THURSDAY, NOVEMBER 20, 2025 | THE GLOBE AND MAIL G B13 EYE ON EQUITIES DAVID LEEDER TELUS (T-TSX) CLOSE $19.02, UP 2¢ QUEBECOR (QBR.B-TSX) CLOSE $52.40, DOWN 48¢ PMET RESOURCES (PMET-TSX) CLOSE $4.56, UP 58¢ POWER CORP. OF CANADA (POW-TSX) CLOSE $68.17, DOWN 14¢ IGM FINANCIAL (IGM-TSX) CLOSE $55.94, UP 44¢ In response to a recent decline in share price, National Bank Finan- cial analyst Adam Shine raised his rating for Telus Corp. to “out- perform” from “sector perform” previously, expecting the Van- couver-based telecommunica- tions company to revisit its divi- dend growth policy before any cuts are made. Target: Mr. Shine trimmed his target for Telus shares to $21 from $23. The consensus target on the Street is $22.70. In a separate client note, Mr. Shine lowered his rating for Quebecor Inc. to “sector per- form” from an “outperform” rat- ing after “impressive” recent share price appreciation with it now approaching his target “that has been repeatedly raised.” Target: Waiting for “a better buy- ing opportunity” to jump back in, he reiterated a $54 target which exceeds the current consensus of $51.67. RBC Capital Markets analyst Kaan Peker thinks PMET Resources Inc. “offers investors Tier-1 lithi- um resource scale, strategic OEM alignment, and leverage to the build- out of a North American battery supply chain.” Target: With its Shaakichiuwaa- naan project now North Ameri- ca’s largest undeveloped hard- rock lithium resource, he sees the Montreal-based company as a “cornerstone for North America’s electrification,” leading him to initiate coverage with an “outper- form” rating and $4.70 target. Consensus is $7.34. RBC Dominion Securities analyst Bart Dziarski said Power Corpo- ration of Canada “continues to be a strong capital return story with a 3.6-per-cent dividend yield [the lowest since Q3/21] and con- tinued share repurchases [10.0 million shares repurchased year- to-date] while maintaining mul- tiple levers of growth [i.e. Sa- gard].” Target: Maintaining his “sector perform” rating, the analyst raised his target to $68 from $60. Consensus is $71.88. Expecting an improvement in new flows, CIBC World Markets analyst Scott Fletcher initiated coverage of IGM Financial Inc. with a “neutral” rating, touting “a diversified portfolio at a fair price.” “We believe that momen- tum can be sustained, as Cana- dian consumer expectations support an improvement in household savings rates, a metric historically correlated with fund flows,” he said. Target: He set a $61 target, which falls $1 below the consensus. I f 2025 was dominated by the Trump tariff war and the AI capital spending boom, 2026 will be the year in which the equity market bubble gets resolv- ed. And there is a lot riding on this, be- cause absent the capex and debt binge over the proliferation of data centres, and the equity “wealth effect” on high- end consumers that has driven the per- sonal savings rate sharply lower, the U.S. economy would already be in recession. The Chinese year of the horse kicks off in February, and I sense we’re shifting in- to a stumble, not a gait. The biggest risk is that, as was the case with every price bubble that fol- lowed a major technologi- cal breakthrough, gnawing realization begins to set in that perhaps just a little too much revenue and earn- ings growth got priced in during the initial wave of uber-enthusiasm. Those who haven’t seen this play out before should read a few history books. The Shiller cyclically ad- justed price-to-earnings ra- tio has expanded by almost five points since May to 39.5 times, and now exceeds every prior bubble peak in the past century outside of the unpreceden- ted tech mania in the late 1990s and early 2000s. This compares with the 1929 bub- ble peak of 33 times, the Nifty Fifty peak in the late 1960s of 24 times, and the 1987 precrash peak of 18 times. The average bubble peak in this valuation metric is 26 times. With it now pressing against 40 times – we are in the stratosphere. The surge in valuations has coincided with investor sentiment indexes soaring off the charts, which happens to be a con- trary negative. Herd mentality. The mad- ness of crowds. An overwhelming con- sensus. A red flag. When you are priced for perfection, and are expecting perfec- tion, disappointment always follows be- cause the world is not perfect. This is the major theme for 2026 – what I call The Great Reassessment. This is definitely not the first price bubble in the S&P 500 we have