Morning Markets for Monday, November 17, 2025

Key Concepts

• Canadian Inflation: Consumer Price Index (CPI) data for October, showing a deceleration.
• Bank of Canada Monetary Policy: Implications of inflation data on interest rate decisions.
• Canadian Housing Market: Trends in sales, prices, and new listings.
• AI-Driven Tech Stocks: Concerns about earnings, cash flow, and valuations.
• Government Budget and Confidence Vote: Fiscal policy, deficit spending, and political implications.
• Internal Trade and Small Business: Efforts to reduce interprovincial trade barriers.
• Corporate Acquisitions and Deals: Strategic moves by companies in various sectors.

Canadian Inflation Data and Economic Outlook

Main Topics and Key Points:

• October Inflation Contraction: Canadian inflation, as measured by the Consumer Price Index (CPI), saw a contraction in October, falling to 2.2% compared to the previous month. This was slightly below the economists' expectation of a 2.1% rise.
• Drivers of Deceleration: The slowdown in headline inflation was primarily driven by cheaper gasoline prices, which fell 4.8% month-over-month in October. This was attributed to lower global oil prices and a switch to different fuel types domestically. Slower food inflation also contributed, with overall food inflation easing from 3.8% year-over-year in September to 3.4% in October.
• Persistent Food Price Concerns: Despite the easing, food inflation has been running above the overall headline CPI for nine consecutive months, indicating that food prices remain high and a concern for consumers.
• Increases in Specific Costs:
  • Cellular Service Costs: A notable exception was a rare increase in cellular service costs, which rose 7.7% year-over-year. This was the first such increase since April 2023 and contributed to a rise in core inflation.
  • Property Taxes: Property taxes and other special charges increased by approximately 5.5% year-over-year, a factor that is seasonally included in the CPI every October.
  • Insurance Premiums: Passenger vehicle insurance premiums remained high and were a significant contributor to overall inflation.
• Core Inflation and Rent: Core inflation saw a larger-than-expected increase, partly due to a surprising rise in rent inflation. The rental component of the CPI rose 5.2% year-over-year in October, up from 4.8% in September. This is seen as out of step with other data sources indicating actual asking rents are down year-over-year.
• Bank of Canada's Stance: Michael Davenport, Senior Economist at Oxford Economics, stated that this inflation data does not materially change the inflation picture or the Bank of Canada's thinking. The Bank of Canada believes current interest rates are at an appropriate level to maintain inflation near the 2% target and support the economy. The expectation is for the Bank of Canada to hold rates in December and remain on hold throughout 2026.

Supporting Evidence/Data:

• October CPI: 2.2% (vs. 2.1% expected rise)
• Gasoline prices: Fell 4.8% month-over-month in October.
• Food inflation: Slowed from 3.8% (Sept) to 3.4% (Oct) year-over-year.
• Cellular service costs: Rose 7.7% year-over-year.
• Property taxes: Increased 5.5% year-over-year.
• Rent inflation: Rose 5.2% year-over-year in October.

Key Arguments/Perspectives:

• The inflation data, while showing a cooling, has some underlying pressures that prevent a sharper decline.
• The Bank of Canada's current monetary policy stance is likely to remain unchanged in the near term.

Canadian Housing Market Performance

Main Topics and Key Points:

• October Housing Sales: National home sales in October increased by 0.9% on a month-over-month basis, marking the sixth consecutive monthly increase over the past seven months.
• Year-over-Year Decline: Despite the monthly gains, home sales in October were down 4.3% compared to October of the previous year, with just over 42,000 homes sold.
• New Listings: New listings were up 7.2% year-over-year but down 1.4% month-over-month.
• Benchmark Price Trends:
  • Month-over-Month: The benchmark price of a home rose 0.2% month-over-month.
  • Year-over-Year: The benchmark price was down 3% year-over-year.
• Average Price: The average price of a home was just over $690,000, a slight drop.
• Regional Variations: Significant variations exist across the country.
  • Price Drops: Toronto, Vancouver, and Calgary saw prices drop in October.
  • Price Increases: Montreal saw a 7% increase in the benchmark price of a home.
• Phil Soper's (Royal LePage CEO) Insights:
  • Home prices have been "treading water" for years in most places, with significant drops seen in specific property classes and cities like Toronto and Vancouver, particularly for investor-friendly condos.
  • Factors impacting Toronto condos include high inflation, high interest rates post-pandemic, and a reduction in temporary foreign workers and foreign students.
  • Condos without parking are proving to be a tough sell in Toronto, as millennials, the largest demographic cohort, want a car and a place to park it.
  • Urbanization is a major driver of low birth rates, with people in urban areas having children later and fewer children overall.
• Outlook for 2026: Economists are optimistic that more people may enter the housing market in 2026 due to falling prices and lower borrowing costs (following Bank of Canada rate cuts). A modest uptick in activity is possible.

