Good afternoon,
It’s been at least 2 ½ years since I’ve had a significant of cold or flu, but this week the Covid monster came our way. I seem to be one of the lucky ones who’ll get through it quickly, but it’s always sobering to be reminded how precious ones good health is.
Canada helps heat Europe. Amidst the ongoing calamity brought on by Russia’s invasion of Ukraine, Canadian Finance Minister Chrystia Freeland has reaffirmed support for public and private sector investment into liquefied natural gas export terminals throughout the Maritimes. Freeland stated she believes that it’s very important for Canada to step up and help replace that [Russian] energy. And then a certain teenage activist fell off her pony.
Rate Fix: Aside from a stuttering equity market rebound, if there’s any good news out there it might be for those investing in fixed income. The chart below from (from BlackRock) outlines rates returning to pre-2009 levels, at least for now. Also, the whole thing looks like it’s made from candy.
Back Home: Here’s a piece by RBC Economics which reviews the current housing market in Canada, where a long-awaited correction is now underway. https://thoughtleadership.rbc.com/downturn-deepens-in-canadas-housing-markets/
Briefly: Canadian homes less affordable
Canadian home buyers are up against, as shown in the chart below. “RBC’s aggregate affordability reached 54.0% in the first quarter of 2022—the highest level of unaffordability since the early 1990s. Ownership costs rose in every market we track, though the degree of pain felt by buyers varies dramatically across the country. However, we see the burgeoning price correction eventually bringing some relief to buyers. Property values, already slipping, are likely to fall more than 10% in the coming year.
Equity Markets:
An argument against stale ideas: As shown in the charts to the right and below, the top companies in the S&P 500 have a very different look than 10 and 22 years ago, and may well look different in the future, if the pace of change and unpredictability pulls forward
There’s lots of familiar names on the
2012 S&P500 top-10 list,
but it’s a decidedly different mix than
today. Remember when
the iPhone was just a baby!
The unsinkable GE? Today that
legendary corporate Pacman they
used to write textbooks about is a wisp
of its former self. But in 2000,
it topped the S&P500!
Global Insight Monthly for August 2022
Highlights:
As earnings go, so goes the market
Fresh off a market bounce that was partly sparked by better-than-feared Q2 earnings reports, investors should consider where U.S. corporate profits could be headed next year. While we think the bulk of market risks are in the rearview mirror, it may take more time to reveal whether the economic and earnings vulnerabilities have been fully incorporated into stock prices.
U.S. recession scorecard update: Trouble with the curve
One of our most reliable indicators of U.S. recession—the yield curve—has flipped to negative and is now strongly suggesting a recession is on the way. Most others on the scorecard remain positive but less decidedly so than was true a few months ago. PDF link
Enjoy your weekend!
Mark