Good afternoon,

As the war rages on, and peace negotiations stop and start, we begin to adjust to what it looks like to carry on.

 

RBC Economics: It’s a bit long, but if you’re interested, this is a good, comprehensive snapshot of financial markets, and their response to the tumultuous circumstances we find ourselves negotiating. Worth the skimming, if only to give some data-rich context to how it all might translate. Details here: More Ukraine / Pandemic / China / Mixed economy / Inflation musing / Hawkish central banks / Recession risk - https://www.rbcgam.com/en/ca/article/macromemo-march-29-april-11-2022/detail?utm_medium=email

 

Let’s get right to the charts:

 

Oil’s up. And it’s about time!

Energy stocks have done well this year, outperforming every other sector on the S&P/TSX Composite Index. As Bloomberg reports, the “rise in commodity prices fueled by supply disruptions has handed energy stocks their best first quarter on record. The MSCI AC World Energy Index climbed 20% in the three months ended March as the Russia-Ukraine war caused further spikes in food and energy prices.

 

 

Even before the Ukrainian Conflict:

 

Canada admitted nearly 140,000 new immigrants in Q4 alone. That’s a record tally, with plenty more on the way. A simple math exercise: Canada aims to welcome 430-450K immigrants per year through 2024, implying a quarterly inflow of ~110,000 (on average). Immigration’s contribution to Canadian population growth is truly hard to overstate, accounting for almost 90% of last year’s population gain (see chart below).”

 

 

Europe is Feeling it.

 

As highlighted by Bloomberg Intelligence, the valuation gaps between European and U.S. equities have grown. “European equities’ relative valuation to U.S. peers has dived over worries its economy will be more strongly affected by the war in Ukraine. The Stoxx Europe 600 Index is now trading at a 30% discount to the S&P 500 gauge, based on forward P/E ratios, the steepest gap since 2005

 

 

Weekly Wrap:

• Same shock, different effects – The Russia-Ukraine conflict and related sanctions have added stress on the global economic recovery, intensifying inflationary and supply chain threats. We look at why the U.S. and Canadian economies are better equipped to handle these risks than European economies, and how that factors into equity portfolio construction.
• The U.S. Treasury yield curve continues to flatten – Markets are pricing in aggressive tightening by the Fed as it attempts to bring inflation under control, while investors ponder the implications.
• Regional highlights: Bank of Canada prepared to act “forcefully” on inflation; Euro area bonds continue their selloff; Lockdowns hit China’s economy.

 

Read the Full Report Here: Global Insight Weekly

 

Enjoy your weekend. Spring is near!

 

Mark