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 September 16, 2022.

Equity Indices	Level	1 week	YTD
S&P/TSX Composite	19,386	-2.0%	-8.7%
S&P 500	3,873	-4.8%	-18.7%
NASDAQ	11,448	-5.5%	-26.8%
Euro Stoxx 50	3,500	-2.0%	-18.6%
Hang Seng	18,762	-3.1%	-19.8%

Source: Bloomberg, RBC Wealth Management

• TSX finished lower Friday, though off worst levels. Most sectors down, health care, tech and industrials the outsized decliners, with energy and financial also weaker. Consumer discretionary, utilities and materials held up better, with staples and communication services the lone gainers. Canadian equities posted a 2.0% weekly decline, erasing much of last week's big gain

• Canadian dollar weaker against USD with CAD at lowest point since Nov-2020. The loonie is down against the USD dollar with the greenback stronger against most major currencies. The CAD is down almost 5% YTD versus the USD but remains the best performing currency of the majors against the dollar. Analysts noted the CAD is trading defensively in a risk aversion environment.

• US equities lower in fairly uneventful Friday afternoon trading. Major indexes off worst levels, though S&P pacing toward worst seek since 17-Jun, a fourth decline in past five weeks and near lowest levels since mid-July.

• Latest downturn chalked up to negative corporate developments that seem to be playing into the broader earnings risk theme. Bulk of the attention has been on FedEx, which preannounced weak fiscal Q1 (Aug Q) results and pulled FY23 guidance. Cited global volume softness that accelerated in the final weeks of the quarter.

• The market seems like it’s coming to the realization that inflation and the related challenges will not lift overnight, and economic conditions could deteriorate further in the next six months. For long-term investors, we continue to recommend holding Market Weight (neutral) exposure to U.S. equities, and we would include a mix of defensive and growth stocks, with a tilt toward quality stocks. This is designed to balance lingering recession risks with the possibility that the eventual ebbing of inflationary pressures and slowing growth next year could provoke a change of heart by the Fed at some point in 2023.

 

Economy

Canada

• The August report that showed home sales down for a sixth straight month. CBC discussed knock-on effects to the economy, noting average home prices are off 20% from Feb-2022 while Canadian household net worth dropped a record $990B in Q2. Despite the correction, housing affordability is still at the worst level in 32 years.

• Despite the expectation of an economic slowdown in the near term, RBC Economics has recently updated its forecasts for upcoming central bank hikes. In line with the market’s own repricing, RBC Economics forecasts now point towards a more aggressive final stretch of hiking.

• Canadian employment declined for a third consecutive month in August as the labour market shed another 39,700 jobs, according to Statistics Canada, bringing the cumulative declines during that period to roughly 114,000.

U.S.

• Traders were relieved that a looming threat to domestic supply chains was averted at the eleventh hour. U.S. rail operators reached an agreement with their unions earlier today, ending the threat of a national rail strike that had been due to start tomorrow. The Association of American Railroads had estimated that stopping the country’s long-distance freight trains could have reduced daily economic output by more than $2 billion, or about 3%, and would have tied up about 17% of the nation’s trucking capacity as freight moved to the highways.

Further Afield

• The European Commission has proposed requiring EU member states to reduce electricity consumption by at least 5% during selected peak price hours, while aiming to reduce overall electricity demand by at least 10% during the coming winter.

• China’s largest banks are lowering their benchmark deposit rates across the board for the first time since 2015. The move will reduce funding costs for borrowers, and may boost lending to support growth.

 

Notes About Companies in Model Portfolio 

• Johnson & Johnson (JNJ) announces $5B share repurchase program with no time limit and may be suspended for periods or discontinued at any time. JNJ reaffirms its full-year 2022 adjusted operational sales growth and EPS guidance of 6.5% - 7.5% and $10.65 to $10.75 per share, respectively.

 

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