North American Equities: October Review — Earnings and the Road to Year-End

Transcript

Good day, all.  It is November 3rd, 2025.  Pete Hofstra here with an update on North American equities.  We doing okay this morning?  The Blue Jays, so close, so close.  I don’t know.  Any lessons to pull away here?  Money over camaraderie, something like that.  A random walk of baseball.  It's not how well you hit; it's when you hit well.  Anyway, hope everyone has recovered.  Had a tremendous run.  Anyway, all too bad.  Looking back at October, a couple things to remark.  Number one, we didn’t really get the typical seasonal volatility we can see through September and October.  And now we're usually in—November is normally a very strong month, as we head into the Santa Claus rally.  So as long as employment holds up is when you start to see consumer spending.  But a few items to go through.  Let's start maybe geopolitical.  It looks like we're having a literal war on drugs as we're sending some of the military to the Caribbean and the Pacific.  And hopefully there's—well, we'll see.  An invasion of Venezuela or at least a military overthrow of the current regime.  I don’t know that that would be market-moving.  So, to stick with market-moving events.  But it's certainly something people are tracking.  Another fragile truce, ceasefire in the Middle East and Gaza.  Yeah.  Tough, tough environment.  There's a plan, but we'll see whether everyone can stick to the plan, as opposed to pointing fingers.  Again, I think that's become part of the new cycle, right or wrong.  Not necessarily market-moving.  A few things that are market-moving, central banks always market-moving.  So got rate cuts in both Canada and the U.S.  Canada is signaling probably a pause from here at 2.25 feeling the rate is appropriate.  I think in the U.S. they cut and what moved the market is Powell's comment that a December rate cut is basically not a lock.  So that did spook the market bit as people are anticipating further rate cuts thinking the U.S. is still in restrictive territory.  Not that there won't be a rate cut.  I just think they have to keep an eye on the data and the data is not coming through while the government is shut down.  Again, government shutdown, not market-moving.  And it continues on.  The other thing that definitely moves the market is earning.  So Q3 coming out.  All eyes on artificial intelligence.  Kind of a mixed bag.  You saw some decent movements in different directions.  You know, you saw Alphabet certainly did well.  Amazon, solid.  Microsoft posted great results, just couldn’t keep up with demand, but not quite to expectations.  And the one that was sort of put in the penalty box was Meta.  But they all increased their guidance for spending on the artificial intelligence build out.  We were at a conference earlier in the month in Los Angeles, a private tech conference, but obviously a lot of focus on AI.  And the word is around there, if you spend a dollar on compute, meaning you buy compute equipment, you will get a dollar of revenue.  So, there's chatter of is this getting a return on investment.  It's certainly generating revenue.  The backlog for the compute is incredible.  And this is not just people wanting to get access to ChatGPT.  It's the whole machine-learning construct is really changing how software is offered, how business is being done, how call centers are run.  So, people are desperate to get access to that compute.  So, if you build it and build it well, you will be able to sell that.  And that's what you see with the Alphabet's and the Amazon's and certainly the Microsoft.  Meta is a bit of a more complicated because they don’t sell their compute.  They're building this out to help drive their own business and then maybe to offer other tools to gather attention to sell advertising.  Because at the end of the day they are an advertising company.  Whereas Alphabet at least has transitioned part of their business to a direct rent the compute business.  So, for Meta, it's a bit more of a play to say how does this spend actually improve your business, given that you're not pulling revenue from it directly.  So, I think a few more question marks, but certainly the ramp up in capital expenditure looks great for NVIDIA, looks great for the semiconductor.  This infrastructure spend is not slowing down.  It's picking up.  $5 trillion club, NVIDIA, market cap, right.  $5 trillion.  Just incredible.  Anyway, October ended up being a decent month, certainly for the U.S.  Canada a bit softer.  Gold softened towards the end of the month, started out strong.  So, I think we eked out gains and a little bit of profit taking maybe on gold.  So, we'll see where it moves from here.  As we head into the end of the year, I think we don’t see a reason for the market to really correct yet.  I mean typically what you're going to see in a strong year like this, people are chasing returns.  The losers may get punished as tax loss selling season is here.  So, there can be opportunities to pick up along the way across our different funds.  So, we're always on the lookout for those.  And then it tends to be in the New Year when people want to reset.  And if they're going to sell any of their gainers, they'd rather do it the start of the year and not trigger an immediate tax.  We'll certainly keep an eye on things.  It's something—and I won't make this much longer, but I do want to touch on maybe next month—we'll see how the month goes—is start to talk a bit more about Bitcoin, the crypto currencies in this stable climate.  Obviously, that's a big area.  We have some exposure there and happy to provide our view.  But maybe we'll just put that out as a teaser for next month.  Be well. Talk to you soon.