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 catch up on the past four weeks’ Weekly Update in the link to my Blog.

Read my latest Smart Investor newsletter on my website. The Q1 2024 edition covers Market Review for 2023, a Turning Point on interest rates, and advantages of Bonds. Plus my Book List for 2023.

 

Markets

Market scorecard as of close on Friday January 19, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	20,907	-0.4%	-0.2%
U.S.	S&P 500	4,840	1.2%	1.5%
U.S.	NASDAQ	15,311	2.3%	2.0%
Europe/Asia	MSCI EAFE	2,179	-2.1%	-2.5%

Source: FactSet

• TSX finished higher in Friday afternoon trading, near best levels. Most sectors higher. Real estate the outsized gainer, tech, financial, utilities, health care, industrials, materials, staples and consumer discretionary also ahead. Energy, and communication services the laggards. Canadian equities ended with a moderate 0.4% weekly decline thanks to Friday's rally.

• US equities ended higher Friday, gaining strength as the day evolved. S&P 500 reached a new all-time closing high for the first time since 3 January 2022. Big story last week was the continued repricing of 2024 rate cut expectations. March odds now running only slightly above 50%, while market pricing in 140 bp+ of easing this year, down from a recent peak near 175 bp.

• The earnings season will pick up significantly this week, with 76 companies in the S&P 500 set to report financial results.

 

Economy

Canada

• On Wednesday (January 24^th) the Bank of Canada (BoC) is widely expected to hold the overnight rate steady at 5% in the first policy decision of 2024 – extending a pause that started following the last hike in July.

• The increase in headline price growth to 3.4% in December (from 3.1% in November) matched expectations after surprising on the upside in November on a surge in travel tour prices. On a three-month annualized basis the scope of inflation pressures continues to improve. The uptick in core underlying price pressures suggests that BoC officials may not consider rate cuts as soon as expected by futures markets.

• Canadian housing market activity gained momentum, with home resales rising by 8.7% m/m in December. Price concessions from sellers and a modest decline in mortgage rates, which have moved sharply higher since the BoC started raising its policy rate in 2022, were supportive factors behind the home sales rebound.

U.S.

• Treasury yields are climbing higher last week on stronger-than-expected economic data from the Commerce Department’s December retail sales report, which showed consumer spending rising at the fastest pace in three months. As Americans contend with lingering inflation, elevated borrowing costs, and slowing employment, we think growth will likely slow later this year.

Further Afield

• The European Central Bank (ECB) is still concerned that services inflation and wage inflation, the latter at over 5% y/y, remain too high. Markets scaled back their expectations of the first rate cut timing somewhat, assigning a lower probability of a cut in April.

• China resumed publishing its youth unemployment data in December, having previously suspended it in June 2023. Officials said the latest jobless rate was 14.9% for those between 16 and 24 years old. Youth unemployment soared in early 2023 as hiring slowed in several sectors. Regulatory crackdowns in recent years on sectors ranging from technology to finance had a lingering effect on jobs.

• Monetary policy will also garner attention with the Bank of Japan (Tuesday) and the European Central Bank on (Thursday) scheduled to deliver their latest interest rate decisions. Comments from policymakers on how they are thinking about potential upside risk to inflation stemming from geopolitical tensions, which have raised the prospect of higher transportation costs and supply chain disruptions, are expected to be of particular interest for market participants.

 

Notes About Companies in Model Portfolio

• Apple (AAPL) Appeals Court says ban on Apple U.S. watch imports to be reinstated on 18-Jan following a pause. At issue is infringement on two patents related to the blood oxygen sensor owned by Masimo.

• Berkshire Hathaway Inc. (BRK.A/BRK.B) has acquired Pilot Corporation’s remaining 20% interest in Pilot Travel Centers LLC effective January 16^th. Berkshire Hathaway now owns 100% of Pilot Travel Centers.

• Microsoft (MSFT) On January 12^th, Microsoft detected that beginning in late November 2023, a nation-state associated threat actor had gained access to and exfiltrated information from a very small percentage of employee email accounts including members of our senior leadership team and employees in our cybersecurity, legal, and other functions, on the basis of preliminary analysis. As of the date of this 8-K filing, the incident has not had a material impact on the company's operations.

• Visa (V) announced January 16^th it has completed its acquisition of Pismo – a global cloud-native issuer processing and core banking platform.

 

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