Highlights

Hello everyone, welcome to Economic Impact. Today is November 20th, 2024, and as usual I am with our chief economist Stéfane Marion. Stéfane, we had an election in United States.

Yeah, it's been a shock for many people, many sectors, but for financial markets, Denis, I have to tell you it's been positive so far. And as you look at the year so far, year to date, we're looking at positive returns for every asset class. And you know what? Despite the fact that the stock market has done particularly well this year in the US, Canada too and last year, investors now believe that next year could be yet another banner year.

Wow! Can we say the same thing for across the world? Is it the same situation? Are we seeing the same results?

No breadth is not that great Denis when you when you think about it because the reality is that—there's a lot of numbers on this slide, but bear with me—if it's green, these markets reach a new all time high in November. There's only three markets in the world that did that, the US, Canada and Hungary. So not everyone wins in this new political or geopolitical environment.

And since the election of Mr. Trump, price earning are still at the top, at the highest.

Well, the reason the US is as high as it is right now, it's been driven by multiple expansions. So forward P ratios are now trading at 23 times forward earnings. Denis, if you look prior to the COVID pandemic, when earnings normally surged during a recession, you have to go back to 1999 to see earnings or price the valuation on the stock market as high as what we have right now. And, and notice that the valuation on U.S. stock market is 35% higher than it was when Mr. Trump first won his election in 2016. So there's a lot of good growth expectations already built in the current valuations.

And at the same time, we're observing shift into yield curve, major shift in the yield curve.

This is where I'll need you to help me because you used to be a fixed income specialist and you still are, but you are actively involved in terms of trading. So what we're seeing right now, what's helping fuel the rally in financial markets is the fact that the yield curve, which had been inverted for two years. And remember, you and I exchanged a lot of times on that saying an inverted yield curve is not a good sign for the economy. Well, guess what? The inversion has disappeared. And now people are saying, wow, if the yield curve inversion has disappeared, therefore the economy can only do better in the months ahead.

Yeah. What's quite interesting that we're seeing a yield curve, you know, shifting upward while we're seeing rates going down, and we don't see that very often in the cycle.

No. So it's a yield curve. You know, it's a steepening, but it's a bear steepener.

That's getting complicated.

It's complicated, but it's most important. Because if you calibrate your model on just the shape of the yield curve, you say, OK, it's steepening, it's good for the economy is one thing. But what's happening right now, it's steepening, but I can't calibrate a model for something I've never seen. So what I'm trying to say here is that yes, rates are coming down at the short end of the curve. The feds already reduced the Fed funds rate by 75 basis points. But long-term rates, 10 year treasury yields, are up 79 basis points. So this type of bear steepener, Denis, has not been observed in over 30 years. Since the Fed started targeting the Fed funds rate, this is the first time it happens when the Fed starts cutting rates. So most unusual.

But what's kind of weird also is that the government, U.S. government are going for, you know, probably one of the biggest deficits ever and we're seeing the yield curve going down. In fact, shifting U and treasury Fed fund going down, that's weird.

There's a malaise here that seems to be explained by the fact that the 10 year treasury yield is moving higher because people are concerned now because with the level of government debt in US. So unless the US is able to significantly reduce its spending, what we're looking at for the next few years is that the US debt to GDP ratio will exceed the previous high, which was reached after... well at the end of World War 2 when the US was financing a global war. So we are in unchartered territory. Hence the movement of the yield curve that is most uncanny.

Despite all of that P/E are high, yield curve is shifting up, Fed funds are going down. People are still expecting good results or good performance for the coming year. So people are looking at the yield curve with not necessarily the same amount of details that we should speak to, you know, is it a bear or bull steepener? So you're absolutely right. What's driving the market right now? It's a steepening of the yield curve, as simple as that. And yes, every region of the world is expected to benefit from the new economic policies that will be unveiled by Washington in the quarters ahead. So anyway, Denis, when you look at this, every region of the world is expected to be up next year. So I'm not sure everyone wins in a new political or geopolitical environment, but these are the expectations as we speak.

