Morning Markets for Monday, May 11, 2026

Key Concepts

• Energy Crisis & Geopolitics: The impact of the U.S.-Iran conflict on global energy prices and supply chains.
• AI Monetization: The shift in investor focus from massive capital expenditure (CapEx) to demonstrated paths toward profitability.
• Market Dynamics: The "broadening out" of earnings growth beyond the "Magnificent Seven" tech stocks.
• Rental Market Correction: A shift in Canadian housing trends characterized by declining rents due to increased supply and shifting demographics.
• Operational Efficiency: The importance of safety and operational performance in the mining sector (Barrick Gold).

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1. Market Overview and Economic Outlook

The markets are currently experiencing a rally, with the TSX, S&P 500, and NASDAQ showing positive momentum. However, there is significant caution regarding the Middle East.

• Energy Risk: Dec Mullarkey (SLC Management) warns that if diplomacy fails between the U.S. and Iran, the energy crisis will intensify. This would lead to "demand destruction" (growth impairment) starting in Asia, then Europe, and eventually North America.
• Non-Linear Effects: An energy shock would trigger a ripple effect, impacting fertilizer costs, food prices, and corporate margins, potentially leading to widespread layoffs.

2. Corporate Performance and Sector Analysis

Technology and AI

• CapEx vs. Revenue: Investors are no longer satisfied with high spending on AI infrastructure. Companies like Meta saw stock declines after failing to demonstrate revenue paths, while Google was rewarded for a more disciplined approach.
• NASDAQ 100: Scott Croner (Citi Research) argues the NASDAQ 100 remains a "clean" way to play the AI build-out. He notes that the Price-to-Earnings-to-Growth (PEG) ratio is at its lowest since 2010, suggesting that earnings growth is currently outpacing stock price appreciation.

Mining (Barrick Gold)

• Performance: Barrick beat profit and revenue estimates, driven by strong sales volumes and operational execution rather than just high gold prices.
• Capital Allocation: The company announced a $3 billion share buyback program, signaling that management believes the stock is undervalued relative to its peers.
• Strategic Assets: The "Four Mile" deposit and the "Lumwana" copper expansion (expected 2028) are central to the company's growth thesis.

Other Notable Movers

• Cineplex: Shares fell due to weaker-than-expected Q1 results, attributed to a shift in advertising spending toward the Winter Olympics.
• Circle Internet Group: Shares rose following an earnings beat and the announcement of a $222 million pre-sale of ARK tokens and an AI agents platform.
• Constellation Energy: Faced revenue pressure due to increased nuclear outages, though growth remains tied to data center energy demand.
• Mosaic: Repealed its phosphate forecast due to the high cost of sulfur, a byproduct of the ongoing war.

3. The Canadian Rental Market

Shaun Hildebrand (Urbanation) reports that average asking rents in Canada fell 4.7% year-over-year in April, the 19th consecutive decline.

• Drivers: A net outflow of non-permanent residents (international students/temporary workers) and a rapid increase in rental supply (growing at 4% annually).
• Market Nuance: While rents are down, many purpose-built rental buildings are offering "free rent" incentives (2–3 months), effectively lowering the real cost by 10–15%.
• Future Outlook: While currently a "renter's market," supply may tighten in a few years as current condo construction projects finish and new development slows down.

4. Investment Perspectives

• Canadian Natural Resources (CNR): Gavin Graham (Spire Wealth Management) highlights CNR as a "cash machine" with disciplined capital allocation and a 4.5% yield. He notes that Canadian energy assets are increasingly attractive due to political stability.
• Power Corporation: Viewed as a discounted entry point into insurance and asset management, with a strong 4% yield and efficient management.
• Primaris REIT: Despite the "death of the mall" narrative, Primaris is seeing success by repurposing retail footprints and attracting high-quality tenants, offering a 5% yield.

5. Synthesis and Conclusion

The current market environment is defined by a tension between strong corporate earnings and geopolitical uncertainty. While the AI-driven tech sector continues to show fundamental strength, investors are becoming increasingly discriminatory, demanding clear paths to profitability. Simultaneously, the Canadian economy is undergoing a structural shift in housing, where a supply-demand imbalance is providing temporary relief to renters. The overarching takeaway is that while the "AI playbook" remains in full throttle, any escalation in the energy crisis could force a total reassessment of global equity valuations.