experi- enced. Remember – a 0.5 standard devia- tion represents a plain-vanilla bull mar- ket; a one standard-deviation event means we have moved into a mania phase; and breaking above two standard deviations relative to the historical norm is a definitive bubble. We’ve now moved well above that point. Generative artificial intelligence has been driving this market euphoria. But we’re not in a bubble in terms of the idea, the concept and the shift in the innovation curve. The bubble always is in “animal spir- its” – that is, it is only a bubble in the be- haviour of the investment community as visions of unrealistic future revenue and profit streams get way over their skis. We moved into an official price bubble in June, 2024, when the S&P 500 reached two standard deviations relative to the historical norm. The historical record shows that the median length of the time we spend in a bubble phase is 16 months. Therefore, if past is pres- cient, that would mean the bubble reached its maxi- mum point at the S&P 500 peak back on Oct. 28. Histo- ry is rhyming. Nobody ever said you can’t make money in a bub- ble; the main message is more that the bull market in this phase has gone into “extra innings.” In fact, over this median 16-month length of time that we are in a bubble phase, the S&P 500 makes a median advance of 25 per cent. This time around? Try 27 per cent. And as is typically the case when the stock market defies gravity in these epi- sodes, everyone from Wall Street strate- gists to the media to academia wax on about how things are different this time. There is, in fact, no doubt that generative AI is different, just as the internet was back in the late 1990s. What isn’t differ- ent is investor behaviour and, as 19th- century Scottish writer Charles Mackay would put it, “the madness of crowds.” And it is this madness that will natu- rally dissipate as we move back to sanity in 2026, and benefit only those who exer- cised patience, resolve and diligence during this past year of excess but unjus- tified returns, and those with the liquid- ity to pick up the pieces of shredded bal- loon as this bubble bursts, as they all do. Get ready for this market bubble to burst in 2026 Shiller P/E, length of bull run and standard-deviation measures are red flags that signal a shift is near DAVID ROSENBERG OPINION When you are priced for perfection, and are expecting perfection, disappointment always follows because the world is not perfect. This is the major theme for 2026 – what I call The Great Reassessment. M y teenaged daughter often complains about being un- lucky, but her registered education savings plan (RESP) suggests anything but: It has grown steadily over the past 17 years, thanks partly to good fortune. All right, I’ll take a little credit here. I steered steady contributions into low- cost, diversified funds with a few sound stock picks on the side. But let’s be honest. My daughter was born in November, 2008, when the fi- nancial crisis was battering stocks into cheap, unwanted pulp. The recovery from those lows has been spectacular: The S&P 500 has gained 1,137 per cent, including rein- vested dividends. Canada’s S&P/TSX Composite Index is up 555 per cent, also including dividends. My daughter’s RESP – tax-sheltered savings that can be put toward the cost of postsecondary education – benefited immensely from this prolonged bull market. Each year’s contribution caught the next wave of the equity rally. She got lucky with high interest rates, too. When I wanted to take some risk off the table over the past couple of years – as university approached and our time- frame grew shorter – guaranteed invest- ment certificates and money market funds delivered enticing yields as high as 5 per cent. But parents with young children face a very different investing climate today. Stocks aren’t cheap. Some observers are voicing concerns about a possible equity bubble, which could lead to a prolonged downturn if it bursts. And recent interest-rate cuts are eroding the allure of safe GICs and money market funds. But do not despair, because RESPs have a couple of built-in features that should help even if the broader market fails to deliver stellar returns in the years ahead. For starters, parents get a 20-per-cent booster. That’s because for every annual con- tribution up to $2,500, the government adds 20 per cent as a grant. So that $2,500 becomes $3,000. These annual grants can add up to as much as $7,200 over the