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 July 21st, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,548	1.4%	6.0%
U.S.	S&P 500	4,536	0.7%	18.1%
U.S.	NASDAQ	14,033	-0.6%	34.1%
Europe/Asia	MSCI EAFE	2,182	-0.3%	12.2%

Source: FactSet

• TSX finished higher Friday, near best levels. Most sectors higher. TSX logged a 1.4% weekly gain with the Canadian benchmark closing at best level since 9-May.

• US equities finished mixed in fairly listless Friday trading, ending best levels. The Dow, S&P, and Russell posted weekly gains; the Dow closed higher for the tenth straight session. More broadening of market strength beyond big tech as DJIA outperformed Nasdaq on Thursday by most since March 2021 and on longest winning streak since 2017.

• U.S. Financials has been the best-performing sector last week, up 3.06%, as banks’ earnings results have been coming in better than the consensus feared.

 

Economy

Canada

• Canadian headline inflation slowed to 2.8% y/y in June, slightly below the consensus expectation of 3.0%. The softer-than-expected data was primarily driven by the pullback in energy prices.

• In the bigger picture, inflationary pressure remains broad in nature and consumer spending has proven to be relatively resilient. As a consequence, we believe interest rates will likely remain high for the duration of the year, with the potential for one more rate hike by the Bank of Canada (BoC) before the end of 2023.

U.S.

• According to the Citigroup Economic Surprise Index, which provides a snapshot of how an economy is faring relative to consensus economic forecasts, U.S. data has continued to come in stronger than expected as inflation moves lower, employment remains resilient, and the housing industry shows signs of recovery.

• The Department of Labor released data on the morning of July 20 that showed initial unemployment claims dropping to 228,000 for the week ending July 15, well below the consensus expectation of 241,000, and down from 237,000 last week.

• Ahead of this week’s Fed policy rate meeting, some economists are arguing whether the Fed should settle for a slightly higher inflation rate rather than risk driving the U.S. economy into a recession with additional monetary tightening (Bloomberg). The Federal Reserve and the European Central Bank are projected to further raise interest rates, while the Bank of Japan is expected to hold.

Further Afield

• In the eurozone, weakness in manufacturing and falling retail sales have weighed on economic results. In China, retail sales have fallen and Q2 GDP came in below consensus expectations.

• On July 19, Chinese authorities issued guidance on boosting the growth of the private economy that included promises to improve the business environment, enhance policy support, and strengthen the legal underpinnings of business development.

 

Notes About Companies in Model Portfolio 

• Following second week of Q2 earnings season, 17.5% of S&P 500 has now reported. According to FactSet, 75% of reporters have beat expectations, while earnings are surprising to the upside by just over 6.5% in aggregate. This is below the respective five-year averages of 77% and 8.4%.

• Johnson & Johnson (JNJ) 2023 Q2 reported sales growth of 6.3% to $25.5 billion with operational growth of 7.5%* and adjusted operational growth of 6.2%. Operational growth excluding COVID-19 Vaccine of 8.9%. “We are entering the back half of the year from a position of strength with numerous catalysts, including becoming a two-sector company focused on Pharmaceutical and MedTech innovation” said Joaquin Duato, Chairman of the Board and Chief Executive Officer.

• TC Energy (TRP) announced that it has entered into an agreement to monetize a 40% interest in its Columbia Gas Transmission, LLC (Columbia Gas) and Columbia Gulf Transmission, LLC (Columbia Gulf) systems. Total proceeds for the transaction are expected to be C$5.2B (US$3.9B) in cash, to be paid at closing, subject to certain customary adjustments.

 

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