Shiuman Ho's Weekly Update -- Monday April 25, 2022

Shiuman Ho's Weekly Update -- Monday April 25, 2022

四月 25, 2022 | Shiuman Ho

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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 April 22, 2022.

Equity Indices

Level

1 week

YTD

S&P/TSX Composite

21,186

-3.1%

-0.2%

S&P 500

4,272

-2.8%

-10.4%

NASDAQ

12,839

-3.8%

-17.9%

Euro Stoxx 50

3,840

-0.2%

-10.7%

Hang Seng

20,639

-4.1%

-11.8%

Source: Bloomberg, RBC Wealth Management

  • TSX ended lower Friday afternoon trading, near worst levels. All sectors down, consumer discretionary, materials, financial, and tech the big decliners. TSX recorded a 3.1% weekly loss, the biggest drop since 21-Jan. Canadian equities now off 0.2% YTD but still TSX outpacing S&P 500. US equities finished lower in Friday trading, ending at worst levels. Gold finished down 0.6%. WTI crude ended down 2.0%. Canadian dollar sharply lower against USD.

  • US equities finished lower in Friday trading, ending at worst levels with S&P and Nasdaq posting worst session since early March. Sectors fairly mixed and all lower by at least 1.5%. Industrial metals, hospitals, medtech, retail, rails, machinery, IBs, telecom, homebuilders and autos among the laggards. Airlines, video games and select HPCs holding up better. Treasuries firmer across the curve. Dollar firmer on the major crosses and commodity currencies.

  • Fixed income volatility remains high as Treasury yields continue to rise. Over the five trading sessions ending April 20, yields increased by 0.2% on Treasuries maturing in two years and by nearly 0.15% on 10-year government securities, to reach 2.57% and 2.83%, respectively. The primary driver of bond losses continues to be the expectation that monetary policy will tighten further.

 

Economy

Canada

  • Canadian consumer price inflation hit 6.7% y/y in March, up from 5.7% in February and representing the largest price increase since January 1991. Consumers are enduring higher prices at grocery stores, as the price of food items climbed 8.7% y/y, the biggest jump since March 2009.

  • With inflation continuing to run hot and global central banks, including the BoC, charting a course to higher policy rates in response, the sensitivity of economic activity to rising interest rates is worth considering. On this front, we believe Canada’s economy may be more sensitive to higher rates than the economies of most other developed nations, as Canadian household debt levels have increased meaningfully over the past decade.

U.S.

  • The Fed last week released its periodic survey of economic conditions in the U.S. This edition of the so-called Beige Book was generally positive, citing a moderate pace of economic growth with consumer demand remaining stable even as firms passed along rising costs. The twin constraints of supply chain interruptions and labor shortages remain problematic across the country, with employers in several regions noting difficulties in attracting and retaining workers.

  • Rising bond yields have helped drive a rally in the dollar, with the U.S. Dollar Index (DXY)—a roughly trade[1]weighted measure of the greenback’s value—staying near multiyear highs. Higher Treasury yields are also increasing the relative advantage of U.S. debt compared to euro-denominated and (particularly) yen-denominated government bonds, potentially drawing overseas institutional investors to increase allocations to U.S. government debt.

Further Afield

  • The European Central Bank (ECB) Governing Council is becoming increasingly hawkish as many members are now supportive of hiking rates to 0% by the end of the year.

  • In the International Monetary Fund’s flagship World Economic Outlook report, the multilateral group trimmed their outlook for the global economy seeing growth at 3.6% this year, down from 6.1% last year. The forecast has been downgraded substantially from its 4.4% global growth expectations which were published in January. It comes as no surprise that the primary driver of this downgrade is the repercussions of the war in Ukraine which are exacerbating disruptions to global trade.

  • Over the weekend, French President Emmanuel Macron won his second presidential term, solidifying the current order that exists in Europe through a push for economic coordination throughout the Eurozone and further coordination in collective defense of the continent through countering Russian aggression.

 

Notes About Companies in Model Portfolio

  • Johnson & Johnson (JNJ) reported Q1 revenue $23.43B vs FactSet $23.62B. On the positive side, MedTech results came in ahead of expectations on a lower than anticipated Omicron impact and signs of continued recovery in the business. This was offset by lower than expected Pharma results (particularly Imbruvica) as well as lower COVID vaccine guidance.

  • Procter & Gamble (PG) reported third quarter fiscal year 2022 net sales of $19.4 billion, an increase of seven percent versus the prior year. Excluding the impacts of foreign exchange, acquisitions and divestitures, organic sales increased 10%. Diluted net earnings per share were $1.33, an increase of six percent versus prior year EPS.

    • Operating cash flow was $3.2 billion for the quarter. The Company returned over $3.4 billion of cash to shareholders via approximately $2.2 billion of dividend payments and $1.2 billion of common stock repurchases.

 

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