There's a lot of positive on the market right now.

There's a lot of positive on the market right now.

There's a lot of good news already priced in the market.

But the bond market is getting a little bit more suspicious.

OK, let's come back to Canada and talk about the, you know, what's going on in our own country in terms of unemployment.

So I'm going to tell you why we have a weak currency, right? So the reality is we have a big divergence in terms of economic performance with the unemployment rate for people age 25 to 54, which is your biggest consumer base if you want, at over 5.5% in Canada, whereas the US it's at closer to 3.5%. So this massive divergence, Denis, brings that if the economy is not performing, obviously monetary policy can diverge between the two countries.

Yeah, that does mean lower Canadian rate but lower Canadian dollar.

So the way your forecast models work, when you do your currency forecasts, if you have an historical, it's a near historical spread. Well, I won't say historical, but the highest since 1997. This divergence between monetary policy between two countries is likely to be sustained for longer because of the behavior of the unemployment rate which brings about a cheaper currency. So we're at 1.41 to buy U.S. dollar. Well, we might have to pay 1.45 in the months ahead according to our model if those interest rate differentials prevail for a little bit longer, which I believe they will just because of where the economy is relative to the US. So a lot of moving parts Denis.

Well, you have a lot to say today, OK, What kind of conclusion we can come with?

Well, the conclusion is it's even difficult to know precisely with precision where you are in the cycle because the US keeps on pushing more fiscal stimulus despite the fact that the unemployment rate is low. And with the yield curve that is starting to steepen right now and in bear steepener mode, we will see what happens in the months ahead, particularly that the stock market is not cheap in the US. So if long term rates move higher because people are concerned about fiscal policy, that might be an issue. Denis, I would also say, you know, not everyone will win in the new economic regime, but the market seems to be positioned that everyone wins. So I'm a little bit more skeptical on that one. I know that people are—there's a lot of hype that AI could boost productivity and that's fine by me, I have no issues with that. But down the road, we have to be, you have to be consistent with economic theory. If I want to do more AI, more robotics, I need more electricity and electricity costs are becoming a concern at this point in time. So by at large, Denis, it's a structural change. The selection will bring about structural change. Deregulation, tax cuts will be good for corporate earnings. But there are other concerns, particularly what happens with this steepening of the yield curve. So the message here today. So let's just be prepared to live with market fluctuations in a month ahead. There will be volatility, the market will find a direction. But I'm not sure that it's a one way bet that everything goes up next year.

And once again, let's be careful.

Absolutely.

Well, thank you, Stéfane, for being with us today. Hopefully, it's gonna help you in your investment, you know, assets and everything, portfolio management. We'll see you in December. Thank you for being with us.

Hello everyone, welcome to Economic Impact. Today is October 17^th 2024, and as usual I am with our Chief Economist, Stéfane Marion, who exceptionally is in Calgary right now and we are at a distance. Hello, Stéfane, how are you today?

Good morning, Denis. So we're doing this remotely this morning.

Yeah, remotely exactly. Stéfane, you know, we've been talking about the stock market for a while and we said we should be prudent but despite of that, the stock market keeps going up.

Yeah, the enthusiasm is still there Denis. We're hitting an all-time high and it's in many regions of the world driven by both expectations of more rate cuts by the central banks. So we're talking about the synchronized monetary easing cycle and also expectations that, you know, we could have sizable fiscal stimulus from countries such as China that will help support global growth and obviously earnings going into. But I have to say, Denis, there's a lot of these expectations that are already embedded in current valuations.

And at the same time, you know, valuations are quite high compared to the past.

Yeah.

