To my clients:
It was a down week for North American stock markets with the Canadian TSX finishing down 1.2%; the U.S. Dow Jones Index down 1.9%; and the U.S. S&P 500 finishing down 1.9%.
AN FYI… Brenda will be sending out an email next week to allow clients to schedule their annual review. This year we will be offering three different review options and I have no preference as to what clients select. Whichever works best for your circumstances is perfectly fine with me and I’d encourage you to select accordingly. The three options are:
1) In-person review
2) Video conference review
3) NEW: telephone review with a pdf review package emailed beforehand. The package emailed will be identical to that presented during in-person and video conference reviews.
Another short update emphasizing stronger than expected economic data and reduced rate cut expectations…
On economic data, it is the first full week of the new year and with it the usual Big 3 economic indicators (in actuality, the first of these big 3 was reported last Friday). While the ISM Manufacturing Index again contracted for the 24th time in the past 25 months, it nonetheless surprised to the upside with a reading of 49.3, and is knocking on the door of a return to expansion (any reading above 50.0 indicates expansion). Meanwhile, the ISM Services Index (representing nearly 80% of the U.S. economy) also surprised to the upside with a reading of 54.1, and continues the general trend of expansion in place since the pandemic shutdowns. Lastly, the biggest economic indicator of all, the monthly Employment Report, also surprised to the upside with a very expansionary 256,000 new jobs created in December and with the unemployment rate ticking lower to 4.1%.
The across the board better than expected readings led to a sell-off in markets today. Why? Because expectations for additional rate cuts in 2025 have again been dialed back. Most economists now expect somewhere between 0 and 2 rate cuts this year. Cheaper borrowing rates are a tailwind for corporate America, and reduced expectations on this front subdue enthusiasm for stocks – at least in the short-term. But let’s not lose sight of the fact that economic data was buoyant (in the case of Services and Employment), and significantly better than expected in the case of manufacturing. Medium to longer-term, it is my belief that strength in economic metrics will outweigh reduced expectations for rate cuts. However, should rate increases begin to be contemplated or effected, then that is a different paradigm which might impact my market strategy on behalf of clients. For a variety of reasons, I don’t believe rate increases to be likely, but it is an outlier possibility that must be monitored. Rest assured, I’ll be monitoring.
That’s it for this week. I look forward to connecting with clients during annual reviews. 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
Visit Our Website: www.nickscholte.ca
It’s an honor to receive referrals. If you have family or friends who would benefit from our services, please let us know.
