The Street for Tuesday, April 28, 2026

Key Concepts

• Artificial Intelligence (AI) Infrastructure: The massive capital expenditure (CapEx) currently being deployed by tech companies to build AI capabilities.
• Fiscal Update: The Canadian federal government’s mid-year report on budget deficits and economic projections.
• Sovereign Wealth Fund: A proposed Canadian government vehicle designed to attract domestic investment into nation-building infrastructure projects.
• Dovish Monetary Policy: A central bank stance favoring lower interest rates to stimulate economic growth, particularly in the face of a potential technical recession.
• Supply Chain Disruption: The impact of geopolitical instability (specifically in the Middle East/Strait of Hormuz) on global energy and fertilizer prices.
• Technical Recession: A period of two consecutive quarters of economic decline, currently a concern for the Canadian economy.

1. Artificial Intelligence and Tech Sector Outlook

Phillip Peterson (IG Wealth Management) emphasizes that AI is a "nascent industry" characterized by rapid evolution and high volatility.

• Productivity vs. Job Loss: Peterson argues that AI is currently "eliminating tasks, not jobs," allowing for upskilling and increased productivity rather than mass layoffs.
• Market Dynamics: He compares the current AI landscape to the early automotive industry, where multiple players are competing for dominance. He suggests that while some companies may "overbuild" capacity, the long-term utility of these models will likely lead to a consolidation of winners.
• Tech Earnings: Investors are currently cautious, looking for confirmation that companies are seeing tangible returns on their massive AI infrastructure investments.

2. Canadian Economic Policy and Fiscal Update

The federal government is expected to release a fiscal update showing a deficit of approximately $26 billion, which is significantly lower than the initial $78 billion projection.

• Sovereign Wealth Fund: Prime Minister Mark Carney announced a new $25 billion sovereign wealth fund. Peterson views this as a positive, long-overdue mechanism to channel domestic capital into infrastructure. However, critics (including Pierre Poilievre) argue that previous government-backed banks have failed to deliver results.
• Monetary Stance: Peterson suggests the Bank of Canada (BoC) should adopt a "dovish" tone. With GDP growth stalling and a "renewal shock" hitting mortgage holders in the first half of the year, he believes the BoC should consider rate cuts to support the economy.

3. Sector-Specific Analysis

• Energy: Peterson remains bullish on Canadian energy. Despite the volatility caused by the war in the Middle East, he notes that stocks like Suncor are trading at attractive valuations (10x forward P/E). He views the recent M&A activity (e.g., Shell acquiring ARC Resources) as a potential catalyst for the sector.
• Software (SaaS): Peterson warns against a "blanket sell-off" of software stocks. He advises investors to be discerning, focusing on companies that can successfully integrate AI to enhance their value proposition rather than those easily replaced by it.
• U.S. Banks: These are highlighted as attractive due to strong U.S. economic performance and valuations that are 20–30% cheaper than their Canadian counterparts.
• REITs (Real Estate Investment Trusts): The outlook is cautious. High population growth is currently putting downward pressure on rents, and commercial REITs remain tied to the broader economic slowdown.

4. Notable Corporate Performance

• Celestica: Shares dropped ~14% due to "softer" guidance, despite meeting earnings expectations. Analysts view this as a healthy reset after a 50% rally in the previous month.
• Spotify: Missed expectations on operating income and premium subscriber growth, though monthly active users beat estimates.
• Coca-Cola: Reported 10% organic revenue growth by successfully segmenting products for both budget-conscious and affluent consumers.
• UPS: Shares fell after the company maintained its financial outlook, disappointing investors who expected an upward revision.

5. Synthesis and Conclusion

The current market environment is defined by a "reset of expectations." While geopolitical tensions in the Middle East have driven oil prices higher—impacting consumers and inflation—the underlying fundamentals of the global economy remain resilient. The primary takeaway for investors is to move away from broad sector assumptions and toward a more granular, company-specific analysis. Whether in AI, energy, or software, the focus should be on firms that can demonstrate productivity gains and maintain disciplined capital allocation in a high-interest-rate environment.