Market Factors: Amazon’s precedent means investment opportunity and social upheaval

This edition of Market Factors starts with an automation trend enriching companies and dampening worker prospects. Strategists starting to lean bearish makes up section two, and the diversion covers ways the pandemic changed everyday life for good.

AI

Amazon.com, Walmart, lead automation charge

The biggest story for investors this week is the New York Times report that Amazon.com is set to replace 600,000 jobs with AI-centered robots and related automation. A quick search – using Microsoft’s Copilot AI that I have used to replace previously popular search sites – finds that Walmart is also in the midst of an automation boom.

Me being me, the first thing I did after seeing the Times story was look for investment opportunities – vendors getting paid to assist the corporate giants in making humans redundant. In Amazon.com’s case, this ghoulish task was unsuccessful. Amazon previously bought its robotics partner, Kiva Systems, in 2012 and now does a lot of the work internally. Much of the outsourced expertise is supplied by a company called Covariant which, unfortunately for investors, is private.

Walmart used to have an internal robotics and automation operation but it was sold to Symbotic Inc. (SYM-Q) as part of a long-term tie up between the two companies. Symbotic will provide AI-enabled robots to further automate online pickup and delivery processes and estimates the deal will add US$5-billion to its business backlog.

Amazon and Walmart are two of the best-run companies on the planet and they are leaders in operational efficiency. Walmart, for instance, rose to prominence with a novel just-in-time warehouse delivery process that kept inventories lean and profit margins high. Just in time is now the standard in retail operations worldwide.

If global industry follows the automation trend so clearly underway at Amazon and Walmart we’ll have both investment opportunities and social upheaval. Symbotic is up 325 per cent (not a typo) since the end of April 2025 but this is no consolation for jobless unskilled workers looking for a paycheque.

Automation makes too much sense for companies big enough to afford the sizeable upfront costs. Robots don’t need benefits, don’t get sick, and never complain. It appears that AI is also expanding the potential for automation.

A pervasive automation trend will make for a dire job market where even the crappiest of jobs are hard to find. A lot of people will be justifiably miserable without financial support.

The internet bubble reaffirmed a historical pattern of technological advancement – invention, then finance bubble, then widespread dispersion of the technology into the economy. Automation is part of the AI dispersion stage and even if this is early in the cycle, it would seem inevitable over the medium term.

Equities

Wall Street bulls having second thoughts

BofA Securities’ head of U.S. equity and quantitative strategy Savita Subramanian has written recent, bull-friendly reports identifying the modern “asset-light” economy as justification for higher average valuation levels for the S&P 500. Ms. Subramanian’s latest piece, however, took a decided turn towards the bearish.

The strategist noted that of the 20 valuation metrics she closely tracks, four of them including price to operating cash flow are at record levels. Five others – price to GAAP EPS, median price to earnings, EV/EBITDA, the S&P 500 vs WTI crude and the S&P 500 relative to the Russell 2000 – have exceeded the 1999-2000 highs.

All told, 19 of the 20 valuation metrics are currently above their long-term averages.

BofA has a proprietary bear market checklist that includes consumer confidence, long-term growth expectations, bank lending standards, merger and acquisition activity and cheap stock performance relative to expensive. Luckily, only 60 per cent are currently triggered, compared to at least 70 per cent when previous market peaks were hit.

Ms. Subramanian is also concerned about recent credit issues in the U.S. regional bank sector and also liquidity issues if major pension funds sell holdings of passive S&P 500-tracking ETFs.

The strategist’s advice for investors is to be extremely selective, adding only stocks with the combination of price momentum, positive earnings revisions and attractive valuations.

Diversions

COVID caused permanent social change

Stripe Inc. CEO Patrick Collison took to X to describe his view on how the pandemic changed the world. I had to have Marginal Revolution point this out because I don’t go on X anymore.

Mr. Collison first noted that in France, small culturally important stores like fromageries had closed and replaced by pizza places. This is a phenomenon I’ve seen here in Toronto, notably with small restaurants, and a lot of retail space near King and Yonge remains empty.

Participation in stock markets soared during COVID and remains at high levels, supporting stock prices. Mr. Collison also recounted conversations with academics who agree that post-pandemic students are less likely to attend class or complete reading assignments.

Working from home remains popular and the bustling workplace may be a thing of he past. Also, I am among those who have not lost all of the COVID-19 pounds I gained during lockdowns.

The essentials

Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here to visit our Inside the Market page.

Globe Investor highlights

Morgan Housel on why investors hate spending their savings – and answers to other questions we posed of him

From FOMO to fear of margin calls: gold’s wild rise enters a new stage

David Berman reports on three ways our readers are navigating a possible market bubble

The U.S. is cementing a higher inflation regime as investors abandon their worries over consumer prices, reports Mike Dolan. On a related thought, Jamie McGeever writes on how Jerome Powell’s emphasis on employment, not inflation, is behind the recent downturn in Treasury yields

Global money managers are circling back to Japan’s stock and debt markets amid political leadership changes

What’s up next

The domestic economic news calendar has two big events over the next week. Retail sales data for August is out on Thursday and economists expect a 1.0 per cent month-over-month increase. The Bank of Canada will announce its decision on interest rates next Wednesday. Derivatives markets indicate a roughly 71 per cent chance of a rate cut, according to Bloomberg data.

The earnings calendar is picking up steam. Rogers Communications Inc. reports results on Thursday ($1.256 per share expected) then Celestica Inc. (U$1.477) and TMX Group Ltd. ($0.488) follow on Monday. Advantage Energy Ltd. ($0.134) profits will be announced Tuesday and then Wednesday, the big day, Gildan Activewear Inc. (US$0.983), Agnico-Eagle Mines Ltd. (US$1.883), Allied Properties REIT ($0.509) and Canadian Pacific Kansas City ($1.1041) all report results.

U.S. consumer prices for September will be released this Friday with economist expectations pegged at 0.4 per cent month over month higher. The S&P Global U.S. Manufacturing PMI announcement, also on Friday, will offer a preliminary look at activity in October – projections indicate an expansionary 51.9 reading expected.

U.S. durable goods for September are expected to show a 0.6 per cent month-over-month decline when reported on Tuesday. The Federal Reserve will announce their decision on interest rates next Wednesday.

Honeywell International Inc. ($2.568) , Blackstone Inc. ($1.225), and Ford Motor Co. ($0.36) post earnings on Thursday. Procter & Gamble Co.’s ($1.885) numbers are out Friday. Keurig Dr Pepper Inc. ($0.539) will release earnings on Monday.

Tuesday is a big day with Corning Inc. ($0.665), Royal Caribbean Cruises Ltd.($5.675), United Parcel Service Inc. ($1.32), and American Tower Corp ($2.472) posting profits. Wednesday is equally stacked with Visa Inc. ($2.9767), Caterpillar Inc. ($4.519), Microsoft Corp. ($3.684), Alphabet Inc. ($2.279), Meta Platforms Inc. ($6.739) and Starbucks ($0.551) all reporting.

See our full earnings and economic calendar here