Supporting Evidence/Data:

• October home sales: +0.9% month-over-month, -4.3% year-over-year.
• New listings: +7.2% year-over-year, -1.4% month-over-month.
• Benchmark price: +0.2% month-over-month, -3% year-over-year.
• Average home price: Just over $690,000.
• Montreal benchmark price: +7%.

Key Arguments/Perspectives:

• The housing market is showing signs of recovery on a monthly basis, but year-over-year comparisons reveal ongoing weakness.
• Regional disparities are significant, with some markets experiencing price declines while others see increases.
• Demographic shifts and affordability challenges are influencing housing demand and family planning.

AI-Driven Tech Stocks and Market Concerns

Main Topics and Key Points:

• NVIDIA Earnings Anticipation: All eyes are on NVIDIA's earnings report, scheduled for Wednesday after the market close.
• Concerns about AI Stock Sustainability: John Zechner, Chairman and Founder of J. Zechner Associates, discussed potential fears surrounding AI-driven tech stocks.
• Depreciation Schedule Concerns: A key concern is the depreciation schedule for AI equipment. If the useful life of this equipment is shorter than anticipated (e.g., 4-6 years instead of 6-8 years), companies may be understating depreciation, thus overstating earnings. This challenges the argument that tech earnings are a strong backstop.
• Free Cash Flow Issues: The argument that tech companies generate substantial free cash flow is also being questioned. Some companies are moving into negative free cash flow, evidenced by significant bond issuances (e.g., Meta's $30 billion bond deal) and large raises by companies like Alphabet and OpenAI.
• Rush to Monetize AI: If earnings are overstated and free cash flow is not being generated, there's a potential "rush to monetize AI" to generate profits quickly.
• High Bar for NVIDIA: The bar is set very high for NVIDIA, given their exceptional performance over the past two and a half years. While NVIDIA is expected to perform well, other tech companies with good earnings (e.g., Palantir, Microsoft, Meta) have not seen corresponding stock performance.
• Sales to China and Equipment Rollout: Questions remain about sales to China and the speed of equipment rollout.
• Peter Thiel's NVIDIA Holdings Sale: Peter Thiel's hedge fund sold its holdings in NVIDIA in the third quarter, shifting to Apple, Microsoft, and a reduced stake in Tesla. This suggests a move towards potentially safer bets.
• Shift to Value-Oriented Plays: Investors are shifting towards more value-oriented plays like Alphabet and Meta, which are seen as likely to monetize AI sooner and better through their existing platforms.
• Reduced Sector Bet: J. Zechner Associates has reduced its overall bet in the AI tech sector, while still acknowledging technology as a growth sector.
• Opportunities in Beaten-Down Areas: The firm is looking for opportunities in "beaten-up areas" and "tax loss selling candidates" that may offer potential with patience.
• Examples of Beaten-Down Stocks:
  • Northland Power (NPI): The dividend cut led to a 27% sell-off. Management cited more opportunities available, including two major projects (Halong Bay and North Baltic). The stock is trading at 7-8 times forward cash flow, considered good for renewables.
  • Cargojet: Economically sensitive, the stock was "decimated" and is now trading at 6-7 times operating cash flow (down from 10-15 times). The founder's $1 million stock purchase is seen as a positive sign.
  • BCE: The dividend cut led to an outflow of investors, but the valuation of the telecom sector is considered attractive. BCE's expansion into fibre in the US is seen as a smart growth strategy.
• Tax Loss Selling: The current time of year (tax loss selling) is putting pressure on some stocks, creating opportunities.

Supporting Evidence/Data:

• NVIDIA's expected revenue: $54 billion for the quarter.
• Meta's bond deal: $30 billion.
• Northland Power (NPI): Trading at 7-8 times forward cash flow.
• Cargojet: Trading at 6-7 times operating cash flow.

