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 August 26, 2022.

Equity Indices	Level	1 week	YTD
S&P/TSX Composite	19,873	-1.2%	-6.4%
S&P 500	4,058	-4.0%	-14.9%
NASDAQ	12,142	-4.4%	-22.4%
Euro Stoxx 50	3,604	-3.4%	-16.2%
Hang Seng	20,170	2.0%	-13.8%

Source: Bloomberg, RBC Wealth Management

• TSX finished lower in Friday afternoon trading, near worst levels. All sectors lower. Canadian equities fell 1.2% on a weekly basis.

• US equities finished lower in Friday trading, ending near worst levels. S&P logged its worst daily performance since 13-Jun and its second straight weekly loss (though still up more than 10% from the June YTD lows).

• Hawkish-leaning Powell speech the easiest excuse, but this was widely expected and at least removes an overhang. Powell cautioned against the risk of prematurely loosening policy. Added that while July inflation data welcome, it will take some time to restore price stability, argued for a restrictive policy stance for an extended period and said this could drive a sustained period of below-trend growth. Noted a 75bp rate hike in September could be appropriate, though Fed will be data dependent. Also reiterated expectations for Fed to slow pace of tightening.

 

Economy

Canada

• Canadian Department of Finance reported in June there was a surplus of $4.9B compared to $12.7B deficit last year. The government noted 2022-23 results continue to improve compared to the peak of the COVID-19 pandemic. The budget surplus was $10.2B in Q2 compared to the deficit of $36.5B in 2021-22, with quarterly revenues up 20.9%.

• Canadian consumers have been fairly resilient to start the year, and June was no exception. According to Statistics Canada, retail sales rose 1.1% in June, far exceeding the consensus expectation of a modest 0.4% increase.

U.S. 

• Economic data have been mixed. New home sales plunged 12.6% in July to 511,000, the lowest level since January 2016 and well below consensus expectations of 575,000, as high prices and elevated mortgage rates pushed buyers to the sidelines.

Further Afield 

• Another week, another record increase in European natural gas prices, this time after Gazprom announced the Nord Stream 1 pipeline would close for three days of unscheduled “maintenance,” highlighting once again Europe’s dependence on Russia.

• Since late June, a spreading mortgage boycott in China has dominated news headlines. Homebuyers across the country are refusing to repay mortgages on yet-to-be completed projects that are suffering construction halts. Commercial banks impacted so far have reported that at risk mortgages amount to about 0.01 percent of their loan books. The weakness in China’s housing market could last longer than we previously expected.

 

Notes About Companies in Model Portfolio

• Royal Bank of Canada (RY) reported on Wednesday net income of $3.6 billion for the quarter ended July 31, 2022, down $719 million or 17% from the prior year. Compared to last quarter, net income was down $676 million or 16% with lower results in Capital Markets, Personal & Commercial Banking, Corporate Support and Insurance partially offset by higher results in Investor & Treasury Services and Wealth Management.

• TD Bank Group (TD) Reported Third Quarter 2022 results ended July 31, 2022 last Thursday. Reported earnings were $3.2 billion, down 9.3% compared with the third quarter last year, and adjusted earnings were $3.8 billion, up 5.1%. Canadian Retail net income was $2,253 million, an increase of 6% compared with the third quarter last year. U.S. Retail accelerated its business momentum in the third quarter.

 

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