Below is a summary of some of the relevant news items from the Capital Markets and the Economy from the past week extracted from RBC Global Insights and FactSet Research.

 

Markets

Market scorecard as of close on Friday February 11, 2022.

Equity Indices	Level	1 week	YTD	52-week
S&P/TSX Composite	21,549	1.2%	1.5%	16.7%
S&P 500	4,419	-2.2%	-7.3%	12.3%
NASDAQ	13,791	-2.6%	-11.9%	-2.2%
Euro Stoxx 50	4,155	1.7%	-4.9%	-2.1%
Hang Seng	24,907	1.4%	5.0%	-18.6%

Source: Bloomberg, RBC Wealth Management

• TSX closed higher in volatile Friday afternoon trading. Materials and Energy the leaders with tech and consumer discretionary the laggards. Canadian equities finished the week with a gain 1.3%. WTI crude settled up 3.6%, off best levels amid heightened Ukraine tensions. Canadian dollar lower against USD.

• US equities came under notable pressure in Friday trading, ending near worst levels and seeing the S&P drop back below its 200 day moving average. Semis, growth software, big tech, autos, retail, apparel, and airlines were among worst performers. Energy, precious metals miners, food, and grocers held up better.

• Market was lower most of the afternoon but big downturn chalked up to latest ramp in geopolitical tensions with report US believes Putin is prepared to invade Ukraine. Added invasion could commence before the 20th and involve airstrikes and ground seizures. While market has a long track record of largely ignoring geopolitical tensions, still a headline risk at a time when path of least resistance has shifted lower on expectations for a more aggressive Fed tightening cycle

 

Economy

Canada

• Unlike the equity markets, the Canadian real estate market carried forward its momentum with key metropolitan cities posting year-over-year price gains in January. Supply remains low by historical standards and demand continues to be robust as households reprioritize the need for larger spaces in a hybrid/remote working environment.

• The omicron variant’s economic impact is set to be noteworthy but ultimately short-lived across Canadian labour markets, in our view. The unemployment rate rose to 6.5% in January from 6.0% in December, as the economy shed approximately 200,000 jobs as a result of broad public-health measures implemented by Ontario and Quebec, Canada’s most populated provinces.

• The Bank of Canada held its benchmark rate unchanged at its January policy meeting, citing the preliminary impact of the variant’s spread, but it continued to signal that rate hikes are coming soon.

U.S. 

• U.S. prices rose at the fastest pace since 1982 last month, with the January Consumer Price Index (CPI) 7.5% higher y/y and so-called core inflation (which removes volatile food and energy prices) up 6% in the same time period. One potential positive for policymakers is that inflation remains heavily tilted to goods rather than services, with prices for the former rising at nearly three times the pace of the latter. As supply-chain issues are resolved, we expect some downward pressure on future CPI levels—although it will likely be some time before we approach the Fed’s 2% target, in our view.

• January’s nonfarm payrolls report showed significant progress in the labor market. Not only did the U.S. add nearly half a million jobs to start the year—despite the omicron variant’s impact—but revisions to last year’s numbers showed 700,000 more jobs were created in 2021 than were initially reported. The U.S. has now recovered all but three million of the jobs destroyed during the pandemic, a notable improvement from the 22 million jobs lost in April 2020.

• With employment largely recovered and inflation significantly above target, the consensus expectation—which we share—is for the Fed to begin rolling back pandemic accommodation at its March meeting.

Further Afield 

• Although it left both policy rates and the pace of asset purchases unchanged, the European Central Bank (ECB) adopted a hawkish tilt at its February meeting in a stark reversal of its long-standing position. Markets are now pricing in the first increase in interest rates as early as June, as opposed to December previously, and 0.40 percent in rate hikes by the end of 2022.

• China announced travel and consumption data for the Lunar New Year holiday. During the seven-day national holiday, about 130 million passenger trips were taken via road, rail, and other domestic transport routes, a 31.7% increase over 2021, but still nearly 70% below pre-pandemic levels.

 

Notes About Companies in Model Portfolio

• Brookfield Asset Management Inc. (BAM.A) on Thursday announced record financial results for the year ended December 31, 2021. The company generated $12.4 billion of net income and $6.3 billion of distributable earnings in what was a record year. This was driven by $71 billion of capital inflows, strong performance from principal investments, and significant carried interest and gains generated from $42 billion of asset sales. The Board declared an 8% increase in the quarterly dividend to US$0.14 per share.

• The Walt Disney Company (DIS) today reported earnings for its first fiscal quarter ended January 1, 2022. Diluted earnings per share (EPS) from continuing operations for the quarter increased to $0.63 from $0.02 in the prior-year quarter. Excluding certain items(1), diluted EPS for the quarter increased to $1.06 from $0.32 in the prior-year quarter. By segment, revenues at Parks, Experiences and Products more than doubled while the Media & Entertainment Distribution segment grew double digits (+15% yoy) on strong Disney+ performance (+34% yoy) which helped to offset softness in Linear Networks (flat) due to higher programming and production costs. DIS closed out the quarter with 129.8M Disney+ subs (+37% yoy), 21.3M ESPN+ subs (+76% yoy) and 45.3M Hulu subs (+15% yoy).

• Fortis Inc. (FTS) released its 2021 fourth quarter and annual financial results Friday. It reported annual net earnings of $1,231 million, or $2.61 per common share in 2021. Adjusted annual net earnings of $1,219 million, or $2.59 per common share. Fortis has targeted a reduction in carbon emissions of 75% by 2035 from a 2019 base year. The Corporation expects to achieve the majority of this target through delivering on TEP's plan to exit coal generation and replace it with wind, solar and energy storage.

• Intact Financial (IFC) reported Q4 2021 results. Net operating income per share of $3.78 in Q4-2021 and $12.41 for the full year increased 19% and 25%, respectively, driven by robust underwriting and distribution income, and meaningful accretion from RSA. Quarterly dividend increased by 10% to $1.00 per common share and initiating share buyback program.

• Magna International (MG) Announces sales of $36.2 billion for the year ended December 31, 2021, an increase of 11% from the year ended December 31, 2020, compared to global light vehicle production which increased 4%. Light vehicle production in 2021 was negatively impacted primarily by semiconductor chip shortages, while 2020 was negatively impacted primarily by the COVID-19 pandemic. Diluted earnings per share increased to $5.00 in 2021 compared to $2.52 in 2020. Our adjusted diluted earnings per share increased 30% to $5.13 in 2021 compared to $3.95 in 2020.

• TELUS Corporation (T) on Thursday released its unaudited results for the fourth quarter of 2021. Consolidated operating revenues and other income increased by 20 per cent over the same period a year ago to approximately $4.9 billion. In the fourth quarter, we recognized a $410 million pre-tax gain arising from the disposition of our financial solutions business, as reported in other income. Excluding the gain, operating revenues and other income increased by 9.9 per cent.

 

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I appreciate the opportunity to serve you and look forward to continuing to help you accomplish your long-term financial goals.

 

Regards,

Shiuman