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 December 1, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,453	1.7%	5.5%
U.S.	S&P 500	4,595	0.8%	19.7%
U.S.	NASDAQ	14,305	0.4%	36.7%
Europe/Asia	MSCI EAFE	2,125	1.1%	9.3%

Source: FactSet

• TSX finished higher in Friday afternoon trading, near best levels. All sectors higher. TSX recorded a 1.7% weekly gain led by materials while energy and staples lagged.

• US equities ended higher Friday afternoon, near best levels and achieved a fifth straight week of good gains. Cyclicals were among the standouts. Big tech largely underperformed. Treasuries rallied with some curve steepening, building on the week's strength.

• Stocks entering final month of the year with momentum behind the key peak Fed and soft-landing narratives. Seasonality another bullish talking point, along with stable 2024 consensus earnings estimates.

 

Economy

Canada

• Canada’s economy avoids technical recession -- Canadian Q3 GDP growth was softer than expected, declining at a 1.1% annualized pace. However, Q2 growth now revised by Statistics Canada to have expanded at a 1.4% annualized pace rather than contracting slightly.

• While it looks like Canada’s economy will avoid a recession in 2023, growth has softened enough for the market to expect rate cuts by the Bank of Canada in H1 2024.

U.S.

• Expectations for less restrictive monetary policy in 2024 strengthened this week. Interest rate futures now reflect a high probability that the Federal Reserve cuts overnight rates by more than 1.35% next calendar year, with essentially no chance of further rate hikes.

• The combination of lower rates and potentially slower growth was a major headwind for the dollar. The U.S. Dollar Index (DXY)—a roughly trade-weighted measure of the greenback against other major currencies—is down approximately 4% in November. Even with the recent step back in value, the dollar remains well above both pre-pandemic and longer-term average levels versus major currencies.

Further Afield

• Eurozone inflation declined in November with both headline and core numbers coming in much lower than consensus expectations, indicating a continued improvement over previous periods. With the effects of higher interest rates still working their way through the economy, the market is now expecting rate cuts as early as spring 2024.

• Chinese authorities are intensifying their efforts to resolve the crisis in the country’s real estate sector by exerting significant pressure on banks to address a funding gap of approximately US$466 billion. This funding is necessary to stabilize the industry and to support the completion of unfinished apartment projects.

 

Notes About Companies in Model Portfolio

• Royal Bank of Canada (RY) reported Thursday net income of $14.9 billion for the year ended October 31, 2023, down $941 million or 6% from the prior year. Results reflect an increase in provisions in Personal & Commercial Banking and Capital Markets. Its board of directors has declared an increase to its quarterly common share dividend of three cents or 2% to $1.38 per share.

• TD Bank Group (TD) announced Thursday its financial results for the fourth quarter ended October 31, 2023. Reported earnings were $2.9 billion, down 57% compared with the fourth quarter last year, and adjusted earnings were $3.5 billion, down 14%. “For fiscal 2024, it will be challenging for the Bank to meet its medium-term adjusted EPS growth target range of 7-10% and return on equity target of 16+% as it navigates a complex macroeconomic environment, expected further normalization in PCLs and critical business investments.” TD increases quarterly dividend by 6.3% to C$1.02 from C$0.96.

• • Excerpt from a letter to clients from RBC Portfolio Advisory Group (December 1, 2023): “Throughout the year, expectations for the Canadian banking sector have been overwhelmingly negative. That helps to explain the group’s lackluster stock performance year-to-date… Commentary from management teams painted a picture of reserved optimism. Banks are bracing for a continued deceleration in growth as higher interest rates continue to work their way through the economy… In our view, the banks reflect the broader economic issues that exist in Canada. Namely, growth is sluggish, but not terrible. Higher interest rates are having an impact but there are limited signs of significant stress at this time.”

• TELUS (T) has secured approximately 100 MHz of prime 5G mid-band spectrum nationally, with contiguity in 96% of the country including all major markets, at an average price of C$0.82 per MHz-pop. TELUS will now hold licences to an average of 72 MHz of 3800 MHz spectrum nationally, acquired at an average price of C$0.24 per MHz-pop.

 

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