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 January 6, 2023. Far right column shows performance for the year 2022.

Country	Equity Indices	Level	1 week	YTD	2022
Canada	S&P/TSX Composite	19,815	2.2%	2.2%	-8.7%
U.S.	S&P 500	3,895	1.4%	1.4%	-19.4%
U.S.	NASDAQ	10,569	1.0%	1.0%	-33.1%
Europe/Asia	MSCI EAFE	1,961	0.9%	0.9%	-16.8%

Source: Bloomberg, RBC Wealth Management

• TSX finished higher Friday, near best levels. All sectors higher, energy, industrials, consumer discretionary and materials the outsized gainers, utilities, staples and financial also ahead with health care the notable laggard. Canadian equities logged a 2.2% weekly gain to kick off 2023, though a big pullback in energy stocks partly offset strong gains elsewhere.

• US equities sharply higher on Friday and up for the first week of 2023 trading. Not much dispersion with growth and value both up. Fed officials remain unrelenting in their higher-for-longer messaging and strategists continue to highlight some fairly meaningful downside risk to consensus earnings estimates.

 

Economy

Canada

• Canada added 104K jobs in December, crushing market expectations of a 10K positions. The surprise outsized gain pushed unemployment down to 5.0%. StatCan noted growth was led by younger workers rejoining the workforce.

• The Canadian economy is starting off the new year with its central bank’s benchmark interest rate sitting at 4.25%, a 400 basis point (bps) increase since March 2022. Looking out through 2023, RBC Economics believes we are near the top of the rate-hiking cycle and the door is open to a pause, but a 25 bps January hike is on the table as inflation begins its decline from multi-decade highs.

U.S.

• December non-farm payrolls increased by 223K, a bit higher than consensus for 205K but a downtick from November's downwardly revised 256K.

• The recently released minutes of the Federal Reserve’s December meeting emphasized the central bank’s commitment to bringing inflation back to its target level, and also highlighted the divergence between the Fed’s forecasts and the market’s estimate of likely future rates. Interest rate futures at the time of the meeting—and continuing through to today—indicate a high probability that the Fed could switch to rate cuts by the second half of this year, a view at odds with Fed projections of interest rates ending the year at 5.1%.

Further Afield

• The December year-over-year inflation rate slid to 6.7% in France, 8.6% in Germany, and 12.3% in Italy. Consensus expectations for December have inflation in the euro area as a whole below 10% for the first time since August.

• Despite these better numbers, the European Central Bank (ECB) will likely continue to worry about underlying price pressure as inflation remains much above its 2% target.

 

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