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 Q4 2023 edition covers Market Review, the Type of Recession we may have, and how to build Resilience in portfolios.

 

Markets

Market scorecard as of close on Friday November 3^rd, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	19,825	5.8%	2.3%
U.S.	S&P 500	4,358	5.9%	13.5%
U.S.	NASDAQ	13,478	6.6%	28.8%
Europe/Asia	MSCI EAFE	2,031	4.4%	4.5%

Source: FactSet

• Canadian equities finished higher Friday, just off best levels. Gains were fairly broad-based. Comes after Thursday's rally that saw TSX post its biggest gain since Nov-2022 pushing the index back into positive territory on the year. Canadian benchmark is up more than 5% on the week, on track for best weekly performance since Apr-2020.

• US equities higher in Friday afternoon trading, just off best levels. S&P 500 posted fifth-straight gain, higher by nearly 6% for the week for best weekly performance since Nov-22.

• U.S. stocks entered November on a strong footing after posting monthly declines in August, September, and October—the first three consecutive months of declines since the COVID-19 pandemic. Investors adopted the “bad news is good news” mantra, as generally weaker economic data implied tamer inflation and lower interest rates were likely ahead. Commentary from Fed Chair Jerome Powell was also perceived as dovish, encouraging risk-on behavior.

 

Economy

Canada

• Canada’s unemployment rate rose to 5.7% from 5.5% with employment growth no longer keeping up with higher population/workforce growth. The slowing in labour markets is consistent with softer GDP data over Q2 and Q3 and adds to evidence that headwinds from higher interest rates are building.

• BoC Governor Macklem reiterated federal and provincial spending will feed into inflation if current plans are maintained. Macklem testified that if government spent less it would be easier to reduce inflation. Macklem told the Senate committee that inflation may not come down to target until H2 of 2025, but it would be easier to reduce inflation if the government spent less.

U.S.

• The U.S. Fed - as widely expected - held the fed funds target range steady at 5.25% to 5.5% at Wednesday’s meeting. This marks the second consecutive meeting in a row, and third this year, that the Fed opted not to hike interest rates.

• RBC Economics continues to expect that outperformance of the U.S. relative to other advanced economies (growth is slowing more clearly in the U.K., Euro area, and Canada) won’t last as households run out of ‘excess’ pandemic savings and headwinds from higher interest rates build with a lag. 

 

Further Afield

• Euro area GDP contracted by 0.1% in Q3, in line with the recent decline seen in economic activity data. However, euro area inflation is heading in the right direction—both preliminary headline and core inflation fell in October to 2.9% and 4.2%, respectively.

• China’s factory activity declined in October, returning to a state of contraction, while the expansion of the services sector unexpectedly slowed. This indicates to us that the overall economy remains fragile and requires policy support.  

 

Notes About Companies in Model Portfolio 

• With over two-thirds of S&P 500 companies having reported Q3 2023 earnings by midweek, results appeared to be “good enough.” Analyst consensus now expects 4% q/q earnings growth for the quarter, which would end the streak of three consecutive quarters of earnings declines for the index as a whole. However, guidance for the next few quarters was subdued, with management teams expressing concerns over a potential recession in 2024.

• Apple (AAPL) announced financial results on Thursday for its fiscal 2023 fourth quarter ended September 30, 2023. The Company posted quarterly revenue of $89.5 billion, down 1 percent year over year, and quarterly earnings per diluted share of $1.46, up 13 percent year over year. Hardware product revenues came in below expectations for F4Q23 with macro headwinds particularly apparent in Macs as well as Wearables, Home and Accessories, even as Services surprised on the upside and offset the weakness in hardware products in aggregate.

• Berkshire Hathaway (BRK.A and BRK.B) released operating results on Saturday for the third quarter and first nine months of 2023. On a year-to-date basis, reported revenue increased to $309.2 billion from $141.6 billion when compared with the same period in 2022. When including the impact of the investment gains/losses, reported operating earnings declined to negative $12.8 billion from negative $2.8 billion in the prior year's period(s). Excluding the impact of investment gains/losses and other adjustments, third-quarter (year-to-date) operating revenue increased 21.2% (21.1%) to $93.2 billion ($271.1 billion), with much of the gain coming from the Alleghany acquisition and the onboarding of operating results from Pilot Travel Centers.

• Brookfield Infrastructure Partners L.P. (BIP.UN) announced its results last Wednesday for the third quarter ended September 30, 2023. Brookfield Infrastructure reported net income of $104 million for the three-month period ended September 30, 2023 compared to $113 million in the prior year. Current year results benefited from the contribution associated with recently completed acquisitions and organic growth across the base business. These positive impacts were partially offset by higher borrowing costs associated with the financing of growth initiatives and lower gains on currency and commodity contracts than in the same period last year.

• Nutrien Ltd. (NTR) announced last Wednesday its third quarter 2023 results, with net earnings of $82 million. Third quarter 2023 adjusted net earnings per share was $0.35 and adjusted EBITDA was $1.1 billion.

• Telus (T) released its unaudited results on Friday for the third quarter of 2023. Consolidated operating revenues and other income increased by 7.2 per cent over the same period a year ago to $5.0 billion. Darren Entwistle, President and CEO: “Our robust performance in our core telecom business is underpinned by our globally leading broadband networks and customer-centric culture, which enabled our strongest quarter on record, with total customer net additions of 406,000, up 17 per cent, year-over-year, driven by strong demand for our leading portfolio of bundled services across Mobility and Fixed services.”

 

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