Markets should be choppy after Israel and the US trade bombing campaigns with Iran, which look set to continue. Oil futures added >5%, extending the near-20% rally leading up to the attack…

… which should drive short-term equity movement (producers up, airlines down). What happens next depends on the conflict’s duration, with supply chain risk growing the longer ship traffic through the Strait of Hormuz is stalled.

Following its Venezuelan operation in January, US success in Iran would represent the second major disruption to Chinese oil supply this year… let’s see.

Friday’s GDP print came in better than expected, gaining 0.2% M/M and ending Q4 on a positive note…

… despite being down 0.2% versus Q3, driven almost entirely by an inventory drawdown concentrated in manufacturing and wholesale trade…

… which drove non-farm inventories into the red on the year - the first negative print since 2020.

That offset higher exports and fixed capital formation, which added another ~1% in Q4 - marking the fourth straight gain…

… driven primarily by government investment in weapons systems.

Combine that with a 0.4% increase in household consumption (0.6% on a per capita basis due to population decline)…

… and the final domestic demand picture improved versus the prior quarter.

Extendicare (EXE) was up 10% on its Q4 results, which showed continued strength in the home health care segment - with 15% organic volume growth…

… and contribution from its recent $570M acquisition of CTG. Combined with consistent mid-single-digit growth in long-term care, the company’s scale is driving margin expansion…

… which has kept valuation in check, despite a >300% run in shares over the past three years. With an aging population and supply constraints in long-term care…

… Extendicare is well positioned to keep the momentum going.

Some of the consumer discretionary basket got hammered Friday in a move similar to the engineering services drawdown two weeks ago…

… that we chalked up to funds reducing exposure to crowded positions. With no fundamental catalyst behind this sell-off either, that theory is looking more likely.

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