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 27, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	18,737	-2.0%	-3.3%
U.S.	S&P 500	4,117	-2.5%	7.2%
U.S.	NASDAQ	12,643	-2.6%	20.8%
Europe/Asia	MSCI EAFE	1,945	-0.8%	0.1%

Source: FactSet

• TSX ended lower in Friday afternoon trading, near worst levels. All sectors lower. TSX down for eighth straight session and now down 3.3% on the year. Canadian dollar lower against USD, with Loonie down more than 1% on the week and near worst levels since March.

• US equities finished mostly lower in Friday trading, ending not far from worst levels. Major indices logged notable weekly losses. Big tech was largely better. Better earnings sentiment and rate stabilization did not offer much in the way of support.

• Geopolitics no help with situation about a coming Israeli ground invasion of Gaza unclear at best. Recent weakness has largely been a function of underwhelming earnings and guidance takeaways, elevated rate volatility, technical deterioration and related systematic selling pressure, and more worries about the growth headwinds from the meaningful tightening of financial conditions.

 

Economy

Canada

• The Bank of Canada (BoC) held its policy rate steady at 5% following its October meeting last Wednesday, in line with both consensus and market pricing. BoC (also as expected) maintained a clear hiking bias with the policy statement, saying that “inflationary risks have increased” and that they are “prepared to raise the policy rate further if needed.”

• In a similar vein, the year-to-date rise in financing costs has reached levels not seen since 2009. This has been particularly problematic for the Real Estate sector given its sensitivity to interest rates.

U.S.

• Third quarter U.S. GDP remained exceptionally strong, accelerating to an annualized rate of 4.9%. That was also the fifth consecutive increase since Q2/22 and largest since Q4/21. Still, much of that strength came from another decline in remaining ‘excess’ savings accumulated during the pandemic. We continue to expect consumer spending to slow moving forward as higher interest rates and prices erode household purchasing power.

• The Manufacturing and Services PMIs also rose, to 50.0 and 50.9, respectively, exceeding Bloomberg consensus estimates. These reports highlight the continued strength of the U.S. economy, which we think has fueled hopes that an economic soft landing can be achieved—even as monetary policy becomes increasingly restrictive. 

Further Afield 

• As widely expected by market participants, the European Central Bank (ECB) left interest rates unchanged at 4%—the first pause after 10 consecutive hikes. During the press conference on Thursday, ECB President Christine Lagarde stated that “having a discussion on rate cuts is totally, totally premature.”

• Chinese authorities approved a plan to adjust the national budget on Tuesday. China is going to issue an additional RMB 1 trillion (US$137 billion) in government bonds, which will raise the country’s 2023 budget deficit ratio to about 3.8% of GDP from the original 3% target. The bond funds will be used mainly to support flood-control projects and to improve disaster prevention and relief capabilities.

 

Notes About Companies in Model Portfolio

• The Coca-Cola Company (KO) reported third quarter 2023 results last Tuesday: Net revenues grew 8% to $12.0 billion, and organic revenues (non-GAAP) grew 11%. Earnings per share (EPS) grew 9% to $0.71.

• CN (CNR) reported on Tuesday its financial and operating results for the third quarter ended September 30, 2023. Revenues of C$12,357 million for the first nine months of 2023, a decrease of 2%. Operating income of C$4,779 million for the first nine months of 2023, a decrease of 3%. The decrease was mainly due to lower fuel surcharge revenues as a result of lower fuel prices, lower volumes of intermodal, crude oil and forest products, primarily as a result of lower demand for freight services to move consumer goods and the negative impact of the pacific coast dock workers strike, unfavorable crude oil price spreads and weaker market conditions for lumber.

• Fortis Inc. (FTS) a regulated electric and gas utility, released its third quarter results Friday. Third quarter net earnings of $394 million, up from $326 million in 2022. Also contributing to earnings was higher retail revenue in Arizona, due to warmer weather and new customer rates at Tucson Electric Power.

• Waste Connections ( WCN) announced Wednesday its results for the third quarter of 2023. Revenue of $2.065 billion, up 9.8% year over year. Net income of $229.0 million, and adjusted EBITDA of $671.2 million, up 14.1% year over year.

 

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