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 13, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,360	2.8%	5.0%
U.S.	S&P 500	3,999	2.7%	4.2%
U.S.	NASDAQ	11,079	4.8%	5.9%
Europe/Asia	MSCI EAFE	2,080	6.1%	7.0%

Source: Bloomberg, RBC Wealth Management

• TSX finished higher in Friday afternoon trading, near best levels. Most sectors higher, tech, industrials, staples, financials, consumer discretionary, energy and materials the notable leaders with health care the lone decliner. Canadian equities recorded a 2.8% weekly gain following a similar gain last week, up 5.0% YTD.

• US equities finished higher in Friday trading, ending near best levels. Major equity indices logged a second straight weekly gain to start 2023. Banks (earnings), department stores, precious metals, P&C insurance, hotels, cruise lines, building products were among the stronger areas.

• Stocks continued their YTD rise last week, shaking off some early softness in the wake of Friday’s bank earnings, with the bullish narrative continuing its hold on recent investor sentiment. This seems founded on disinflation traction, further slowdown in pace of Fed tightening, near-term Fed move to the sidelines, easing financial conditions via rates and FX, soft-landing (and earnings) support from still-tight labor market, faster China reopening and more resilient Eurozone economy.

 

Economy

Canada

• Canadian employment grew for the fourth straight month as the economy added 104,000 jobs in December and shows no signs of a slowdown. In its latest labour force survey, Statistics Canada said the rise in employment was driven by an increase in full-time work.

• Canada and Mexico scored big win on auto-trade dispute with US with ruling to test CUSMA (CBC, Reuters, Globe and Mail, Bloomberg). The decision had been known for weeks but only released after the end of the North American summit. The trade panel ruled that the US interpretation on the content rules is inconsistent with CUSMA. AMLO told Trudeau he would meet with Canadian power companies to discuss opposition to Mexican energy policies (AP). Mexico is trying to attract investment to the south to build a shipping corridor but needs natural gas supplies. PM Trudeau said solid North American semiconductor industry will prevent over-reliance on Asia

U.S.

• December’s CPI report showed that inflation pressures continue to moderate, lending credence to the belief that peak inflation has been reached. The year-over-year headline CPI inflation reading for December was 6.5%, matching analyst expectations, and the year-over-year Core CPI inflation rate also matched expectations of 5.7%.

• Fed commentary continued to lean hawkish with expectations for rates to go above 5% and hold there for an extended period of time. Divergence between market and Fed on 2H rate cut expectations continued to get more attention in the press. Market was already priced for a 25 bp rate hike before CPI and while it pointed to easing inflation pressure, it was only in line after coming in softer than expected in prior two readings.

Further Afield

• The eurozone’s inflation expectations are fading much faster than actual inflation. The latest European Central Bank survey of consumer expectations sees inflation at 5% in a year’s time, down from 5.4% previously.

• The COVID-19 situation in China remains challenging. As of the time of writing, China has not published new case numbers for three consecutive days, raising further doubts about the reliability of the official figures. World Health Organization officials think that infection rates are likely much higher than reported, and some local officials think that China may pass the worst of its massive outbreak in the next month.

 

Notes About Companies in Model Portfolio

• Apple (AAPL) People with knowledge of the matter say that Apple intends to start swapping out the display in the highest-end Apple Watches by the end of 2024, although the target could potentially slip until 2025, with the company planning to eventually bring the displays to other devices.

• • The article reports that the screens upgrade the current OLED standard to micro LED, with the move to negatively impact Samsung Display and LG Display.

  • Apple also plans to start replacing Qualcomm (QCOM) modem as soon as 2024.

• Intact Financial (IFC) announced estimated catastrophe losses for Q4 of 2022 of approximately $143M on a pre-tax basis ($0.63 per share after-tax).

UnitedHealth Group (UNH) reported 2022 results last Friday. Revenues of $324.2 Billion grew 13% year-over-year, with double-digit growth at both Optum and United Healthcare. Full year and Q4 adjusted net earnings were $22.19 and $5.34 per share.

 

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Shiuman