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 February 10, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,612	-0.7%	6.3%
U.S.	S&P 500	4,090	-1.1%	6.5%
U.S.	NASDAQ	11,718	-2.4%	12.0%
Europe/Asia	MSCI EAFE	2,085	-1.6%	7.3%

Source: Bloomberg, RBC Wealth Management

• TSX finished slightly higher in Friday afternoon trading. Sectors mixed with pretty wide dispersion. TSX closed with a 0.7% decline, its first weekly decline of 2023 (but still up 6.3% YTD).

• US equities ended mostly higher in fairly quiet Friday trading, with the S&P oscillating around the unchanged mark for much of the session. However, S&P and Nasdaq capped their worst weeks of 2023. S&P posted its worst weekly decline since mid-December, though index still up strongly since the October 2022 low and remains above the 4000 level. But given some notable weakness over prior two sessions, some question of whether path of least resistance has flipped to the downside.

 

Economy

Canada

• Bank of Canada (BoC) Governor Tiff Macklem delivered a monetary policy speech in which he reminded Canadians of the BoC’s mandate and its tools to target price stability, as well as the mechanics that drive policy and its transmission to the economy. “The Bank of Canada won’t be cutting interest rates anytime soon” — he also recognized that any meaningful drop in inflation would have to come from a moderation in wage growth.

• Market expectations are now pointing towards the possibility of further rate hikes from the Bank of Canada in its fight against inflation after January’s stronger-than-expected jobs data. The economy added 150,000 jobs in January, while unemployment rate held steady at a near record low of 5%, according to Statistics Canada.

U.S. 

• The U.S. labor market started the year on an exceptionally strong note as hiring unexpectedly soared in January while at the same time unemployment fell to 3.4%, marking the lowest level since 1969.

• The strong jobs report provides the Fed with more reassurance to keep interest rates high for the time being, and the futures market now reflects overnight policy rates moving above 5% this year, which implies up to two more 25 basis point (bps) rate hikes by May. However, we think the Fed will stop raising rates after one more 25 bps hike in March.

• The U.S. trade balance widened to $67.4 billion during the month of December, a 10.5% increase from November as imports greatly outweighed exports for the month. That said, the balance has substantially improved from the lows set in March of last year, when the deficit reached $106.4 billion.

Further Afield

• In the UK a new government has restored some stability, while in Europe, mild weather and high levels of natural gas storage mean energy shortages are unlikely this winter. Wholesale natural gas prices retreated, benefitting both regions and lifting hopes that inflation would soon peak too. Bond yields declined from their autumn peak, underpinning equity valuations.

• The European Central Bank (ECB) is hiking at the fastest pace on record, but is likely to downshift to 25 basis point (bps) hikes. ECB President Christine Lagarde has all but committed to another 50 bps hike in March. We think the downtrend in inflation will tame the ECB’s hawkish tone after March.

 

Notes About Companies in Model Portfolio

• Fortis Inc. (FTS) reports Q4 & annual 2022 results. Reported net earnings of $1.3 billion. Adjusted net earnings per common share2 of $2.78, up from $2.59 in 2021, representing ~7% annual EPS growth.

• Intact Financial Corporation (IFC) reported Q4-2022 results. Net operating income per share of $3.34 in the quarter and $11.88 for the full year reflected higher investment and distribution income, which partially offset lower underwriting margins EPS decreased to $2.26 in Q4-2022, but was up 9% for the full year on higher operating income and investment gains. Quarterly dividend increased by 10% to $1.10 per common share.

• TELUS Corporation (T) released its unaudited results for the fourth quarter of 2022. Consolidated operating revenues and other income increased by 3.8 per cent over the same period a year ago to $5.1 billion. Adjusted EBITDA and Free Cash Flow grew 9.5 per cent and 64 per cent, respectively; Net income for the full year up 1.2 per cent.

 

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