To my clients:
It was a mixed week for North American stock markets with the Canadian TSX finishing up 0.3%; the U.S. Dow Jones Index down 1.3%; and the U.S. S&P 500 down 0.4%.
Seven points to make this week:
1) Inflation, as measured by the Consumer Price Index, came in BELOW expectations rising just 0.1% month over month and 2.4% year-over-year (getting close to the Fed’s 2.0% target). Core consumer inflation (stripping out food and energy prices) also came in BELOW expectations at just a 0.1% monthly rise. Year-over-year core inflation was somewhat farther from the Fed’s target at 2.8%.
2) Producer Prices (a precursor to consumer prices) also came in BELOW expectations at just a 0.1% monthly gain for both the broad index and the core index.
3) The inflation readings have again opened the door for Fed rate cuts in 2025. Market expectations now anticipate two cuts in 2025 with the first forecast to occur in September.
4) China and the U.S. reached a “deal” on trade. To my lens, the sparse details announced so far indicate the deal is minimal in scope, and certainly not the sort of all-encompassing deal that would justify U.S. actions on the trade front. But it’s a start and at least the two sides are talking.
5) In the words of Iran’s Supreme Leader, Iran and Israel are “at war”. This comes after Israeli strikes against Iranian nuclear infrastructure and military personnel last evening. As I type, Iran is launching retaliatory missiles at Israel which appear to have been mostly intercepted (although video I am seeing shows at least one missile may have made it through the Iron Dome defenses into the city of Tel Aviv). As I have said repeatedly over the years, regional conflicts (Russia/Ukraine, Israel/Palestine etc.) tend to have little lasting impact upon markets. I’ve learned to adhere quite strongly to this maxim over the course of my career, with perhaps a potential China/Taiwan conflict and its broader geopolitical implications an envisioned exception.
6) U.S. markets have recovered nearly all of their tariff inspired losses and are now flattish to up on the year.
7) However, the U.S. dollar has fallen about 5.5% vs the Canadian dollar since January 1st thus leaving client U.S. portfolios still in negative territory when converted back to Canadian dollars.
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
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