Key Arguments/Perspectives:

• The sustainability of AI stock valuations is being questioned due to potential overstatement of earnings and declining free cash flow.
• A shift towards more established tech companies with clearer monetization strategies is occurring.
• Opportunities may exist in undervalued sectors and companies that have experienced significant sell-offs.

Canadian Government Budget and Confidence Vote

Main Topics and Key Points:

• Confidence Vote on Budget: The Liberal government faces a confidence vote on its budget today.
• Budget Proposals: The budget proposes spending increases for defence, housing, and new infrastructure projects. It also includes a deficit of almost $80 billion in 2025-26.
• Avoiding an Election: To avoid an election, the Liberals need at least two votes from opposition members or for opposition MPs to abstain from voting.
• Opposition Stances:
  • Conservatives: Have stated they will not support the budget, but have not confirmed if all their MPs will vote against it.
  • NDP: Voting with the government is unlikely, but their MPs could abstain.
  • Bloc Québécois: Will vote against the budget.
  • Green Party: Leader Elizabeth May has indicated she won't support it but could be persuaded.
• Political Implications: The vote is described as high-stakes and could come down to the wire. No party explicitly wants an election, but a miscalculation could trigger one.
• Brooke Thackray's (Global Investments) Analysis:
  • Large Deficit: Concerns about the significant spending and a large deficit ($70 billion in the first year, $321 billion over five years).
  • Accounting Concerns: The interim Parliamentary Budget Officer raised concerns about the accounting of investments and tax credits, and the likelihood of meeting deficit reduction targets.
  • Aggressive Growth Assumptions: The budget includes aggressive growth assumptions with no recession factored in, posing risks to deficit and debt projections.
  • Increased Government Borrowing: Higher deficits mean more government borrowing, potentially leading to higher interest rates for the government over time.
  • Lack of Focus on Private Sector: The government's focus is on government-approved projects rather than fixing the supply side through deregulation and making it easier for companies to start and proceed.
  • Red Tape: Significant red tape exists, particularly in the energy sector, with a lack of a clear 20-year plan for pipeline construction and continued regulations like tanker bans.
  • Government as Solution: The government appears to believe it can provide the answer, with a lack of focus on private companies.

Supporting Evidence/Data:

• Budget deficit: Almost $80 billion in 2025-26.
• Total deficit over five years: $321 billion.
• Government needs 172 votes for a majority; currently two seats short.

Key Arguments/Perspectives:

• The budget's significant spending and deficit raise concerns about long-term fiscal sustainability.
• The government's approach to economic growth relies heavily on public spending rather than private sector initiatives and deregulation.
• The confidence vote highlights the political fragility of the current government.

Internal Trade and Small Business Concerns

Main Topics and Key Points:

• CFIB Focus on Internal Trade: The Canadian Federation of Independent Business (CFIB) is closely monitoring the Committee on Internal Trade meetings.
• Key CFIB Calls:
  • Mutual Recognition Agreements (MRAs): Expanding MRAs between provinces for food, labour, alcohol, and services.
  • Tangible Progress: The CFIB wants to see tangible, on-the-ground differences for businesses, enabling them to trade across provinces without navigating complex provincial rules.
• Brian Marleau's (CFIB VP) Insights:
  • Momentum vs. Impact: While there has been positive momentum and "right things being said" by governments, businesses are not yet feeling the impact.
  • Stalemate in MRAs: Nine provinces have passed legislation for MRAs, but implementation is often contingent on other provinces moving first, creating a stalemate. Nova Scotia and Manitoba are leading, but agreements are not universal.
  • Call for Blanket Acknowledgement: The CFIB desires a blanket acknowledgement that one set of rules should work mutually across all provinces for a truly unified Canadian economy.
  • Progress on Alcohol: Some progress is seen on direct-to-consumer alcohol shipping, but it's slated for May 2026.
  • Food Inspection Issues: A major frustration is that provincially inspected food cannot move across provincial borders without federal inspection, even if it's safe for consumption within a province. This adds red tape.
  • Lloydminster Example: The town of Lloydminster, straddling Saskatchewan and Alberta, only recently allowed businesses on one side of the road to transfer provincially inspected products to the other, highlighting the silliness of current barriers.
  • "Walking Their Talk": The CFIB urges governments to enact the commitments they've made.
  • Risk of Individual Trade Agreements: If a broad agreement isn't reached, the CFIB fears a proliferation of individual trade agreements between provinces, creating dozens of rules for businesses to navigate.