So if we look at this slide and the little red, you know, sorry– yellow dots shows the beginning of easing cycles in the US And you can see that it's exceptional for the US stock market to be valued at 21 or close to 21 times forward earnings at the beginning of an easing cycle. So there's only one precedent for such a situation, Denis. So again, we're navigating into unusual waters if you want and on certain waters, I would say when it comes to valuations on the stock market.

Yeah. And we're seeing on that graph that only a two time out of seven we saw the market going down after rates cuts. And you know, it's interesting to see where we are in the cycle compared to the past. But also, the next slide will show us how the market interprets, you know what's going on in term of you know, valuation and volatility. And I would say the first three lines, that's quite busy. But it's quite interesting because it shows, you know, as the market is doing different signals depending on what you look at.

Yeah, so you're right. So that, you know, the blue bar represents the range in which the market has already as traded in the past. The green line, if you want, the green number represents where we are now versus what you see on average in any other episodes. So you can see that valuations, you know, trading at, you know, almost 21 times forward earnings is quite high relative to the norm. The fact that, you know, earnings expectations are at 14% versus normal of 10% means that, you know, we're expecting significant growth in the months ahead. And the stock market has not really corrected historically the Fed starts cutting rates once the stock market starts correcting, which hasn't been the case this time around. So from a stock market, the first 3 bar show that, yeah, there's a lot of good news already expected in the stock market.

And at the same time, the last three bar are giving a different signal. The one what we call the MOVE is the volatility on the bond market, the VIX is the volatility on the stock market and after that the corporate spread and all of those data are, you know, below the line.

So historically the markets a little bit nervous because you know, the Fed starts cutting rates because maybe something's happening to the economy. So this time around the stock market is already concluded that this is a soft landing and other markets are saying it's going to be a perfect soft landing with no volatility. You can't get more perfect than this Denis because volatility for bonds or for the stock market is well below the historical average and corporate spreads are the least stress we've ever seen at the beginning of the easing cycles. So again, there's a very strong conviction in the markets that the soft landing is mission accomplished, and it only gets better from this point on.

Yeah. And but, you know, there's probably cloud above our head because when you look in the United States, you know, the very small business optimism is not there.

Yeah. So small businesses in US, and we said it before, the uncertainty index is important to look at because they account for 50% of job creation. So I do recognize that the latest jobs report in the US was stronger than expected. But, you know, it seems like it broke the trend from the past six months to me. But I don't think, you know, one month makes a trend. So we'll have to see another good employment report before we change our mind on a potential stress on US labor markets that could undermine profit expectations. But I have to say, people always claim that an election year is good for equities. It's been the case so far. I get this, Denis. But at the same time, we've never seen so much uncertainty prior to US election, and that's quite evident in this slide. So my point, Denis, here's, yeah, if we are going to change our view on the US economy, let's wait for another jobs report. But more importantly, let's wait for the result of the US election and to see whether it's contested or not by one of the two candidates. Both candidates could also contest. We'll see that, Denis. So I think, you know, going into the US election, we've never seen so much uncertainty. And at the small business level, that should transpire theoretically with less aggressive hiring. But let's see the next job report to see if I'm right or not on that one.

Yeah. And we won't wait too long because all of this will happen the beginning of November, then we'll know more really at the start of November about that.

When we meet next month in person, then we will be able to assess the whole situation.

Yeah, might be quite different. But if you come back in Canada, you know, the story is a bit different where, you know, the economy is not doing so well.

Yeah. So people are uncertain about this, you know, the health of the US economy. I have strong conviction that from a Canadian perspective, we're not that great. It's pretty weak. If you look at the manufacturing sector, it's stagnation. If you look at the service sector, it's contraction. So I know the latest jobs report in Canada, like in the US, was better than expected. But I think the uptrend on the unemployment rate is still intact. And that suggests that the Canadian economy is underperforming, Denis. So yes, we're looking at yet another quarter of weak growth in Canada. It's not a recession, Denis, don't get me wrong, but it's still below potential growth and it's underwhelming. And underwhelming growth means higher unemployment in the months ahead.

