| Left to Right: Corinne, Sarah, Mark, Peter, Nathalie and Jackson Gallivan Wealth Management Report: October 2024 Our thoughts go out to all of our clients impacted by Hurricane Helene in North Carolina & Florida. If you want to join us in donating to support relief efforts, this is a great summary of options from NBC news. A few topics our newsletter touches on this month:
TC Energy spinoff (South Bow Corporation SOBO-TSE): In June 2024, TC Energy approved the spin off of the firm’s liquids pipelines business (including Keystone). The spin off shares of South Bow Corp (SOBO) have now been received in the accounts of TC Energy shareholders. In discretionary/PIM portfolios we will take action on your behalf, but if you have questions about the spinoff, please do not hesitate to reach out. Ottawa Client Event (OCan Film Fest – Friday, November 8th): We are sponsoring a fun night at the Bytowne Cinema for the Ottawa Canadian Film Festival (OCAN24) where there will be a screening of Canadian short films. Please keep an eye out for the invitation next week. Our Thoughts: China Turning A Corner? It has been a busy few weeks with several issues garnering investor attention. The U.S. jobs report has taken on more importance given the Federal Reserve’s admission that it is watching it more closely. Elsewhere, investors have been preoccupied with the escalating conflict in the Middle East and the pending US presidential election. Meanwhile, the third quarter earnings season is nearly upon us, which we will expand on next month. Today following the North American equity rally we have experienced so far in 2024, we are broadening our scope to spotlight China, which is an important harbinger for what global growth might look like going forward. We admittedly do not discuss China as much as we should. After all, it is the world’s second largest economy. According to the International Monetary Fund (IMF), China is expected to account for more than 20% of global economic growth over the next few years, which is nearly twice as much as the U.S. It is also one of Europe’s biggest trade partners, and an important consumer of luxury goods. Finally, it is the world’s largest consumer of most commodities, making it relevant for Canada. China has experienced a slowing in its growth rate over the past decade – from nearly double-digit growth to a rate that is now closer to 5% - as the country has been deliberately trying to transition its economy from one led by government investment and construction, to one driven more by its consumer. After the country curbed its pandemic restrictions in late 2022, there were high hopes for a swift economic recovery driven by Chinese consumers who would enthusiastically spend their pandemic savings, following the pattern seen in other post-pandemic economies. Moreover, the central bank did its part by lowering various policy rates. But rather than stimulate demand and loan growth, the opposite has occurred: consumers and businesses have reduced their borrowing and spending. The weak housing market has been a big headwind. House prices have been on a downward trajectory for a few years and the country has done little to stabilize the market given their concerns over some of the excesses and an over-supply of homes that were built in the prior decade. With nearly 90% of Chinese households owning their homes, the fall in prices has left the average Chinese consumer feeling less wealthy and less confident in the outlook. It is a big reason why investors have increasingly felt that Chinese policymakers need to do more to address the depressed levels of consumer sentiment. In the past few weeks, a series of measures have been announced: interest rate cuts, funds to support the stock market, and the lowering of downpayment requirements on homes, amongst other things. Many of these tools have been deployed before, with limited success, but what stood out this time was the sheer breadth of the actions taken. Meanwhile, there has been a notable shift in tone from senior government officials, who expressed a willingness to take more direct measures to stimulate consumer spending, business investment, and address the property market crisis. Instead of merely trying to stabilize the property market, officials announced their commitment to “halt its decline”. The stronger language raises hope the government may be prepared to undertake a bigger fiscal response in the future to deal with some of the deflationary forces that have taken hold in recent years. Some difficult long-term headwinds for China remain: a shrinking population and a tense geopolitical climate. Nevertheless, a bigger commitment by policymakers to revive its consumer base would be a welcome development for global investors as it could provide a much-needed boost to one of the important engines of global growth. By the numbers (September): The TSX was up 3.2% and the S&P 500 was up 2.1% in U.S. dollars (2.4% in $CAD). The Europe, Australia & Far East index (EAFE) was up 0.9%, while the Emerging Markets index was up 6.7%. The Canadian bond market was up 1.9%. Interesting Listening/Reading
Regards, Mark, Peter, Sarah, Corinne, Nathalie & Jackson Gallivan Wealth Management RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / ™ Trademark(s) of Royal Bank of Canada. Used under licence. © 2024 RBC Dominion Securities Inc. All rights reserved. This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The strategies and advice in this report are provided for general guidance. Readers should consult their own Investment Advisor when planning to implement a strategy. Interest rates, market conditions, special offers, tax rulings, and other investment factors are subject to change. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / ™ Trademark(s) of Royal Bank of Canada. Used under licence. © 2024 RBC Dominion Securities Inc. All rights reserved. |