Market Factors: A magnetic investment opportunity

This edition of Market Factors starts by describing why magnets have become such a significant growth opportunity, and continues with more research showing that AI has been a dud so far in the workplace. The diversion talks catchiest songs, and as always we look ahead to the key data releases of the coming week.

Resources

Ex-China magnet and rare earth production ramps up

I hadn’t thought about magnets since early grade school in the 1970s but apparently they are now a big deal in the investment world and, thanks to U.S. military demand, they have geopolitical significance too. Western governments are no longer comfortable with China’s dominance in rare earth metals, a category that includes Neodymium iron boron (NdFeB) magnets, setting up huge opportunities for more local miners to fill the gap.

BofA Securities analyst Lawson Winder attended the Rare Earth Mines, Magnets and Motors conference in Toronto last week. His primary takeaway concerns the extremely strong demand for NdFeB magnets – global demand is set to double by 2035 (a roughly 9 per cent compound annual growth rate) and U.S. demand is set to increase fivefold (about 18 per cent annually).

Demand for NdFeB magnets is driven by electric vehicles (rising 11 per cent per year), robotics (29 per cent) and automated air mobility, more commonly known as drones (15 per cent).

MP Materials Corp. (MP-N) is front and center in Mr. Winder’s report. The company’s magnet production is virtually assured through its partnership with the U.S. Department of Defense, a well-funded client.

Iluka Resources Ltd. is the other prominent company in the report. They specialize in refining capacity for rare earth materials, a notoriously dirty process in China, and process the materials used to make magnets. Mr. Winder cautions, however, that significant rare earth revenue for Iluka is three years away.

Related companies not mentioned in the report include Texas-based USA Rare Earth Inc. (USAR-Q) – a producer of magnets – and magnet equipment provider Neo Performance Materials Inc. (NEO-T), based in Toronto. These more speculative stocks have been on a tear in 2025, up 152 per cent and 180 per cent, respectively. Both stocks have significantly exceeded the average analyst 12-month price target, which is often a sign of froth.

U.S.-China trade tensions have sent rare earth prices sharply higher in 2025, providing more motivation to speed new production.

The almost-certain demand, driven by both new technology and the U.S. military, makes the rare earth sector an interesting investment option. Investors should, however, consider any related purchase as speculative because of the specific, single industry focus of the growth story.

Tech Trends

AI not affecting labour markets yet

A study by Yale professors found that AI is having only minor effects on employment patterns so far, helping alleviate anxieties in professions previously seen to be in the crosshairs of automation.

The study found that the “broader labour market has not experienced a discernible disruption since ChatGPT’s release 33 months ago.” The professors were unsurprised by the results in light of historical precedents that suggest widespread change in labour markets occurs over decades rather than years.

The study did find some signs of disruption, but at levels only marginally higher than the adoption of the internet in the early 2000s.

The report includes a ton of detail for those interested but for most investors it is enough to recognize that AI will be implemented over many years. The AI skeptics will be loud in the near term but are likely to be wrong over the next two decades.

Diversions

A bad list of catchy songs

Prominent Canadian music journalist Alan Cross pointed to a vastly misguided research report from St Andrews University in Scotland attempting to identify the catchiest songs of all time. There are some good picks – Queen’s We Are the Champions and Baha Man’s Who Let the Dogs Out – and some incomprehensible choices from artists like The Proclaimers and Bon Jovi.

As a child of the 80s I went to Rolling Stone’s The 200 Best Songs of the 1980s knowing I’d find at least 20 songs catchier than the weaker ones in the St Andrews University list. This is despite my misgivings about Rolling Stone magazine, a group of people simultaneously stuck in the 1960s and attracted to mediocre pop like Bette Davis Eyes.

Here are my catchy song picks from the 80s list, in no particular order: Just Can’t Get Enough (Depeche Mode), Love Shack (B-52s), Super Freak (Rick James), Save it for Later (English Beat), Cruel Summer (Bananarama), Let the Music Play (Shannon), Town Called Malice (The Jam), Fool’s Gold (Stone Roses) and In between Days (The Cure).

Now, let’s see which list, mine or the Scotland one, gives readers the most earworms.

The essentials

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Globe Investor highlights

The latest stock picks and market predictions of CIBC’s Sid Mokhtari, who continues to outpace the S&P/TSX Composite Index

Investing professor Dr. George Athanassakos says trailing price-to-earnings ratios, not forward, are more reliable market indicators – which isn’t good news for investors right now

Why the recent pullback in ultra-long sovereign bond yields may prove short-lived

September saw a rush of new ETFs coming to market in Canada, with many targeting income investors

Jamie McGeever on how easier Fed policy is fueling the “everything rally” in financial assets, yet probably doing little to boost the labour market

What’s up next

The biggest economic report for the week is the domestic net change in employment for September that’s out on Friday. Economists now expect a gain of 5,000 new jobs. Month-over-month manufacturing sales for August will be released on the 15th.

Domestic profit reports include Richelieu Hardware Ltd. ($0.405 per share expected) and Aritzia Inc. ($0.389) on Thursday.

I will dispense with the U.S. economic calendar for the time being because I don’t know which releases will actually happen. Earnings results of note include PepsiCo Inc. ($2.265) on Thursday and Blackrock Inc. ($11.682) and Johnson & Johnson next Tuesday. Abbott Laboratories ($1.301) reports next Wednesday.

See our full earnings and economic calendar here