But probably more and bigger rate cuts have to come in Canada.

Yes, Denis, because underwhelming growth means that inflation is coming down quite significantly in Canada. So headline inflation surprised everyone at 1.6% only in September. Notice on this slide Denis, if you exclude the mortgage interest rate component, which you know the cost of financing your mortgage inflation is only at 1%. But Denis, if you exclude shelter on which the Bank of Canada has no control because of surging population growth, we're at 0.4%. Denis, that is extremely low, I cannot justify keeping rates where they are right now in Canada. I have to up the ante on rate cuts in Canada, 25 basis points is just too slow, they have to move to 50 basis points increment. And that's where the whole Canada.

But if you go province by province, some provinces are not that great too. They are in deflation situation right now, in territory of deflation.

Yeah, actually it's a good point. If you exclude, if you look at inflation, excluding shelter, it's at 0.4%, so anemic at the national level. But there are 4 provinces we're actually talking about deflation. So prices actually coming down if you exclude the shelter component. Those four provinces, Denis, it would be Quebec, Manitoba, New Brunswick and Saskatchewan. So you rarely see so many provinces showing deflation. So as I said before, the Bank of Canada, despite the rate cuts, monetary policy is overly restrictive. They need to start cutting rates by  basis points increment because now Denis what they've been doing, they've been cutting rates, but inflation is falling faster, which means that you're not you're not moving the needle on real interest rates. So 50 basis points would be my best guess for next week and another 50 basis points after that. We got to come back to % very quickly to help the economy for next year.

Well, on that positive note for consumers. Thank you very much for being with us, Stéfane. And hopefully next time we'll be close together in the same room. And thank you all for being with us. We'll see you next month, beginning of November.

Thank you.

Hello everyone. Welcome to Economic Impact. Today is September 10th, 2024 and as usual, I am with our Chief Economist, Stéfane Marion. Good morning, Stéfane.

Good morning, Denis.

So, since the last time, we see the performance from the asset classes being a bit different. Since the last time.

Since we last time we saw each other, was in July at the beginning of Q3, right, all asset classes were rising. We were arguing for potential volatility. And now near the end of Q3, we can see this volatility has actually occurred, or more dispersion I should say with respect to the total returns of different asset classes. Note that the S&P TSX was really trailing behind all the other equity indices, actually leading in the third quarter, but followed by the bond market. And maybe the biggest difference, Denis, is the underperformance or lack of performance, negative performance from the S&P 500. So that's a big change from the start of the third quarter.

And because of that, we saw the volatility increasing quite a lot.

Well, yeah, you know, the negative return was triggered by a surge in volatility in August. Note on this slide that if you exclude the pandemic episode, we haven't seen volatility - VIX - at 40 since 2015. So about a decade, 9 years. And that means Denis that people are now second guessing what the actual outlook will be like. I would just remind you that at this point in time, there's still 80% of investors that are bidding on a soft economic soft landing for the US. We'll see what happens. But clearly there are some investors saying, well, maybe things are not so clear cut going forward.

Yeah. And I think the Fed not decreasing rates makes that volatility is getting higher and higher because, you know, people are expecting those rates going down and they're not coming down.

Yeah. Do you know how long it's been since the Fed last cut rates, Denis?

Long, long time.

Well, since their last rate hike, it's been now 12 months. Historically, that's very, very long because on average, the Fed will cut rate seven months after its last rate hike. Now it's been a year. We're going to get one probably in September. But note on this slide, what the big difference is between this time around and previous cycle is that the unemployment rate is up almost a full percentage point. Well, 0.7 percentage point, which is much bigger in terms of amplitude than what you normally see in a typical cycle, which is the blue line on this slide.

Is that what we call the SAHM rules?

