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 Thursday April 6, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,197	0.5%	4.2%
U.S.	S&P 500	4,105	-0.1%	6.9%
U.S.	NASDAQ	12,088	-1.1%	15.5%
Europe/Asia	MSCI EAFE	2,100	0.4%	8.0%

Source: FactSet

• TSX ended higher in rangebound Thursday afternoon trading. Most sectors higher, health care the outsized gainer, real estate, utilities, staples, industrials standout leaders with energy and communication services the decliners. Canadian equities rose 0.5% in holiday shortened week led by materials and energy.

• US equities mostly higher, reversing some early sluggishness. Mixed price action beneath the surface. Big tech, regional banks, airlines, rails, precious metals, biotech and pharma among the best performers. Energy, payments, credit cards, machinery, builders, apparel & accessories, softlines, chemicals, networking and semicap equipment the laggards.

 

Economy

Canada

• The Organization of Petroleum Exporting Countries (OPEC) and its partners surprised market participants last week when they announced plans to collectively curtail production by approximately 1.16 million barrels per day (bbl/d). All else equal, RBC Capital Markets believes the global oil market will be in a modest supply deficit for the duration of the year.

• Despite the recent pickup in growth momentum, the Canadian economy is still likely headed for a contraction, according to RBC Economics. Consensus forecasts are for real gross domestic product (GDP) to register solid 1.0% q/q growth in Q1, up from 0.0% the previous quarter. However, higher borrowing costs and still-elevated inflation will likely continue to squeeze consumption and economic activity.

U.S. 

• The theme of “de-dollarization” saw a spike in social media interest during the week. Proponents contend that recent trade deals denominated in currencies other than the U.S. dollar signal the end of the greenback’s reserve currency status. We think these views are overblown, as central banks have been pragmatically diversifying their reserve holdings for decades: in the early 2000s, the U.S. dollar’s share of global reserves was just over 70%; it now sits at 58%. But there is still no viable candidate with adequate liquidity, convertibility, or depth of asset markets to supplant the dollar, in our view.

Further Afield

• Borrowing costs are starting to bite. Robert Holzmann, a hawkish member of the European Central Bank’s (ECB) Governing Council, acknowledged that the recent U.S. and Europe bank stress led to a further contraction in lending, which has a comparable effect to raising interest rates in the 0.5%–1.5% range, leading to tighter financial conditions.

• China’s economic recovery maintained its momentum in March, with manufacturing, services, and construction activity remaining strong, reinforcing the positive outlook for 2023. The readings imply a strengthening post-pandemic recovery. We expect rebounds in consumption and government spending on infrastructure to help drive up growth this year. The China and Hong Kong stock markets rose amid broad gains in Asia.

 

Notes About Companies in Model Portfolio

• The banking sector will lead the Q1 2023 reporting charge on Friday April 14, and investors will likely focus on repercussions from the isolated bank failures in March, deposit flight, and credit deterioration issues. Consensus 2023 earnings estimates for the Financials sector have already fallen by more than 11% since the end of February, and we think any sign of “less bad” news may attract buyers.

• Johnson & Johnson (JNJ) announced that its subsidiary LTL Management LLC (LTL) has re-filed for voluntary Chapter 11 bankruptcy protection to obtain approval of a reorganization plan that will equitably and efficiently resolve all claims arising from cosmetic talc litigation against the company and its affiliates in North America. To that end, the company has agreed to contribute up to a present value of $8.9B, payable over 25 years, to resolve all the current and future talc claims.

 

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