RBC Economics expects BoC will deliver 25bp hike at the January 25th meeting to 4.50% before pausing. This adds to the 400 basis points of hikes in 2022. Keep in mind the current prime rate in Canada is 6.45%. The prime rate, also known as the prime lending rate, is the annual interest rate Canada’s major banks and financial institutions use to set interest rates for variable loans and lines of credit, including variable-rate mortgages. With inflation driven by global factors appearing to have peaked, particularly those relating to energy and global supply chains, RBC Economics expects central banks’ attention to turn towards the tight labour market conditions. Ultimately, RBC Economics has the view that central banks will raise interest rates by less than what’s currently being priced into markets.

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Portfolio Notes

(+) indicates a positive development, (-) indicates negative, and (~) indicates neutral

(+) Bank of America (BAC-US) beat estimates on the top and bottom lines for the fourth quarter. A sharp rise in net interest income helped the results, though management cautioned that the metric could decline sequentially in the first quarter. CEO Brian Moynihan also said that a mild recession was the firm’s baseline assumption for 2023. Owned in US Portfolio.

(+) Freeport-McMoRan (FCX-US) Copper prices pushed past $9K/metric ton this week for the first time since June on optimism over a post-COVID recovery in China, which consumes more than half the world's copper. Shares of Freeport McMoran, the world's second largest copper producer after Chilean state company Codelco, have surged 18% already this year. Metals also are supported by the weaker dollar, which has slipped to near a seven-month low as traders anticipate the U.S. Federal Reserve turning less hawkish. Owned in US and Opportunity Portfolios.

(+) Hecla Mining Company (HL-US) announced positive guidance for preliminary silver and gold production for the fourth quarter and full year 2022. Hecla is the fastest growing silver producer with a 40% increase in production since 2018. This sustainable growth is due to the continued strong performance of all of their projects. Hecla could achieve as much as 17 million ounces of silver production, and would make Hecla the largest silver producer not only in the United States but also in Canada. With silver's growing use in the solar industry and the focus on clean and green energy, this is an exciting time to be the leading silver producer in the world's best jurisdictions. Owned in Opportunity Portfolio.

(+) JPMorgan (JPM-US) Shares of the biggest U.S. bank by assets rose after the firm posted fourth-quarter profit and revenue that topped expectations. The New York-based bank said profit jumped 6% from the year earlier period to $11.01 billion, or $3.57 per share. Interest income at the bank surged 48% on higher rates and loan growth. Owned in US Portfolio.

(+) Louis Vuitton (LVMUY-US) A new year brings a leadership reshuffle to the ranks of Louis Vuitton Moët Hennessey, the world’s largest luxury goods group by sales, as Bernard Arnault continues to promote his children to key posts within his empire. Arnault, the world’s richest person, appointed his daughter Delphine to run Dior, LVMH’s second-largest brand. Pietro Beccari, who has been Dior C.E.O. since 2018, was named the chief executive of LVMH’s flagship brand Louis Vuitton, which accounts for almost two-thirds of the company’s annual operating profit. The luxury conglomerate has become a family affair. Antoine Arnault, 45, is C.E.O. of Christian Dior SE, the holding company through which the Arnaults control LVMH. Alexandre Arnault, 30, is the executive vice president of product and communications at Tiffany & Company. Frédéric Arnault, 27, is the chief executive of TAG Heuer. Jean Arnault, 24, was promoted in November to the role of watches director at Louis Vuitton. Demand for LVMH handbags, shoes and designer clothes has proved robust, even with the global economy in a downturn and Covid hurting sales in mainland China, one of its most important global markets. Owned in Core Portfolio.

(+) Microsoft (MSFT-US) Microsoft is reportedly in talks to make a substantial investment in the owner of ChatGPT, OpenAI, while also discussing whether to integrate the noteworthy technology into its services, like its Bing search engine, Outlook, Word and more. Such an initiative from Microsoft would be seen as a smart, strategic move from the tech giant. Earlier reports indicate that they could inject $10B into OpenAI at a $29B valuation and then receive 75% of the company's profits until its investment is recouped. From there, it would hold 49% of OpenAI, while other investors own 49% and the remaining 2% would be held by its nonprofit parent. Owned in Core and US Portfolio.

(+) UnitedHealth (UNH-US) The health-care stock advanced after the company surpassed Wall Street’s fourth-quarter expectations. UnitedHealth reported adjusted earnings of $5.34 a share on $82.8 billion in revenue. Analysts polled by Refinitiv expected earnings of $5.17 per share on revenues of $82.59 billion. Owned in the US Portfolio.

Weekend Reading

RBC MacroMemo - January 10 – January 23, 2023 COVID-19 / China / Ukraine / Oil / Employment / Business weakness / Happy inflation / Productivity assumptions/ U.S. politics / Climate change RBC GAM

How much water is in California’s reservoirs? It has rained nonstop for several weeks in parts of California. All the rivers and creeks are overflowing, flooding in low level areas and tree falls are common. They have not seen this much rain in the last decade. But the good news is the reservoirs are filling up. This chart describes that well. ENGAGING DATA

The rise and fall of 15-minute delivery startups, an oral history The people interviewed for the article have mixed opinions on whether the business can work at all. MODERN RETAIL

Microsoft Looks to Add OpenAI’s Chatbot Technology to Word, Email THE INFORMATION

Byron Wien and Joe Zidle: The Ten Surprises of 2023 In this edition of the Surprises – a series Byron has been publishing since 1986 – the strategists outline unexpected events that could shape the political, economic and financial landscape in 2023. BLACKSTONE

RBC client guide to 2022 tax reporting This guide summarizes the important dates and required tax information to prepare your annual tax return. It also includes a handy list of potential tax slips you may receive from RBC Dominion Securities® (depending on your investment holdings and account activity). Tax reporting guide – RBC Wealth Management

Is Millennial Gold Now . . . Just “Gold”? When we look at Gold today, it has been outperforming equities over the past 12 months gaining 4% versus SPX’s 16% loss. However, it is breakeven over 3 years, and on a longer timeline, it lags, often dramatically. Is gold a trading vehicle or an investment vehicle? RITHOLTZ

The Best Way to Shovel Snow I didn't realize there were instructions. ART OF MANLINESS

How the First Home Savings Account (FHSA) works The First Home Savings Account

is a type of registered savings plan for Canadians saving to buy their first home. Canadian residents aged 18 years or older can open an FHSA to save towards the purchase of a home in Canada. You cannot have an FHSA if you have owned a home within the previous four years. GET SMARTER ABOUT MONEY

AI and the Big Five The story of 2022 was the emergence of AI, first with image generation models, including DALL-E, MidJourney, and the open source Stable Diffusion, and then ChatGPT, the first text-generation model to break through in a major way. It seems clear to me that this is a new epoch in technology. STRATECHERY