If you want to speak to economics jargon on that one. OK, fine. I'll summarize what the SAHM rule is. I'll simplify it. Normally when the unemployment rate that rises 1/2 percentage point above its cyclical low, you trigger what you call the SAHM rule. And historically it's been associated with a significant slow down of the economy and more often than not a recession. So the SAHM rule was actually triggered last July, which brought this volatility that we got in August on the stock market. Now, as I said before, most people still believe all the SAHM rule is misleading us this time around. Maybe the soft landing is still the typical outcome because even the Fed argues that they can achieve a soft landing despite being very late in the game in terms of cutting rates.

And despite the fact that about the Fed are not, you know, moving down on their rates, global inflation is still creeping down.

Now, I will concede that the Fed is able to cut rates now and maybe they will be able to cut rates aggressively because inflation is coming down. As you can attest on this slide, you know, it's a global phenomenon. It's not just a Fed that will be coming cutting rates. It's a whole bunch of central banks. And under the circumstances, if it's a synchronized easing cycle, people believe that, there you go, you're going to get this economic soft landing and earnings won't be impacted negatively.

And at the same time, you know, we're seeing the economy cooling. That means that, you know, earnings and revision may come.

 Inflation does not come down by magic, Denis. So basically, what that means is that for inflation to come down, you have to get slower economic growth. And if you get slower economic growth and you keep monetary policy restrictive, you can get an accident. You know, at some point in time, as you'll see on this slide, the blue line shows that global manufacturing activity is now contracting again. And historically this has been associated with downward earnings revision. So again, the market is priced for perfection right now because you're training at high multiples and the assumption is that, you know, mission accomplished by the central banks, you'll get this economic soft landing and no impact on earnings. But I think an impact, a negative impact is coming if you can gauge on historical relationship between activity and earnings revision.

But then earning growth expectation will have to come down because right now they are still pretty high.

 Yeah. And remember we spoke to this back in July and say, listen, this is a bit high. It was expectations of 14% over the next 12 months. It's been revised a little bit down, but you're still expecting 12%. That's the red zone or pink zone on this slide. 12%, you know earnings per share growth globally, but note that every region in the world is showing a positive uptrend on earnings despite the fact that monetary policy remains restrictive. So we're going to get these rate cuts Denis, but monetary policy is not becoming accommodative anytime soon. So you're going to get below potential growth, which I think will impact earnings.

More to come then on that front.

I think so, yeah.

OK. If we come back to Canada, then you know, GDP still pretty high, but consumption, personal consumption are not there.

Yeah. So, if you focus of course on GDP, you'll say, ah, it was a better outcome than expected, but that's because government accounted for 50% of growth in the second quarter. If you look at consumer spending, the red line on this slide is pretty anemic, Denis. So, and that's impressive when you consider that population growth continues to surge in 2024. So to get the surge in population growth, this and only 0.6% growth in consumption means that your economy is not performing very well. So things are not better than elsewhere in Canada. It's actually it's a pretty tame GDP outcome in Q2.

Would you say that at this time, even if the Bank of Canada lowers rate, you know, before the Fed, they're not lowering fast enough to bring the consumption back?

It's a good question. I mean, the reason consumer spending is so weak is because households must devote 25% of wage increases to servicing their debt because interest rates are much higher than they were a few years ago. So considering all that, considering that inflation's coming down, there's going to be rate cuts. But at the end of the day, what you can see on this slide is that despite the fact that the Bank of Canada has cut rates already twice, the policy rate adjusted for inflation is barely coming down. So, monetary policy remains the most restrictive since 2006. Denis, what that means is expect slower growth in Canada and a higher unemployment rate, which will probably lead the Bank of Canada to accelerate the pace of rate cuts in the coming weeks. So yes, there will be collateral damage to the Canadian economy in the coming weeks. So but the good news, inflation is coming down. They can cut down to cut the rates aggressively, but there's still going to be an impact on earnings in Canada as there will be a negative impact elsewhere in the world.

Would you say that the Bank of Canada don't cut rate as much as they should because of the Fed not starting to do so?