Supporting Evidence/Data:

• Nine provinces have passed MRA legislation.
• Newfoundland and Labrador is the last holdout.
• Direct-to-consumer alcohol shipping commitment: May 2026.

Key Arguments/Perspectives:

• Despite positive rhetoric, the implementation of internal trade agreements is lagging, hindering small businesses.
• Mutual recognition of provincial regulations is crucial for creating a truly unified Canadian economy.
• Specific issues in food and alcohol trade create unnecessary barriers and red tape.

Corporate Acquisitions and Market Movers

Main Topics and Key Points:

• Sunoco Corp. Acquisition: Sunoco Corp. received positive initiation from Raymond James, with an "Outperform" rating. This follows their acquisition of Parkland, a Canadian fuel distributor. Analysts believe this will diversify Sunoco geographically and in offerings, help deleverage the company, and offer more revenue. However, heightened volatility from Parkland's fuel business is noted.
• Plug Power Price Target Cut: Plug Power, a hydrogen fuel cell company, saw its price target cut by Susquehanna. While they have seen growth in their electrolyzer business and improved cash flow, concerns remain about the demand for hydrogen fuel cells, which are still relatively new technologies.
• American Electric Upgrade: American Electric, a US utility provider, received an upgrade at Jefferies. They are seen as best positioned among peers due to contracted values and being in the regulated space. They are also expected to capitalize on data center growth, which will require significant power.
• Novo Nordisk Price Cuts: Pharmaceutical giant Novo Nordisk is cutting the prices of its blockbuster products Wegovy and Ozempic by 30% for existing cash-paying patients. This move aims to make its drugs more competitive with copycat medicines and rival Eli Lilly.
• Transalta Acquisition: Transalta will acquire Far North Power Corporation for $95 million, adding four natural gas-fired facilities in Ontario. This is expected to boost Transalta's free cash flow and integrate seamlessly with their focus on data center opportunities in Alberta.
• Johnson & Johnson Acquisition: Johnson & Johnson is buying Halda Therapeutics for over $3 billion USD. Halda is developing oral therapies and other treatments for multiple cancers, aiming to boost Johnson & Johnson's pipeline and address declining sales.
• Curaleaf and Sienna Senior Living: Curaleaf is bouncing back, up about 4.84%, and Sienna Senior Living is up about 3%.
• Stantec, Discovery Silver, RS Energy: These companies are trading lower, with Stantec down about 4.5%, Discovery Silver down 4.2%, and RS Energy also down.

Supporting Evidence/Data:

• Sunoco Corp. acquisition of Parkland.
• Plug Power price target cut by Susquehanna.
• American Electric upgrade by Jefferies.
• Novo Nordisk price cuts: 30% for Wegovy and Ozempic.
• Transalta acquisition of Far North Power Corporation: $95 million.
• Johnson & Johnson acquisition of Halda Therapeutics: Over $3 billion USD.

Key Arguments/Perspectives:

• Companies are making strategic acquisitions and price adjustments to enhance competitiveness and diversify.
• Market sentiment is influenced by analyst ratings, earnings reports, and sector-specific challenges.

Conclusion/Synthesis

The broadcast covered a range of critical economic and market developments. Canadian inflation cooled in October, primarily due to lower gas prices, but persistent food inflation and rising cellular costs remain concerns. This data reinforces the Bank of Canada's current stance of holding interest rates steady. The housing market showed a monthly rebound in sales, though year-over-year figures indicate ongoing weakness, with significant regional disparities. In the tech sector, concerns are mounting over the sustainability of AI-driven stock valuations, with questions arising about depreciation schedules and free cash flow generation, leading some investors to shift towards more established tech giants. Politically, the Canadian government faces a crucial confidence vote on its budget, which proposes significant spending and a large deficit, with the potential for an election if it fails. Efforts to improve internal trade are ongoing, with the CFIB pushing for greater mutual recognition of provincial regulations to ease burdens on small businesses. Finally, various corporate deals and market movements were highlighted, including acquisitions, price adjustments, and analyst ratings influencing stock performance across different sectors.