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 30, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,155	3.8%	4.0%
U.S.	S&P 500	4,450	2.3%	15.9%
U.S.	NASDAQ	13,788	2.2%	31.7%
Europe/Asia	MSCI EAFE	2,132	-0.3%	9.7%

Source: FactSet

• TSX closed higher in Friday afternoon trading, near best levels. All sectors higher. TSX up 3.8% on the week for best weekly performance since Feb 2021.

• US equities were higher in Friday trading, ending just off best levels as major indices capped off solid weekly gains. Most sectors higher. A very quiet session ahead of Monday's shortened trading day and Tuesday Independence Day holiday in the US.

• It’s hard to believe, but the first half of the year has come to a close. Below, we share some takeaways on the year’s performance thus far and our thoughts going forward.

• • the returns have been modest with global bonds and Canadian equities up a few percentage points

  • the gains are larger in international equities

  • the U.S. equity market has looked strong. Yet, beneath the surface, its gains have been less compelling as the technology sector has had an outsized impact, and in particular a handful of the largest household names.

• You can read more in the 2023 Mid-Year Outlook.

 

Economy

Canada

• The Canadian inflation rate showed encouraging signs of easing in May, providing some relief to the Bank of Canada (BoC) as it considers the potential need for additional interest rate increases to tame inflation. The headline Consumer Price Index (CPI) rose 3.4% on a year-over-year basis.

• Of the various components that make up the CPI, mortgage costs stood out with a 29.9% rise in May. This represents the largest increase on record for the third consecutive month, as a rising-rate environment continues to pressure Canadians.

U.S. 

• The U.S. economy grew faster than anticipated during the first half of 2023, as real gross domestic product grew at a 2% annualized rate in 1Q-23, upwardly revised from the initial estimate of 1.3%. The significant upward revision was largely driven by stronger household spending.

• Last week, Fed Chair Jerome Powell emphasized keeping interest rates elevated for longer as policymakers remain focused on bringing inflation back down to their 2% target. As shown by the chart, current market expectations are still pricing in rate cuts, but Powell’s hawkish language pushed expectations for the first rate cut to December, followed by more cuts in 2024 as the impact of higher rates filters through the economy.

• RBC Wealth Management thinks July will see the final rate hike in this cycle, followed by a long pause until either December or early 2024.

 Further Afield

• Economic growth in Germany and Europe as a whole may be sluggish at best in 2023, but the deterioration in economic activity will not be enough to stop the European Central Bank (ECB) from hiking interest rates to 4% from the current 3.5%, in our view. At the annual ECB Forum on Central Banking in Sintra, Portugal, ECB President Christine Lagarde reiterated her recent hawkish message to key global central bankers.

• China’s consumption-led recovery is displaying signs of losing momentum as spending slows across various categories, including holiday travel, vehicles, and homes. This has led to expectations among investors for increased stimulus measures to support the economy.

 

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