To my clients:
It was a down week for North American stock markets with the Canadian TSX finishing down 3.1%; the U.S. Dow Jones Index finishing down 1.9%; and the U.S. S&P 500 finishing down 2.8%.
It’s another brief update this week. There are only so many different ways I can approach the current market environment without becoming excessively redundant. But it’s important for clients to know that I and RBC are vigilant in as we continue to evaluate conditions. Key observations I’d like to reiterate in point form include:
In our opinion, and per our 7-point scorecard, recession continues to be a very lower probability event. Economic data remains very strong.
Interest rates are assuredly going up, and perhaps aggressively so. Fed Chairman Jerome Powell hinted heavily that a 0.50% rate increase is coming at the net Fed meeting in May.
This would follow Canada’s own recent 0.50% rate increase.
After briefly (and minimally) inverting at the beginning of April, the 2 to 10-year yield curve has re-steepened.
Yield curves incorporating 30-day and 1-year rates on the short-end are significantly steeper.
Markets remain very volatile and unsettling.
Our message remains: since recession is not imminent, equities (i.e. stocks) should be given the benefit of the doubt. It’s not fun at times like this to maintain conviction in this approach, but our exhaustive research of market corrections in prior non-recessionary times clearly argues that it is the right one.
That’s it for this week. All the best,
Nick
Nick Scholte, CIM, FCSI
Senior Portfolio Manager
Scholte Wealth Management
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
3200-1055 West Georgia │ Vancouver, BC │ V6E 3P3
Toll Free: 1.844.665.9900 │Email: nick.scholte@rbc.com
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