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.

Read my latest Smart Investor newsletter on my website. The Q2 2023 edition covers Market Review, Recession Scorecard and Focus on Bonds.

 

Markets

Market scorecard as of close on Friday June 16, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	19,975	0.4%	3.0%
U.S.	S&P 500	4,410	2.6%	14.8%
U.S.	NASDAQ	13,690	3.2%	30.8%
Europe/Asia	MSCI EAFE	2,171	3.0%	11.7%

Source: FactSet

• TSX finished lower in quiet Friday afternoon trading, near worst levels. Most sectors lower. Canadian equities recorded a moderate 0.4% weekly gain, but again notably lagging US peers.

• US equities finished lower, near worst levels in fairly quiet Friday afternoon trading ahead of the long holiday weekend in the US. S&P logged its fifth straight week of gains, something that has not happened since November 2021.

• U.S. equity markets, previously wary of ever-higher rates, have only added to gains in the aftermath of the Fed’s meeting to reach fresh 12-month highs as the S&P 500 is now up over 23 percent from the October 12, 2022 low. Much of this has to do with market participants’ perceptions—rightly or wrongly—that an economic soft landing and improvement in corporate earnings trends are now more likely than they were a few months ago. However, the leading economic indicators we track still signal elevated recession risks.

• In recognition of Juneteenth National Independence Day U.S. markets are closed today (Monday June 19).

 

Economy

Canada

• A wave of stronger-than-expected economic data suggests the Bank of Canada (BoC) still has work to do, with the monetary policymakers forced out of hibernation and back into the business of raising interest rates. The first leg of the move lower in inflation was the easy part, with the BoC fairly confident that CPI inflation will approach the 3% mark relatively soon, but the path from 3% to 2% is likely to prove more challenging.

• The official statement which suggested they have concerns inflation could get stuck materially above their target, and that policy may still not be restrictive enough to cool demand. This clearly leaves the door open to more interest rate increases in the months to come.

U.S.

• The Fed’s decision to pause its interest rate hiking campaign helped, as did data indicating both the U.S. jobs market and consumer behavior remain resilient, with inflation slowly subsiding.

• Fed Chairman Jerome Powell tried to indicate the pause was aimed at slowing the speed at which interest rates have been rising over the past year, rather than officially marking an end to their rate tightening campaign. The committee still expects to raise interest rates by as much as half a percent through the rest of the year.

Further Afield 

• On Thursday, the European Central Bank (ECB) hiked rates by 25 basis points to 3.5% and also announced the cessation of reinvestments under its Asset Purchase Programme; both decisions were widely expected by markets.

• Sentiment has been buoyant this week as China continues to roll out policies to support the economy. The People’s Bank of China (PBoC) unexpectedly lowered a series of short-term interest rates on Tuesday and cut its medium-term lending facility on Thursday for the first time since last August, with investors expecting the move to encourage local banks to lower lending rates.

 

Notes About Companies in Model Portfolio 

• Berkshire Hathaway (BRK.A/BRK.B) Following the close of the markets in Japan today, Berkshire Hathaway’s wholly-owned subsidiary, National Indemnity Company, will notify Japan’s Kanto Local Finance Bureau that it has increased its ownership interest in five of the leading Japanese trading companies. The companies, listed alphabetically, are Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo. Presently these are the only publicly traded investments that Berkshire owns in Japan.

 

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