life of the plan – turning total contributions of $36,000 into $43,200 without risking a penny in the market. Another advantage of RESPs: Since the grants reward parents for spreading out contributions over many years, the plans can deliver the benefits of dollar- cost averaging. This slow-and-steady approach to in- vesting tends to smooth out market volatility from year to year and lowers concerns about buying stocks at a bub- bly peak. If there’s a sell-off, you can benefit from cheaper stocks when you make your next contribution. Okay, you are allowed to make far bigger contributions – up to a lifetime maximum of $50,000 – if you are will- ing to forgo most government grants. And yeah, you can produce some daz- zling returns using this approach if markets co-operate. But that’s a big “if.” Making one investment and forgoing most government grants brings a lot of risk, especially when markets look frothy. Steady contributions, on the other hand, should deliver a smoother ride. The takeaway? If you’re just starting out on this journey for your child’s fu- ture education, and you’re worried about the current heights of the stock market, breathe easy. Luck certainly helps, but it’s not essential. ISTOCK It’s been a golden age for RESPs. What will follow? DAVID BERMAN OPINION REPORT ON BUSINESS | U.S. and Canadian stocks climbed on Wednesday, clawing back some ground lost during the recent sell-off as investors positioned themselves ahead of Nvidia’s much-anticipated quar- terly results and crucial employ- ment data that had been unavail- able during the longest-ever U.S. government shutdown. All three major U.S. stock indexes closed in positive territo- ry, with tech strength putting the Nasdaq out front. The S&P/TSX Composite Index outperformed all of them, rising 0.8 per cent. Chipmaker Nvidia, which has come to represent the nascent artificial intelligence technology that has powered much of the stock market’s rally in recent months, reported better-than-ex- pected earnings and forecast fourth-quarter revenue above es- timates. Shares rose 5 per cent in postmarket trading. Shares of Advanced Micro De- vices rose 2.8 per cent after the bell, while Alphabet was up 1.6 per cent and Palantir Technolo- gies was up 4 per cent. “The market is breathing a big, collective sigh of relief because Nvidia is confirming that AI de- mand is strong,” said Adam Sar- han, chief executive of 50 Park Investments in New York. “If it sticks and stays by tomorrow’s close … this little pullback in the market could end.” The S&P 500 is still down more than 3 per cent from its October highs. Minutes from the Fed’s Octo- ber meeting showed policy mak- ers were more divided than usu- al, lowering interest rates even as some members cautioned the move could quell efforts to cool inflation. The recently ended govern- ment shutdown resulted in a backlog of official economic da- ta, which is now beginning to flow. The Labor Department’s September employment report is slated for release on Thursday. Should the report fall short of ex- pectations, it could affect the U.S. Federal Reserve’s interest rate de- cision at the conclusion of next month’s monetary policy meet- ing. Even so, the Labor Depart- ment announced it would re- lease a combined October/No- vember employment report as the shutdown hindered critical data collection, so the Fed will have less information on the state of the labor market when it meets in December. The Dow Jones Industrial Av- erage rose 47.03 points, or 0.10 per cent, to 46,138.77, the S&P 500 gained 24.87 points, or 0.38 per cent, to 6,642.19 and the Nas- daq Composite rose 131.38 points, or 0.59 per cent, to 22,564.23. The S&P/TSX Composite In- dex ended up 241.95 points at 30,278.41. Brookfield Asset Management launched a US$100-billion AI in- frastructure program in partner- ship with Nvidia and Kuwait In- vestment Authority as demand for computing and energy to support AI applications acceler- ates. Shares of Brookfield Asset Management were up 2.1 per cent. The Toronto market’s technol- ogy sector rose 2.3 per cent, with shares of e-commerce company Shopify Inc up 4.6 per cent. The materials group, which in- cludes metal mining shares, add- ed 1.3 per cent as gold and copper prices rose. The energy sector was under pressure as crude pric- es slid on reports of a U.S.-pro- posed resolution to Russia’s war on Ukraine. REUTERS, GLOBE STAFF TSX ends higher as tech stocks rally ahead of Nvidia results