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 Thursday April 28, 2022.

Equity Indices	Level	YTD
S&P/TSX Composite	21,121	-0.5%
S&P 500	4,288	-10.0%
NASDAQ	12,872	-17.7%
Euro Stoxx 50	3,777	-12.1%
Hang Seng	20,276	-13.3%

Source: Bloomberg, RBC Wealth Management

• Stock markets have been thrown into another funk, amid rising pressures from several directions. The potential for further deceleration in global economic growth. This stems from the renewed COVID-19 lockdowns in China and their potential to exacerbate supply chain problems.

• Also, the ongoing sanctions and counter-sanctions risks related to the Russia-Ukraine conflict have impacted some supply chains and continue to put a premium on commodity prices. Recession risks for the U.S. and Canada are still relatively moderate by our indicators, but we think they have increased for Europe, while growth for China and the global economy could decelerate beneath current consensus forecasts.

• Given the lingering supply chain, inflation, growth, and geopolitical risks, there is a wider range of potential outcomes for the global economy and corporate earnings for this year and next than there was just a few months ago. It could take time for the market to work through the uncertainties and there is risk of a deeper pullback along the way.

• We continue to believe the S&P 500 has the potential to be higher than current levels in the next 12 months primarily because U.S. recession risks are no worse than moderate as things stand, a number of economic indicators are sturdy, and earnings trends are still generally good.

 

Economy

Canada

• Tackling inflation head-on seems to have become the central bank’s number one priority, as words like “forcefully” are continually used by policymakers to describe their plans for monetary tightening. These views were further reinforced in back[1]to-back appearances by BoC Governor Tiff Macklem this week, in which he highlighted the delicate balancing act the bank faces in its effort to tame inflation without tipping the economy into a recession.

• Retail sales, which indicate consumer demand for goods and services, were stronger than expected in February, increasing 0.1% m/m according to Statistics Canada. Consumer spending data tracked by RBC Economics indicates household spending has remained elevated through March and April, but the composition of that spending has begun to shift towards services as pandemic-related restrictions continue to ease.

U.S.

• The currency market added to traders’ concerns during the week, with the U.S. dollar reaching highs not seen since 2002. The greenback benefited from weakness in all major currencies as Europe, China, and Japan saw their currencies fall on increasing economic woes.

Further Afield

• On April 27, the Russian government announced it would stop all deliveries of natural gas to Poland and Bulgaria; the two countries receive close to 50% and 80% of their gas, respectively, from Russia. Poland reassured its citizens that its domestic gas storage facilities are more than 75% full, meaning it believes it can weather the blow.

• China’s government announced a string of fiscal measures this week to support economic growth, which is under threat from COVID-19 outbreaks. Beijing said it will step up infrastructure construction by enhancing and advancing work on transport facilities including airports, and on energy and water conservation projects.

 

Notes About Companies in Model Portfolio

First quarter earnings results which are now about halfway complete. Earnings growth for the broader developed markets is now expected to be over 10%, nearly double the original estimate at the start of the reporting season. Moreover, some of the upside to forecasts has been driven by margins, suggesting cost pressures have not been as severe as expected, at least not yet.

 

On average, the results suggest that companies are still seeing decent levels of demand, particularly from consumers, and are finding ways to navigate through the cost pressures with a degree of resiliency.

 

• Apple (AAPL) announced on Thursday financial results for its fiscal 2022 second quarter ended March 26, 2022. The Company posted a March quarter revenue record of $97.3 billion, up 9 percent year over year, and quarterly earnings per diluted share of $1.52. Continued strong customer demand for our products helped us achieve an all-time high for our installed base of active devices,” said Luca Maestri, Apple’s CFO.

• CN (CNR) reported on Tuesday its financial and operating results for the first quarter ended March 31, 2022. CN delivered sound operating and financial performance across the board, with adjusted diluted earnings per share (EPS) of C$1.32, up 7%. Revenues for the first quarter of 2022 were C$3,708 million compared to C$3,535 million for the same period in 2021, reflecting strong demand.

• Magna (MG) Announces First Quarter 2022 results on Friday. Global light vehicle production was down 7%, largely due to 16% decrease in Europe. Sales of $9.6 billion decreased 5%. Reduced 2022 outlook to reflect expected lower light vehicle production assumptions and an increase in production input costs.

• TC Energy Corporation (TRP) released its first quarter results on Friday. Net income attributable to common shares of $0.4 billion or $0.36 per common share compared to a net loss of $1.1 billion or a loss of $1.11 per common share in 2021. First quarter 2022 results were underpinned by solid utilization and reliability across assets, further supported by the constructive fundamental outlook for North American energy. The growing need for energy security has placed renewed focus on the long-term role our infrastructure will play in responsibly fulfilling North America's energy demands.

• Visa Inc. (V) announced its fiscal second quarter 2022 financial results on Tuesday. Net income in the fiscal second quarter was $3.6 billion or $1.70 per share, an increase of 21% and 23%, respectively, over prior year’s results. “We had solid growth in most countries around the globe and across all elements of our business, with revenue growth of over 20% in consumer payments... While the geopolitical environment remains uncertain, we expect continued growth driven by a robust travel recovery…” Alfred F. Kelly Jr. Chairman and CEO, Visa Inc.

 

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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