To my clients:
It was a flattish week for North American stock markets with the Canadian TSX finishing down 0.03% (note the extra zero); the U.S. Dow Jones Index up 0.02% (again, note the extra zero); and the U.S.S&P 500 down 0.2%.
4 points this week:
1) The U.S Federal Reserve held rates steady, although its board members broadly anticipate 2 cuts by the end of 2025. While Fed Chair Jerome Powell was non-committal as to the timing of a possible first cut, this morning voting Fed board member Christopher Waller suggested it could come as soon as July.
2) For July to be in play for a rate cut, it’s my belief that next week’s PCE release (the Fed’s preferred measure of inflation) will have to confirm what we saw last week in the more widely followed Consumer and Producer Price Indexes – tame inflation readings. We shall see what the PCE reveals.
3) The Israel and Iran conflict continues. The bright line set forth by Israel (and its western allies – most notably the U.S.) to end the conflict is for Iran to cease its nuclear ambitions. Iran has not complied. President Trump has set a two-week deadline for Iran to do so otherwise the U.S. may involve itself militarily (it’s said that the U.S. possesses the only weaponry possibly capable of destroying the mountain fortified Fordow nuclear facility – based upon the purported depth of this facility below its mountain shield, I’m skeptical that destruction by bombing alone is possible). Perhaps offering a glimmer of hope, today Iran entered into negotiations with the EU in Switzerland. So, as with the Fed's preferred measure of inflation, it's a wait and see in the mid-East. All the preceding said, I reiterate what I said last week, regional geopolitical conflicts have little lasting impact on the global economy or markets. I also reiterate that a possible China/Taiwan conflict is an envisioned possible exception to this maxim.
4) I sold a position in discretionary client portfolios today. Owing to price appreciation, I exited Canadian Tire. I anticipate investing in a replacement within the next week.
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
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