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 8, 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

• Canadian equities higher in Friday afternoon trading, just off best levels. The S&P/TSX Composite posted a 0.6% weekly decline with energy and materials the big drag on performance.

• US equities ended higher Friday, near best levels. Follows a stronger finish Thursday in a fairly quiet session. Equities closed at new YTD highs today with S&P and Nasdaq each locking in sixth consecutive weekly gains, up 0.8% and 0.4% respectively.

• U.S. stock indexes have traded in narrow ranges, just below their 2023 highs, during the first full week of December. As pressure from year-end tax-loss selling abated, sentiment turned more positive, with market bulls pointing to a higher likelihood of a soft landing for the economy in 2024. This was in contrast to the recessionary concerns that saw stocks hit a six-month low near the end of October.

 

Economy

Canada

• The Bank of Canada (BoC) maintained its 5% overnight policy rate at its Dec. 6 meeting. This continued pause was driven by recent data showing a weak economic backdrop, including a 1.1% annualized contraction in GDP in Q3 and unemployment ticking higher despite core inflation measures that are still above the 1%–3% BoC target range.

• Wage growth remains resilient in the 4%–5% y/y range, but further softening of the labour market should work against it. All in, inflation has been softening within Canada given incrementally weaker data points, but it is important to be aware that the central bank has not softened its tone and remains vigilant of any potential shifts in trends.

U.S.

• Generally tepid economic data reported during the week buoyed the market, as traders saw this as evidence of a gradually slowing economy that might trigger interest rate cuts from the Fed sooner rather than later. October factory orders were down 3.6% m/m, but the services sector looked a little healthier as the ISM Services Purchasing Managers’ Index beat consensus forecasts with a 52.7 result. A reading below 50 indicates a contraction.

• Economists pored over employment-related data in advance of the monthly payrolls report due Dec. 8. This data added to the cooling-economy narrative pushing interest rates lower.

Further Afield

• Expectations regarding European Central Bank (ECB) action have swung sharply during the week, with markets now anticipating the current deposit rate of 4% being cut several times in 2024. The rapid shift in interest rate expectations puts an additional spotlight on the ECB’s Dec. 14 meeting.

• Moody’s Investors Service, one of the big three global credit rating agencies, downgraded the outlook for China’s government credit rating to negative from stable on Tuesday. The agency said the move was mainly due to concerns the central government may increase financial support to local governments and state-owned enterprises. We acknowledge that these issues are worrisome and reflect the slowing property market and economic growth exerting pressure on local government revenue and parts of the financial industry. However, we don’t anticipate systemic financial risks.

 

Notes About Companies in Model Portfolio

• Intact Financial (IFC) and its subsidiary Royal & Sun Alliance Insurance Limited have reached an agreement to sell RSA's UK direct Personal Lines operations, representing approximately £165M of annual premiums, to Admiral. The transaction will result in the transfer of renewal rights, brands and employees. RSA will retain the claims reserves, which will be run off over time.

• McDonald’s (MCD) Starting next year, as a part of the company's "Digitizing the Arches" initiative, MCD will begin to deploy a new, universal software that connects both customer and in-store digital platforms (e.g., mobile app, web ordering, in-store kiosks, rewards program). Furthermore, the company highlighted generative AI technology solutions— in collaboration with Google Cloud—which aims to enhance both team member and customer experiences.

 

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