You're right that they were probably a little bit shy of going more aggressively, but probably concerns about the Canadian dollar. But at this point in time, you know U.S. dollar has been weak. So Canadian dollar as hell is ground. So I think that opens the door for more aggressive rate cuts in Canada. Actually, our fixed income strategist who recently published their monthly and we're showing an acceleration of the pace of rate cuts from the Canadian perspective in the months ahead.

OK, now we said all of that. What do you expect has returned from different asset classes.

Investment conclusion, right. So well, Denis, if you trigger the SAHM rule, I'm sorry, historically it's not good for risk assets. So, historically 3 months following the triggering of the SAHM rule and note that this is one of the first time the Fed has not even cut rates despite the triggering of the Fed SAHM rule. You can see that the stock market whether it's the US or Canada, it's down about 9%. The only asset classes that play a defensive role would be gold prices and the US dollar. Gold because more volatility, the US dollar because more risk off environment and clearly the bond market is also somewhere to hide. So investment conclusion, Denis, I think there's going to be more volatility this fall as people reassess their earnings expectation. So it's time to be play a bit more defensive in our opinion. And just those US elections coming up, most uncertainty about policies, keep that in mind also.

Well, thank you, Stéfane, and thank you for being with us today. And above all, we expect to be with you next month, beginning of October. Have a good day. Thank you.

Hello, everyone and welcome to Economic Impact. Today is July 11, 2024, and as usual, I am with our Chief Economist, Stéfane Marion. Good morning, Stéfane.

Good morning, Denis.

Once again, we're going to start with the performance of the stock market. It's going well, huh?

Yeah, it's been a hot summer, not just temperature wise. Stock market is on fire. We have records pretty much everywhere around the planet. Notice, Denis, if we focus on the US it’s 17% up this year, but driven by sectors, 2 sector sectors in particular, it's anything related to IT or technology, media and telcos. Yeah.

And they're doing very, very well compared to the rest of the other sectors.

Massively well. So much so that you know, the market share of the TMT sector now accounts for 40% of the S&P 500's valuation, which is a big deal Denis because we haven't seen this in 20 years. So keep this in mind. It represents 40% of the market cap of US equities, but only 24% of earnings. So there's high hopes that to hear that the this sector will continue to deliver on the earnings front.

And not only analysts have hopes for the TMT sectors, but they have hopes also for the whole economy.

Oh yeah. And it's not just that, you know, earnings will continue to do well. It's actually that they will even do better going into the next 12 months. So economy wide US expectations for earnings to accelerate from, you know, roughly 8% where we are now to growth of 13%. Notice on the slide too for the IT sector, the expectations, as you will pick up speed on the earnings growth and reach a pretty impressive figure in the next 12 months, 20%, Denis. So you better hope that everything is fine.

They're drinking nice Kool-Aid, maybe. If you look at the economy and the news that we have and the data that we're collecting so far, it doesn't show that.

I don't mind if they're doing Kool-Aid, but there might be too much sugar in that Kool-Aid right now. Because if you look at the economic surprise index in the US, then it's the worst reading since 2015. So it's been a massive downward surprise recently. It doesn't mean that the economy is not growing, Denis, it's just growing much less rapidly than what we've seen in the past. And this is what you have to take into context. If your economic surprises are negative, can you actually deliver on better earnings growth? And what history suggests is, given the current reading that we're seeing on economic surprise, which is a 2 standard deviation, historically, earnings are actually revised down as opposed to being revised up. So that's the challenge for equity market price for perfection with an economy that does not decelerate. But unfortunately, that's not what we're seeing right now. Economic surprise suggests deceleration.

Yeah. To make things worse, the labor markets, you know, keep deteriorating.

