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 18, 2022.

Equity Indices	Level	1 week	YTD	52-week
S&P/TSX Composite	21,088	-2.5%	-1.0%	14.3%
S&P 500	4,349	-1.6%	-8.8%	11.3%
NASDAQ	13,548	-1.8%	-13.4%	-2.4%
Euro Stoxx 50	4,074	-1.9%	-5.2%	14.9%
Hang Seng	24,328	-2.3%	4.0%	-23%

Source: Bloomberg, RBC Wealth Management

• TSX ended lower Friday, near worst levels. All sectors lower, with health care, energy, materials and industrials the big decliners. Canadian equities posted first weekly drop since 21-Jan with the TSX now lower on the year. Gold ended down 0.1% after a solid gain yesterday. WTI crude finished down 0.8%, posting a weekly drop after eight straight weeks of gains. Canadian dollar lower against USD.

• US equities were lower in Friday trading, though finished a bit off worst levels in choppy trading. Major averages all lower for the week as S&P 500 and Nasdaq posted back-to-back weekly declines. FANMAGs, semis, software, cloud, payments, reopening groups among weaker performers. Industrial metals, paper and packaging, telecom, regional banks, insurance, trucking, dollar stores among groups that fared best. Treasuries firmer with the curve flattening; 10Y holding below 1.95%.

• Market grappling with another day of Ukraine news. Stocks took a leg down following reports from Russia's RIA of explosion near separatists' government building in Donetsk.

• U.S. stocks struggled to maintain gains during the week. The number of COVID-19 cases continued to decline rapidly in the U.S. and other developed markets, but this positive driver was offset by the two Rs—rates and Russia. RBC Capital Markets, LLC Head of U.S. Equity Strategy Lori Calvasina believes the risk of higher interest rates is largely priced into stocks, but the worsening Russia/Ukraine situation is probably not priced in currently.

 

Economy

Canada

• Canada’s Consumer Price Index for January showed a 5.1% y/y rise, the fastest annual increase in prices anyone under the age of 30 has seen in their lifetime. Transportation, food, and shelter costs remained key drivers; notably, the shelter category has experienced the sharpest annual increase since 1990 at 6.2% y/y

• After a sharp rebound in employment following the pandemic-induced layoffs, Canada’s labour market has tightened substantially and businesses are now having difficulty filling job openings. To adapt to this new normal, businesses have begun increasing their spending on technology and automation in an effort to enhance the productivity of each worker.

• Canada has historically relied on immigration to increase its workforce, and after a brief lull due to the pandemic, this trend is expected to continue. On Monday, the Government of Canada announced its intention to welcome approximately 1.3 million people to the country over the next three years, the majority of whom are expected to be economic immigrants selected on the basis of their ability to contribute to the Canadian economy.

U.S. 

• As we approach the two-year anniversary of the COVID-19 pandemic, RBC Global Asset Management Inc. Chief Economist Eric Lascelles has updated his proprietary business cycle scorecard. His model uses 17 inputs to gauge where the U.S. economy stands within its long-term business cycle.

• He concludes the economy is firmly “mid-cycle” compared to early/mid-cycle readings at the start of the year. While he thinks this suggests the cycle will likely be shorter than its predecessor, it also points to several more years of growth, albeit with likely more moderate equity gains in the future compared to recent years.

Further Afield 

• President Xi Jinping called for Hong Kong officials to take “all necessary measures” to get the city’s COVID-19 outbreak under control, an unusually direct intervention that could pave the way for stricter measures and possibly a broader lockdown in the Asian financial hub. Hong Kong is planning to test its entire population in an effort to stamp out the worsening outbreak.

• Stocks tied to Hong Kong’s economic reopening, including those of vaccine makers, casinos, cosmetics makers, and jewelers, gained after a report on the mass testing plan spurred optimism that the city is laying the groundwork to loosen pandemic restrictions.

• The People’s Bank of China (PBoC) injected a net RMB 100 billion into the banking system with its medium-term lending facility on Tuesday, while leaving the borrowing rate unchanged. We think the move signals the central bank wants to keep policy accommodative to ensure economic stability. The central bank projects China’s potential growth rate, or the maximum the economy can expand without fueling inflation, is about 5%–5.7% in the five years through 2025.

 

Notes About Companies in Model Portfolio 

• TC Energy Corporation (TRP) announced Tuesday for the year ended December 31, 2021, net income attributable to common shares was $1.8 billion or $1.87 per share compared to net income of $4.5 billion or $4.74 per share for 2020. TC Energy's Board of Directors also declared a quarterly dividend of $0.90 per common share for the quarter ending March 31, 2022, equivalent to $3.60 per common share on an annualized basis, an increase of 3.4 per cent. This is the twenty-second consecutive year the Board has raised the dividend.

 

Feel free to contact me with any questions and/or to discuss investment ideas.

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

 

Regards,

Shiuman