To my clients:
It was a mixed week for North American stock markets with the Canadian TSX finishing up 0.2%; the U.S. Dow Jones Index down 1.0%; and the U.S. S&P 500 down 1.2%.
Despite this being the first week of a new month seeing the usual release of the “Big 3” economic indicators, this will be an exceedingly short update this week. Why? Because inflation remains the dominant concern, and it is a topic I’ve covered relentlessly throughout the first 5 months of 2022. Next Friday’s release of the Consumer Price Index (the most widely tracked measure of inflation) will undoubtedly fuel or quell these concerns.
With respect to the aforementioned Big 3 economic indicators, once again these collectively painted a picture of a strong economy. The ISM Manufacturing Index came in at 56.1 both exceeded expectations and the prior month’s reading; so too for the monthly U.S. Employment Report showing very strong labor demand at 390,000 new jobs created in May. Admittedly, at 55.9, the ISM Services Index missed expectation and slowed from the prior month, but it remained at levels widely considered to be healthy.
The overall better than expected readings (perhaps counterintuitively) led to more market skittishness as fears were stoked that inflation might continue to escalate and the Fed will be forced to continue its aggressive rate hiking path farther and longer than anticipated, ultimately forcing the economy into recession. Clients will know this is not the scenario I and RBC envision. We will learn more next Friday.
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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