potential of quantum computing to solve complex problems exponentially faster than classical binary computers.

• Methodology: Unlike classical computers that test solutions sequentially, quantum computers test all possibilities simultaneously.
• Real-World Application: Significant potential in drug discovery, potentially reducing trial-and-error timelines from ten years to one or two.
• Investment Perspective: Currently in a "rudimentary" stage similar to the 1990s internet. Investors are advised to stick to large-cap players like Google, Amazon (AWS), and Microsoft (Azure), which offer "Quantum as a Service" (QaaS) and have the balance sheets to capitalize on future breakthroughs.

Synthesis/Conclusion

The market is currently navigating a complex intersection of geopolitical uncertainty and rapid technological transformation. While the immediate environment is marked by caution—evidenced by defensive portfolio positioning and consumer spending shifts—the underlying fundamentals of corporate earnings and AI-driven productivity gains remain robust. The consensus among experts is that while near-term volatility is expected, the long-term trajectory for equities remains positive, provided that companies can successfully manage supply chain constraints and the transition to new AI-integrated business models.