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 May 5, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,542	-0.5%	6.0%
U.S.	S&P 500	4,136	-0.8%	7.7%
U.S.	NASDAQ	12,235	0.1%	16.9%
Europe/Asia	MSCI EAFE	2,145	0.0%	10.3%

Source: FactSet

• TSX finished higher in Friday afternoon trading, near best levels. All sectors higher, tech, energy and health care the outsized gainers. Canadian equities recorded 0.5% weekly pullback with energy and financial the outsized decliners.

• US equities ended higher and near best levels in Friday trading. However, the S&P 500 still ended lower for the week after four consecutive declines through Thursday. Energy and banks were among the best performers, though they were also notable laggards for the week. Big tech was higher, with Apple a post-earnings standout.

• Friday’s upside driven by a good-news-is-good-news dynamic following payrolls, as well as battered regional bank bounce and better earnings takeaways. Nearly 85% of the S&P has now reported and key beat/surprise metrics continue run ahead of their one-year averages, while the 2023 earnings growth outlook has seen some improvement over the last month or so.

 

Economy

Canada

• Canadian economic activity grew at a slower-than-expected pace in Q1 despite notable strength registered in January. March’s preliminary flash GDP estimate put the nominal annualized growth rate at a fairly solid 2.5%, but nearly all of the gains in economic activity came from January as the economy slowed in February and March.

• Despite weaker-than-expected GDP in Q1 2023 suggesting further economic deceleration, we anticipate that stubbornly elevated core inflation metrics will keep the Bank of Canada (BoC) in a restrictive monetary policy stance, at least for the remainder of the year.

U.S.

• As the market widely expected, the Federal Reserve raised rates by another 25 basis points (bps) to bring the target policy range to 5.00 percent to 5.25 percent, equal to its 2023 projection from the March quarterly meeting.

 

• Debt ceiling concerns are beginning to impact the market, with the price to insure against a near-term U.S. default reaching record levels. Treasury Secretary Janet Yellen informed Congress last week that the accounting measures and cash balances on which her department is relying to avoid default will likely be exhausted by early June.

• Falling energy prices have contributed to an overall decline in commodity input costs, with the Bloomberg Commodity Index down over 5% in the two weeks ending May 3. West Texas Intermediate crude fell almost twice as much as the overall index during that time, giving a potentially important boost to the Federal Reserve’s inflation-fighting campaign.

Further Afield 

• The European Central Bank (ECB) raised interest rates by 25 basis points, much as markets expected, bringing the deposit rate to 3.25%. Further tightening of bank lending standards, together with the impact of interest rate increases so far, prompted the central bank to tone down its hiking cycle.

• The Hong Kong Monetary Authority raised its benchmark interest rate by 25 basis points, to 5.5%, on May 4. The rate move, in line with the U.S. Federal Reserve’s hike, was made in hopes of protecting the local dollar’s peg to the greenback.

 

Notes About Companies in Model Portfolio 

• Apple (AAPL) announced on Thursday financial results for its fiscal 2023 second quarter ended April 1, 2023. The Company posted quarterly revenue of $94.8 billion, down 3 percent year over year, and quarterly earnings per diluted share of $1.52, unchanged year over year. iPhone revenues were $51.33B vs consensus $48.84B. Apple’s board of directors has declared a cash dividend of $0.24 per share of the Company’s common stock, an increase of 4 percent. The board of directors has also authorized an additional program to repurchase up to $90 billion of the Company’s common stock.

• Berkshire Hathaway Inc. (BRK.A, BRK.B) released its Q1 2023 results on Saturday. Net earnings attributable to Berkshire shareholders was $35.5 billion compared with $5.6 billion a year ago. This included $27.4 billion in gains in investments.

• Brookfield Infrastructure Partners L.P. (BIP.UN) announced its results for the first quarter ended March 31, 2023. Funds from operations (FFO) for the first quarter was $554 million, increasing 12% relative to the comparable period. Organic growth for the quarter was 9%, reflecting the benefits of continued elevated levels of inflation on tariffs, strong volumes across our transport networks and the commissioning of approximately $1 billion in new capital projects over the last twelve months.

• Fortis Inc. (FTS) released its first quarter results. First quarter net earnings of $437 million up from $350 million 2022. Adjusted net earnings per common share of $0.91, up from $0.78 in the first quarter of 2022.

• TELUS Corporation (T) released its unaudited results for the first quarter of 2023. Consolidated operating revenues and other income increased by 16 per cent over the same period a year ago to $5.0 billion. This included strong mobile phone net additions of 47,000, best first quarter result since 2010; healthy connected device net additions of 58,000; and record first quarter total fixed net additions of 58,000, inclusive of reaching one millionth security subscriber.

• TD Bank Group (TD) and First Horizon Corporation announced Thursday that they have entered into a mutual agreement to terminate their previously announced merger agreement, originally announced on February 28, 2022. TD informed First Horizon that TD does not have a timetable for regulatory approvals to be obtained for reasons unrelated to First Horizon. Because there is uncertainty as to when and if these regulatory approvals can be obtained, the parties mutually agreed to terminate the merger agreement.

• Waste Connections, Inc. (WCN) announced its results for the first quarter of 2023. Revenue in the first quarter totaled $1.901 billion, up from $1.646 billion in the year ago period. Net income in the first quarter was $197.8 million ($180.3 million a year ago). Results were due to record solid waste pricing growth, strong operational execution and continuing acquisition activity.

 

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