Shiuman Ho's Weekly Update -- Monday October 17, 2022

Shiuman Ho's Weekly Update -- Monday October 17, 2022

十月 17, 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 October 14, 2022.

Equity Indices

Level

1 week

YTD

S&P/TSX Composite

18,326

-1.4%

-13.6%

S&P 500

3,583

-1.6%

-24.8%

NASDAQ

10,321

-3.1%

-34.0%

Euro Stoxx 50

3,382

0.2%

-21.3%

Hang Seng

16,588

-6.5%

-29.1%

Source: Bloomberg, RBC Wealth Management

  • TSX finished sharply lower Friday, near worst levels. All sectors were lower. Canadian equities posted a 1.4% weekly decline as a big Thursday rally wasn't enough to offset three days of losses in a holiday shortened week. Canadian dollar sharply lower against USD (at 72.0 cents U.S.).

  • US equities were lower in Friday trading, ending just off session lows. However, today's decline didn't erase Thursday's broad-based rally that saw S&P 500 and Nasdaq both break a streak of six-straight declines. Treasuries weaker across the curve. 10Y yield held above 4% while 2Y above 4.50%.

 

 

Economy

Canada

  • The risk of a Canadian recession has risen substantially, according to RBC Economics forecasts. The housing market, which directly accounted for approximately 10% of Canadian Gross Domestic Product in Q1 2022, has cooled meaningfully year to date as the BoC tightens monetary policy.

  • Canadian Real Estate Association September home sales fell 3.9% with 60% of local markets declining including Greater Vancouver, Calgary, GTA and Montreal. Average selling prices are down 6.6% y/y and more than 21% from the all-time high reached in February before the BoC started lifting interest rates (CBC). CREA chief economists noted resale markets may remain quiet, putting more pressure on rental markets.

U.S. 

  • Inflationary pressures re-accelerated in September, with the Consumer Price Index showing an increase of 0.4% m/m after August’s much smaller 0.1% rise. This led to headline inflation of 8.2% y/y, which was higher than consensus expectations.

  • September retail sales were little changed m/m, weaker than consensus for a 0.2% monthly rise and August's upwardly revised 0.4% increase (was up 0.3%). Headline sales still up 8.2% y/y. Sales ex-autos up 0.1%, better than forecasts for a 0.1% drop.

Further Afield

  • FT reported last Friday that after weeks of pressure, UK PM Truss announced a partial reversal of her economic plans including cancellation of cancel plans to freeze the corporation tax next year, with Truss admitting that last month's mini budget, which contained £45bn of unfunded tax cuts, went further and faster than expected. Developments come as finance minister Kwarteng dismissed and replaced by Jeremy Hunt.

  • It has been a week of extreme capitulation in Gilt yields; the UK 30-year yield rose to 5.1% before rallying to settle at 4.66% after the Bank of England (BoE) significantly stepped up bond purchases to a daily record of £4.56 billion. With the BoE attempting to stabilise markets, the focus is now on the government to restore fiscal sustainability by cutting back on expenditures.

 

Notes About Companies in Model Portfolio

  • Apple (AAPL) announced a new Savings account for Apple Card that will allow users to save their Daily Cash and grow their rewards in a high-yield Savings account from Goldman Sachs. In the coming months, Apple Card users will be able to open the new high-yield Savings account and have their Daily Cash automatically deposited into it - with no fees, no minimum deposits, and no minimum balance requirements.

  • Blackrock (BLK) generated 3Q22 revenues of $4.3bn, that were inline to modestly higher than our model given average AUM trends and better than expected fee rates. 3Q22’s performance fees of $82bn were down notably YoY and QoQ given the more challenging market conditions. Total net flows were $17bn in 3Q22, down from 2Q22’s $90bn.

  • UnitedHealth Group (UNH) Reported Third Quarter 2022 Results with revenues of $80.9 billion; grew 12% year-over-year, with diversified growth across Optum and UnitedHealthcare. Third quarter 2022 earnings from operations were $7.5 billion, growth of 31% year-over-year. UnitedHealthcare provides health care benefits globally, serving individuals and employers.

 

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