Plus: a microblogging battle royale July 10, 2023 Sign Up | View online IN THIS ISSUE 8 min read 🥵 The weather is hot 🧊 Twitter’s feed is cold 👔 The job market is just right The world has one question: Has it sunk in yet, Elon? Has it? Read why below. | @elonmusk / Twitter THE WEEK IN MARKETS Test Time This week we’re skipping last week’s numbers, because the major indexes ended basically flat but also because this week begins... earnings season! Earnings affect markets in a profound way, and prognosticators’ outlook for Q2 is far less dire than it was only three months ago, thanks to AI-fuelled optimism, strong consumer spending, and falling inflation. But this earnings season will be something of a test. If earnings surprise on the upside, as they did last quarter, the stock rally that began earlier this year could keep chugging along. But if earnings disappoint, the rally could lose steam, or worse. Of note: some big U.S. banks (see a list below) will report on Friday. Tesla is up next week, then big tech (Alphabet, Meta, Microsoft, Nvidia, etc.), and Canada’s big banks and oil companies follow after that. THE WEEK IN ONE NUMBER 51% Increase in construction costs since the pandemic started. Some developers say the cost of building now exceeds some property’s expected value when finished — which doesn’t spell great things for Canada’s already limited home supply. WHAT HAPPENED LAST WEEK IMPORTANT Hiring holds strong. Canada added 60,000 jobs in June — triple (!) the expectation — though the unemployment rate rose from 5.2% to 5.4%. The story was similar in the States: employers added 209,000 jobs, and unemployment fell to an almost 60-year low of 3.6%. This was all fresh evidence that the economy might be able to shake off inflation without tipping into a recession, and the data probably gave central bankers a green light to hike interest rates higher. Some doomers are still warning that a recession is nigh-ish, as they’ve been doing for the past, oh, 18 months or so. But, as The Wall Street Journal recently noted, the most anticipated recession in recent history keeps getting postponed and could, with a little luck, be a no-show. July 6th was the hottest day ever. OK, not like ever ever. The planet was hotter when T. rexes were stomping around. But it was the hottest day since people have been keeping careful track. The average global temperature hit 17.23°C, more than 1°C above the 1979–2000 average, according to Climate Reanalyzer data. But, as econ writer Noah Smith pointed out on Twitter, one teeny-tiny positive note is that if renewable-energy adoption continues at a brisk pace, humankind might halt warming at a moderately hellish 1.5°C rather than an apocalyptic 2.5°C. Let’s hope human ingenuity comes through. INTERESTING Meta and Google nix news. As you may have heard, last month the government passed a law that would require the tech giants to pay Canadian media outlets for featuring news on their platforms. Well, last week the tech companies said that, rather than pony up, they planned to block all news links on their platforms. They don’t like that Ottawa wants them to prop up an old media industry (albeit one with great public benefit); publishers don’t like that the tech giants got rich hosting their content for free. Canada cribbed the policy from Australia, where, after some bickering, Google, Meta, et al., agreed to pay news outlets some $132 million a year. But that sort of money probably won’t breathe new life into Canada’s news industry, whose revenue slid by $6 billion between 2008 and 2020. The big question now is whether Meta and Google will capitulate or play hard ball to dissuade other countries from passing similar laws. The latter scenario would be costly for the blocked news organizations and an inconvenience for the rest of us. The government will give Stellantis $15 billion to get back to work. The Dutch automaker threw a tantrum halted work on its new EV-battery plant in Windsor and basically threatened to move south after the U.S. started doling out hefty incentives to boost its EV sector. Last week, Ottawa upped its subsidies to stay competitive as it tries to turn Canada into an EV powerhouse. Musk gets Zucked. Ever since Elon Musk took over Twitter, posters have been searching for a microblogging alternative, but none has caught on. This is partly because other platforms (Post, Bluesky, etc.) all share one big problem: users have to start all over with zero followers. Last Thursday, Meta’s Twitter knockoff, Threads, may have broken the trend, adding some 30 million users within hours of launch. The biggest draw? Users can port their existing Instagram followers to Threads — so, no starting at zero. There’s a lot on the line for both Meta, which could use a win after burning a lot of cash on the metaverse, and for Musk, who spent US$44 billion to buy Twitter and owes steep interest payments to creditors. The risk for Musk is that he could run Twitter into the ground trying to make those payments, default, and perhaps lose the company, and competition from Threads makes that scenario a lot more likely. FROM OUR SPONSOR All investments involve risk. To get more info on our products, investment decisions, fee schedules, user testimonials, promos & more visit wsim.co/disclaimers. THE FOMO INDEX by Stacey Woods IMPORTANT 🇻🇳 Barbie banned in Vietnam for offensive political imagery, so they’ll have to see Oppenheimer instead. Source 🌪️ Alberta hit with one of the most powerful tornadoes in Canadian history (if you don’t count Rob Ford). Source 🥖 CRA gives one-time grocery rebate to 11 million Canadians, because inflation sits better on a full stomach. Source 🚗 Electric flying car has been approved for testing, even though sky has not been approved for driving. Source CRASH & BURN TO THE MOON 😲 Lord of the Rings game card found by Toronto collector could fetch $2.89M. Some guy called Gollum really interested. Source 💸 How I lost US$1.2M on a Bored Ape NFT: A Justin Bieber Investment Tragedy. Source 🎙️ It isn’t love, it isn’t hate, she just forgot we existed: Trudeau