Shiuman Ho's Weekly Update -- Monday November 14, 2022

Shiuman Ho's Weekly Update -- Monday November 14, 2022

十一月 14, 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 November 11, 2022.

Equity Indices

Level

1 week

YTD

S&P/TSX Composite

20,112

3.4%

-5.2%

S&P 500

3,993

5.9%

-16.2%

NASDAQ

11,323

8.1%

-27.6%

Euro Stoxx 50

3,869

4.9%

-10.0%

Hang Seng

17,326

7.2%

-26.0%

Source: Bloomberg, RBC Wealth Management

  • TSX ended higher in Friday afternoon trading, near best levels. Most sectors higher, health care, tech, energy and real estate the outsized gainers with staples, industrials and utilities the laggards. Canadian equities recorded a 3.4% weekly gain on the back of a Thursday's big gains.

  • US equities were higher in Friday trading, ending just off best levels though the S&P 500 at one point rose above 4,000. Friday's strength followed huge rally in Thursday’s session, which helped push S&P 500 to best week since June and Nasdaq since March. Upside leadership continued to be driven by growth and longer duration plays.

    • Leaders included energy, FANMAGs, semis, profitless tech, apparel, MedTech, credit cards, chemicals, airlines, casinos, and China tech. Some of the laggards included A&D, food, beverages, P&C insurers, casual diners. Not much color behind big drop for pharma, biotech, and managed care, but fit with recent rotation to growth.

 

Economy

Canada

  • Canada’s labour market added 108,000 jobs in October (+0.6% m/m), recouping much of the losses during the summer months. The unemployment rate remained at 5.2%, modestly above the 4.9% record low recorded in June and July.

  • Amidst ongoing debate regarding whether the BoC has done enough to tame inflation to potentially moderate the size of rate hikes in the months ahead, the strength of the latest labour market report could keep pressure on the central bank to maintain a hawkish bias in monetary policy.

U.S. 

  • The October reading of the consumer price index (CPI) in the U.S. was released last week. The index rose 7.7% year over year, suggesting inflationary pressures are still very high. However, the reading was below most forecasts, and marked a deceleration from the previous month. The October release adds some credence to the view that the U.S. may be past the worst of the inflationary pressures, for now.

  • The much ballyhooed U.S. mid-term elections took place last week. The outcome was still in-line with general expectations: a divided government. This will make it challenging to pass any meaningful legislation over the next two years. Nevertheless, this kind of a setup has historically proven to be a positive tailwind for equity market returns, particularly after mid-term elections.

Further Afield

  • One of the bright spots this European results season has been the banks. Higher interest rates are helping improve banks’ net interest margins by more than the consensus anticipated, which is helping support consensus earnings upgrades. Despite the profitability tailwinds from rising interest rates, European banks’ valuations remain materially discounted.

  • We have seen multiple signs that China is starting to prepare for reopening since last week. A People’s Daily article de-emphasized the long-term impact of COVID-19 infections and stated that most symptoms are temporary and mild; meanwhile, several regions have stopped requiring a 48-hour negative polymerase chain reaction (PCR) test proof for passengers traveling via railways and airlines, and several cities have been criticized by national authorities for overly strict lockdown and containment measures.

  • And during a visit to China, German Chancellor Olaf Scholz announced last Friday that an agreement had been reached to let German expatriates in China use the COVID-19 vaccine from Germany’s BioNTech.

 

Notes About Companies in Model Portfolio

  • Canadian Apartment Properties Real Estate Investment Trust (CAR.UN) announced on Tuesday operating and financial results for the three and nine months ended September 30, 2022. Net operating income ("NOI") increased by 1.6% and 0.7%, respectively, for the same property portfolio for the three and nine months ended September 30, 2022, compared to an NOI increase of 1.1% and 2.1%, respectively, for the same property portfolio for the three and nine months ended September 30, 2021. Overall portfolio occupancy was at 98.1%. CAPREIT's financial position remains strong, with over $413.9 million of available liquidity, comprising $101.3 million of cash and cash equivalents and $312.6 million of available capacity on CAPREIT's Acquisition and Operating Facility.

  • Walt Disney Company Reports (DIS) Fourth Quarter and Full Year Earnings for Fiscal 2022. Diluted earnings per share (EPS) from continuing operations for the quarter was comparable to the prior-year quarter at $0.09. Fourth quarter saw strong subscription growth with the addition of 14.6 million total subscriptions, including 12.1 million Disney+ subscribers.

  • Intact Financial Corporation (IFC) reported Q3-2022 results. Net operating income was $473 million in Q3 down 6% from Q3 2021. EPS increased 26% to $2.02 with solid operating and non-operating performance. The Company ended the quarter in a strong financial position, with a total capital margin of $2.5 billion and solid regulatory capital ratios in all jurisdictions, despite challenging capital markets.

  • TC Energy Corporation (TRP) released its third quarter results on Wednesday. Net income attributable to common shares of $0.8 billion or $0.84 per common share compared to net income of 0.8 billion or $0.80 per common share in 2021. TRP declared a quarterly dividend of $0.90 per common share for the quarter ending December 31, 2022. “…the demand for our services remains high and is largely insulated from volatility given approximately 95 per cent of our business is either rate-regulated or underpinned by long-term contracts,” said François Poirier, the CEO.

 

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