So this is a topic we addressed in the past. You know, in order to, you know, boost your earnings, if you can't do with the higher sells, you have to increase your profit margins. If you increase your profit margins you might need to reposition your hiring pace. And what we're seeing in US right now is the unemployment rate is on the rise up above 4% for the first time since 2021. So clearly that's a big-ticket item for the economy because that's that 60% of GDP in US is determined by consumer spending. I can tell you that when the unemployment rate is rising, Denis, historically consumer spending does not accelerate.

And to keep going in the same direction. Our leading economic indicator keeps going downward.

Yeah, so this is where we are now. So the unemployment rate would be more coincident. So what about the outlook? Well, if you look at leading indicators in the US and leading economic indicators, it's actually back to where it was at the worst of the COVID recession. So again, Denis, it's just to say that anticipating a better economy in the months ahead might be a challenge because most indicators would suggest a weaker economy, not a stronger economy, which opens the door for rate cuts, don't get me wrong. But will the Fed be able to cut rates aggressively given where we already are and that monetary policy remains restrictive? So again, it's a challenge for earnings growth in the months ahead.

And if we come back to Canada, we'll look at the, you know, jobless rate. Not that good too. Well, it was 6.5% of the national level. But if you want to dig a little bit deeper to look at younger people, 15- to 24-year-old, I mean, you know, it's an unemployment rate above 13% for the first time in a decade so there's got to be some frustrated parents around the table nowadays. And it is an issue. And it does show that once the economy starts doing worse, well, yeah, younger people will be hit first. And this is exactly what we're seeing right now. So there's clearly a deceleration of the economy that's ongoing right now in this country. So let's not be too greedy on earnings growth also from a Canadian perspective.

Yeah. And at the same time, you know, we talked quite a lot about the soft landing. Is it still true? Well, the Bank of Canada has been, you know, going public saying that it's mission accomplished on a soft landing or it looks good for that. I would say, well, depends. Denis, there will always be a landing. I don't know if it's going to be soft or hard, but I can tell you in the GTA right now, the Greater Toronto Area, which is 20% of the Canadian economy, retail sales are actually contracting. And that's a reflection of deterioration in labor markets, restrictive monetary policy, mortgage interest rate resets, right. So yes, the economy is clearly slowing from beginning in perspective. So I don't know yet whether it's mission accomplished on a soft landing or not. I do believe that the Bank of Canada is in position to cut rates a little bit more aggressively in the months ahead. But monetary policy will still be restrictive by the end of this year, meaning the economy will underperform.

And to wrap it up a little bit, you know, we're seeing an economy that is slowing down then probably more rate cuts. But at the same time, we have analysts that have a prediction of pretty nice growth of, you know, revenue of a company or bottom line of a company. We need to be careful here.

Yeah, the next few weeks will be very telling. No, next few weeks will be very telling. We're about to start the earnings reporting season. So let's keep an eye on that. I do believe Denis, as you say that expectations are too aggressive from my standpoint.

We haven't talked inflation yet. It's our favorite subject. Now you're bringing us on what's going on in the eurozone.

Yeah, because you asked me to speak to politicians and I have to speak to politicians I have to speak to inflation at the same time. We saw elections in Europe where the incumbents have been defeated and the parties have been elected, whether it's UK or France, are promising to deliver on services to their people, but I'm just not sure they can be very aggressive on that front. And what that does is when you have these politicians that are promising more fiscal stimulus, well, that keeps your inflation and service component higher, which limits the ability for central bank to cut rates. And Denis that's a reality in the US, in Europe, even from a Canadian perspective, and that brings the great uncertainty as we look towards the next 12 months in 2025, how will central banks be able to cut rates if politicians continue to promise to spend more? And if you promise to spend more, keep an eye on service inflation that will determine the ability of these central banks to cut or not. Right now, I have to say some cuts are coming, but they cannot cut aggressively because of politicians.

OK, on that thank you, Stéfane. Thank you, everyone for being with us today. We'll see you back in September because in August, you know, it's holiday season for us too. Then hopefully we'll see you back in September. Thank you for joining us today.