tweets Taylor Swift about bringing Eras tour to Canada. Source 🌭 This will eat at him: Joey Chestnut wins Nathan’s hot dog eating competition but doesn’t beat his own record. Source WHO CARES WHAT’S UP THIS WEEK The Bank of Canada’s latest interest rate call (Wednesday). That strong jobs data? It probably sealed the deal for another 25-basis-point hike. U.S. bank and financials earnings (Friday). As we alluded to up top, BlackRock, Citigroup, JPMorgan Chase, and Wells Fargo will tell us how their Q2s shaped up. DON’T BE A TLDR HOG 🐷 Like TLDR? The first five million people to click this link can share it with a friend for free. (Don't like TLDR? Afflict it on an enemy! We'll appreciate you either way.) THE BIG IMPORTANT STORY MARKETS The Biggest Stories in Stocks (That Have Nothing to do With North America) Every week in this newsletter, we recap what’s happening in markets and the economy. And, we’ll admit, we tend to focus on Canada and the U.S. But for good reason! Thanks to recent growth, U.S. stocks now command nearly 60% of the global stock value. (Canadian stocks: just 3%, but for a small country we punch above our weight.) At the same time, roughly a quarter of global stock wealth is tied up in Europe, Japan, and China, and Canadians hold many of these assets. So, we thought we’d survey what’s happening overseas, since what happens there invariably affects us here. China Arguably the biggest money story this year is that the world’s second-largest economy — China — has been surprisingly weak after reopening from COVID lockdowns. The country faces a laundry list of problems: a manufacturing slowdown, sluggish consumer spending, a real-estate crisis, a U.S. trade war, etc. And there’s no easy fix. Investors have dumped Chinese stocks in response, pushing Hong Kong’s Hang Seng Index down by 8.8% YTD and the CSI 300, an index of the 300 largest stocks listed in mainland China, down by 1.6% YTD at a time when many indexes are up double digits (Nasdaq: +32% YTD). The same uninspiring economic data fuelling the stock selloff has economists questioning whether China’s economy will ever surpass the U.S.’s, which was a foregone conclusion just a few years ago. Japan Japan is a completely different story from China. Its Nikkei 225 index is up 26% YTD, making it one of the world’s best-performing markets. The strong performance owes partly to the fact that, in March, the Tokyo Stock Exchange urged companies to focus on shareholder profits (which you’d think would go without saying). Honda ($HMC) and other companies, in turn, began paying record dividends. Japan’s tech-heavy stock market has also benefited from the same tech bullishness that has driven the global rally this year and from investors taking money out of China and putting it into its companies. And get this: Japan’s central bank maintains a negative interest rate, despite moderate inflation. That means it costs money to keep cash in the bank, which incentivizes people to invest, and policymakers have said they’re in no rush to raise rates. Europe European stocks have kept pace with the S&P 500 (+15% YTD) despite the bloc’s economic war and war war with Russia, which has come with market uncertainty and an extra serving of inflation. (EU inflation was 7.1% YoY in May; Canada: 3.4%.) The Euro STOXX 50, composed of stocks from 11 Eurozone countries, is up 9.9% YTD, with companies like Adidas, ASML, BMW, and Hermès leading the way. That’s pretty impressive considering the index is light on tech. Though European stocks have fared pretty well, further interest-rate hikes and China’s sagging economy could spell trouble; China is Europe’s third-largest export market. THE UPSHOT OK, so why does all this matter? For one, it’s a reminder that the world — and the markets — are big, and we ignore geographic diversification at our own investing peril. Second, it’s a reminder that dynamics change fast, as Japan’s rocketing market and China’s sputtering one have proved this year. And those shifting dynamics aren’t restricted to the rest of the world. U.S. stocks have done well, but some have argued that they might be overvalued. And there’s no promise they’ll continue to outperform. As always, no one knows what’ll happen next, which is a pretty good reason not to put all your eggs in one basket. Because you don’t need to be diversified — until you really do. —Sarah Rieger OTHER VERY GOOD READS 🎮 Lessons From the Catastrophic Failure of the Metaverse How it went from being worth $13T to bupkis | The Nation 🏭 The US Is Building Factories Again, But Who Will Work There?* How free technical school is helping America reindustrialize | Bloomberg 🚆 Who Broke the TTC? Inside Toronto’s public-transit disaster | Toronto Life 😨 2023: The Year of FOMM (Fear of Making Money) What spooked DIY investors out of the markets? | Wealthsimple Magazine *Article is paywalled, which, yeah, is kind of annoying. But we think good journalism is worth paying for. THE WISDOM OF ... THREADS? At this rate, we’ll all be back on ICQ soon. THOUGHTS ON TODAY’S ISSUE? Love it Good So so This week’s newsletter contributors: Brennan Doherty (writer), Devin Gordon (writer), Stacey Woods (writer), Sarah Rieger (news writer), Ambrose Martos (fact checker), Ciara Rickard (copy editor), Nikki Holmes (copy editor), Sara Black McCulloch (fact checker), Jared Sullivan (senior editor), Peter Martin (senior editor), Kat Angus (managing editor), and Devin Friedman (editor-in-chief). Disclosures: Contributors to this newsletter own stock in Google. Wealthsimple Media Inc. 80 Spadina Ave Suite 400 Toronto, ON, M5V 2J4 Replies to this email address are not monitored. Have questions? Visit our Help Centre or submit a request to our Client Support team. VIEW IN BROWSER PRIVACY POLICY UNSUBSCRIBE TLDR is offered by Wealthsimple Media Inc. and is for informational purposes only. Any views expressed are those of the individual author and/or of Wealthsimple Media Inc., not of Wealthsimple Financial Corp or any of its other subsidiaries or affiliates. 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