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.

You can view the past four weeks’ Weekly Update in the link to my Blog.

To read my latest 2023 Q1 Smart Investor newsletter (What 2023 Holds, How to Invest, my list of books from last year), and catch up on back issues, go to my website.

 

Markets

Market scorecard as of close on Friday March 31, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,100	3.1%	3.7%
U.S.	S&P 500	4,109	3.5%	7.0%
U.S.	NASDAQ	12,222	3.4%	16.8%
Europe/Asia	MSCI EAFE	2,093	3.7%	7.6%

Source: FactSet

• TSX finished higher Friday, just off best levels. Most sectors higher with tech, consumer discretionary and industrials the outsized gainers, real estate, health care, financial, staples and energy also solidly higher. Communication services the lone decliner with materials and utilities little changed. Canadian equities ended higher for a sixth straight session with the TSX logging a 3.1% weekly gain, best weekly performance since November.

• US equities higher Friday, ending near best levels. Major indices posted strong gains last week. Stocks mostly higher for Q1 with Nasdaq the big gainer. Regional banks tended to underperform. Semis lagged but ended firmly in positive territory following earlier pullback. Treasuries rallied across the curve following a big backup in yields earlier in the week.

• Banking turmoil appeared to subside in the U.S., as stock prices and deposit data showed stabilization following several high-profile bank failures. We believe that the U.S. financial system remains well-capitalized and sound, and we expect the recovery in asset prices to continue. The longer-term impact of recent events could be a headwind for economic growth, in our view, particularly if it prompts changes from investors, regulators, or bank executives that lead to tighter lending conditions.

 

Economy

Canada

• The federal government of Canada released its 2023 budget last week. RBC Capital Markets expects the budget to deepen the country’s fiscal deficit due to new outlays allocated towards the health care system and subsidies to low-income households. The budget is particularly supportive of clean energy infrastructure spending, with provisions including a tax credit for investment in clean energy sources and on the cost of equipment.

• On the revenue side, the budget includes proposed regulatory changes in two areas that could negatively impact the Canadian banks and life insurers. The proposals would (1) change the way dividends received by financial institutions are taxed; and (2) introduce lower credit card transaction fees for small businesses.

• If you would like to read how the federal budget may affect you, click on this article prepared by RBC Family Offices Services.

U.S.

• After a three-year hiatus, U.S. households will be required to resume student loan repayments no later than September 1 of this year, although a pending U.S. Supreme Court decision could potentially bring that date forward. We think the payments could act as another headwind to growth, as well as leading to additional defaults on other types of consumer debt.

• Given these potential headwinds, investors now see the Federal Reserve shifting to a more accommodative stance this year, despite Fed Chair Jerome Powell reiterating his base-case view for an extended period of high rates.

Further Afield

• March headline inflation in Spain and Germany tumbled thanks to energy prices that are now markedly lower than they were a year ago. German headline inflation declined to 7.8% y/y in March, compared to 9.3% y/y in the prior month. Further improvements are likely, in our view, as price pressures in energy and agricultural commodities have waned.

• RBC Capital Markets believes this pattern of falling headline inflation and sticky core inflation is likely to be apparent in the euro area inflation data due to be released on March 31. We therefore think the European Central Bank is likely to continue its aggressive hiking path.

• The Organization of the Petroleum Exporting Countries (OPEC) has decided to cut oil production by more than 1 million barrels a day starting next month, in a surprise move that poses upside risks to global inflationary pressures.

 

Notes About Companies in Model Portfolio

• Apple (AAPL) introduced Apple Pay Later in the U.S. Apple Pay Later allows users to split purchases into four payments, spread over six weeks with no interest and no fees. Users can apply for Apple Pay Later loans of $50 to $1,000, which can be used for online and in-app purchases made on iPhone and iPad with merchants that accept Apple Pay.

• Intact Financial Corporation (IFC) and its subsidiary RSA, announced initiatives aimed at improving the strength and sustainability of the UK & International business. The personal lines motor market in the UK remains extremely competitive and requires significant scale to drive meaningful outperformance. After a thorough review, RSA is exiting the UK personal lines motor market, representing approximately £120 million of annual premium for the company.

 

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