Amber Kanwar’s Weekly Setup: Oil, Empire, Adobe and more

Andy Williams was wrong. Back to school is the most wonderful time of the year.

Here are five things to know this week:

Red means go: Disappointing job growth in both Canada and the United States is ratcheting up the prospect of rate cuts, and that helped cement a stock and bond rally last week. The Toronto Stock Exchange is on an eight-session hot streak and crossed above 29,000 intraday for the first time ever, thanks to gold stocks. Gold surged to a record high, taking its cue from rate-cut projections after the U.S. added significantly fewer jobs than expected and revisions meant June saw job losses for the first time since 2020.

Another test for rate cuts will come Thursday when U.S. consumer inflation data for August are released. The fly in the rate-cut ointment is that core inflation is expected to remain sticky at 3.1 per cent while economists project that headline inflation is going to reaccelerate to 2.9 per cent from 2.7 per cent. Nevertheless, the market has fully priced in a rate cut at the next Federal Reserve meeting on Sept. 17.

A combination of weaker economic data and rising prospects for rate cuts could be supportive for markets, argued Daniel Ghali, senior commodity strategist at Toronto-Dominion Bank. “The data is certainly cooling, which could potentially fuel speculation for a 50 [basis-point] cut, but we think it hasn’t yet cooled enough to disprove the current Goldilocks pricing for macro,” he wrote in a note to clients.

Plus one: Crude oil fell to a three-month low as OPEC+ agreed over the weekend to increase production yet again. It marks a continuation of a strategic shift by OPEC to fight for market share over preserving prices. As energy investors lick their wounds, it is worth noting the gold-to-West-Texas-Intermediate ratio is at one of its widest points since the 1980s. Put simply, this means that safe-haven demand is very high compared with demand for oil, which relies on economic growth.

However, should that turn, ATB’s Patrick O’Rourke argues oil might be a better inflation hedge: “Given the Gold-WTI price ratio remains extremely elevated relative to historic levels (currently exceeding four standard deviations from its historic average), we highlight that once the near-term physical supply/demand picture for oil begins to improve, oil may in fact turn out to be a better inflation hedge than gold.”

Cutting to success: You may have caught all those U.S. tech executives in Washington last week prostrating themselves in front of President Donald Trump. The fervent thank-yous were interrupted only by promises to spend hundreds of billions of dollars on innovation in America. One of the direct beneficiaries of that is expected to be Oracle Corp. ORCL-N

As all these companies, from OpenAI and Meta META-Q to Apple AAPL-Q and Alphabet GOOGL-Q, race to prop up artificial-intelligence infrastructure, Oracle is poised to see its strongest growth in two years. At 13-per-cent revenue growth, you might not think that is all that impressive. However, for the better part of the past 10 years, Oracle was unable to put up more than single-digit sales growth. Now its infrastructure business alone is poised to grow 56 per cent. You are definitely paying up for it, with the stock trading at 52 times earnings.

Photoshop can’t fix this chart: Shares of Adobe Inc. ADBE-Q have underperformed the tech sector, falling more than 20 per cent this year as investors believe it is a “have not” when it comes to the AI revolution. It is the third worst-performing software stock after Salesforce Inc. CRM-N and Fair Isaac Corp. FICO-N Adobe reports Thursday evening and is expected to show its worst sales growth in more than two years. Expectations are especially low after rival Figma Inc. FIG-N said last week growth was going to slow, prompting a 20-per-cent one-day drop in the stock.

Add to cart: Empire Co. Ltd. EMP-A-T has pulled back about 10 per cent from its recent record and the grocer is set to report results Thursday morning. Food inflation in Canada is running above 3 per cent, and while that can be good for grocers, they’ve been under pressure not to show sales growth above CPI. In addition, higher inflation puts pressure on consumers who often look to trade down. Tariffs are an added wrinkle that could lead to higher costs without the ability to pass them through. “Positively, Empire could continue to be well-positioned to benefit from potentially ongoing Buy Canadian purchasing trends,” Bank of Montreal’s Tamy Chen wrote in a preview note. She added that Empire touts the “highest assortment of Canadian products.”

In the Money with Amber Kanwar is Canada’s top investing podcast. New episodes out Tuesday and Thursday. Subscribe now! www.inthemoneypod.com