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 Q3 2023 edition covers Market Review, Concentration of Returns in U.S. equities and Estate Planning Basics.

 

Markets

Market scorecard as of close on Friday October 20, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	19,116	-1.8%	-1.4%
U.S.	S&P 500	4,224	-2.4%	10.0%
U.S.	NASDAQ	12,984	-3.2%	24.1%
Europe/Asia	MSCI EAFE	1,960	-2.6%	0.8%

Source: FactSet

• Canadian equities finished lower Friday, near worst levels. All sectors lower. TSX logged a 1.8% weekly drop, back firmly into negative territory on year after three straight declines to end the week. Economists noted last week's data helped cement expectations for the Bank of Canada to stand pat this week, with consensus for a hawkish hold while market also dialed back odds of a hike to <20% (down from ~40% prior).

• US equities finished down in Friday trading, ending near worst levels and seeing the S&P move below its 200-day moving average for the first time since March. Geopolitics, rate pressure from earlier in the week, disappointing earnings (particularly in banks/financials) were the go-to excuses. Treasuries were stronger across the curve following another backup in long-term yields on Thursday that saw 10-years trade just below the 5% level.

 

Economy

Canada

• Canadian inflation unexpectedly decelerated in September, a sign that prior rate hikes are having their intended effect. According to Statistics Canada, the headline Consumer Price Index (CPI) rose 3.8% y/y in September vs. 4.0% y/y in August, while core CPI, excluding food and energy prices, came in at 3.2% y/y in September vs. 3.6% y/y in August.

• The BoC has released its Q3 Business Outlook Survey (BOS) which points to a softer demand backdrop as inflation—despite receding—is expected to remain a headwind. Looking broadly, the BOS reported that many companies are expecting lower sales growth alongside slower investment and hiring activities, while about 50% of businesses reported that persistent cost pressures continue to impact their operations.

U.S.

• U.S. retail sales rose by 0.7% in September as consumer spending powered ahead, despite another uptick in inflation from the latest Consumer Price Index report. Even though wage growth is losing steam, it appears Americans still have the leeway to keep spending as the labor market remains generally strong, led by ample growth in payrolls and labor force participation.

• U.S. housing starts rebounded slightly in September, but this only partially offset the sizeable drop in August, which was the largest decline in over a year. The entire housing market is now heavily depressed as a result of surging interest rates and still-high prices, making affordability the worst on record for prospective homebuyers.

Further Afield

• China Q3 2023 GDP growth came in much better than feared. According to the National Bureau of Statistics of China, GDP grew 4.9% y/y and 1.3% q/q, exceeding economists’ expectations, as government stimulus efforts worked their way through the system. The quarter saw a sharp increase in retail sales, particularly for restaurants, alcohol, and cars, offsetting a drag from the property market.

• The Bank of Japan (BoJ) announced an unscheduled bond-purchase operation on Wednesday, and the benchmark 10-year yield hit 0.848% on Thursday, the highest level since 2014. Some fixed income strategists think it may be difficult for the BoJ to stop the upward trend in yields, according to a report in The Japan Times.

 

Notes About Companies in Model Portfolio 

• Costco (COST) announced that Craig Jelinek will step down as CEO, effective 1-Jan-24. The board has elected Ron Vachris, President and COO since February 2022, as President and CEO, effective 1-Jan-24. Craig will remain with Costco through April 2024, serving in an advisory role and assisting Ron during the transition. Craig will also continue to serve on the board and will stand for reelection at the January 2024 annual meeting.

• Intact Financial Corporation (IFC) and its subsidiary RSA announced that all conditions related to their acquisition of Direct Line Insurance Group plc's brokered Commercial Lines operations have been fulfilled. The transaction is anticipated to close on October 26, upon payment of a £520 million cash consideration.

• Johnson & Johnson (JNJ) reported revenue of $21.35 billion with sales growth of 6.8% year-over-year. JNJ delivered a Q3 beat led by better-than-expected results in Innovative Medicines (Pharma) business and margins. Despite the Q3 MedTech miss, JNJ expects MedTech procedure volumes in 2024 in the 5-7% range.

• Procter & Gamble (PG) reports Q1 revenue of $21.87 billion, up 7% year-over-year. Operating cash flow was $4.9 billion, and net earnings were $4.6 billion for the quarter. - PG delivered high quality earnings with gross margins expanding to 52%, largely driven by pricing, favorable commodity costs, and productivity, which was partially offset by negative mix, product/package reinvestment and FX.

 

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I appreciate the opportunity to serve you and look forward to continuing to help you accomplish your long-term financial goals.

 

Regards,

Shiuman