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.

Happy Lunar New Year!

 

Markets

Market scorecard as of close on Friday January 20, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,503	0.7%	5.8%
U.S.	S&P 500	3,973	-0.7%	3.5%
U.S.	NASDAQ	11,140	0.6%	6.4%
Europe/Asia	MSCI EAFE	2,080	0.0%	7.0%

Source: Bloomberg, RBC Wealth Management

• Stocks in major markets have started the year on a positive note on declining inflation rates and the belief that major central banks are close to the end of their rate hike cycles. Also contributing has been better-than-feared economic data.

• TSX finished higher Friday, near best levels. Most sectors higher, health care and tech the outsized gainers, materials, consumer discretionary, industrials, real estate, communication services and financial other leaders, with staples the lone decliner. Canadian equities logged a 0.7% weekly gain, building on strong performance to start 2023 with the TSX now up nearly 6% YTD.

• US equities finished higher in Friday trading, ending at session highs. Nasdaq posted best session since 30-Nov to end higher for the week. S&P 500 closed a touch above its 200 day moving average, though still posted a weekly pullback after rallying over the first two weeks of 2023. Several dynamics in focus including recent ramp in soft-landing expectations dented by some weaker US economic data such as retail sales.

 

Economy

Canada

• Canadian CPI inflation decelerated to 6.3% y/y (-0.5% m/m) in December, according to Statistics Canada. Much of December’s decline can be attributed to relief at the pump with gasoline prices falling 13.1% m/m, the largest drop since April 2020.

• RBC Economics expects the strength of the recent data release will result in the BoC raising interest rates by 25 basis points at next week’s meeting, but it thinks the end of the hiking cycle is fast approaching.

U.S. 

• The monthly decline in the Producer Price Index was primarily driven by falling food and energy prices; at the same time, core prices edged slightly higher, though levels are still down 1.3% from a year ago.

• The U.S. last week reached its statutory borrowing limit, commonly referred to as the debt ceiling. In response, the Treasury Department began implementing so-called “extraordinary measures” that rely on a combination of accounting shifts and cash flow management to keep the government operating. As you may recall the movie tends to go something like this: negotiations are tense and highly partisan with neither side willing to compromise then disaster is avoid when the debt ceiling is raised at the last minute.

Further Afield

• China’s Q4 GDP came in significantly above expectations, growing 2.9% y/y compared to the 1.6% consensus forecast. Economists raised consensus growth forecasts for China after the faster-than-expected relaxation of COVID-19 restrictions and following a surprisingly resilient economic performance toward the end of 2022. The new consensus forecasts are for the economy to expand 5.1% in 2023.

• As global inflation continues to show solid signs of easing, China’s economic reopening and elevated household savings deposit levels raise concerns of whether prices could begin to rise again on a global level. On the other hand, the reopening could lead to a further easing of supply chain bottlenecks and enable companies to boost production. The two effects are likely to offset each other over time.

 

Notes About Companies in Model Portfolio

• The Procter & Gamble Company (PG) reported second quarter fiscal year 2023 net sales of $20.8 billion, a decrease of one percent versus the prior year. Excluding the impacts of foreign exchange and acquisitions and divestitures, organic sales increased five percent. Diluted net earnings per share were $1.59, a decrease of four percent versus prior year EPS. Net earnings was impacted by foreign exchange and higher input costs.

 

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