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 February 16, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	21,256	1.2%	1.4%
U.S.	S&P 500	5,006	-0.4%	4.9%
U.S.	NASDAQ	15,776	-1.3%	5.1%
Europe/Asia	MSCI EAFE	2,257	1.4%	0.9%

Source: FactSet

• TSX higher in Friday afternoon trading, off best levels. Canadian equities closed higher in Thursday afternoon trading, near best levels. TSX finished with a 1.2% weekly gain, rebounded from Tuesday's drop.

• US equities finished lower in Friday trading, ending just off worst levels. Small-caps underperformed though still outpaced large caps by more than 150bp for the week. Equities under a bit of pressure Friday cementing weekly declines for both S&P and Nasdaq. Market seemed to come to grips with Tuesday's hotter January CPI report and Thursday's retail sales miss (noting seasonal effects and weather considerations), but Friday’s above-consensus January PPI has injected an additional note of caution.

 

Economy

Canada

• CPI growth decelerated to 2.9% year-over-year from 3.4% in December – back under the top end of the Bank of Canada’s (BoC) 1% to 3% target range for the first time since June 2023.

• Retail sales spending (excluding autos) softened for a second consecutive month in January. While households posted a surprisingly strong Q4 (spending likely kept real output growth in positive territory in Q4 led by a temporary rebound in services activity), this is not expected to last. If December and January are any indication, Canadian households are clamping down on spending.

U.S.

• The year-over-year rate of CPI growth slowed less than expected in January - to 3.1% from 3.4% year-over-year with core (ex-food and energy) price growth unexpectedly holding steady at 3.9%. But broader signs of reacceleration in inflation pressures coming in the wake of another surge in employment and faster wage growth in January are reinforcing the risk that the Fed won't need (or be able to) pivot to interest rate cuts as quickly or aggressively as previously expected.

• U.S. retail sales declined during January as consumers took a breather after the holiday shopping season. The value of retail purchases dropped 0.8% from December, marking the largest downward move in nearly a year.

Further Afield

• There was some relief for the Bank of England (BoE) as UK inflation held steady at 4% y/y in January, unchanged from December. More positively, both headline and services inflation were lower than the BoE’s forecasts in its February Monetary Policy Report (MPR).

• European Central Bank (ECB) President Christine Lagarde dispelled hopes for imminent rate cuts as concerns for stubborn wage growth remain in focus. On Thursday, Lagarde stated that the ECB wishes to avoid making a “hasty decision” and policymakers “do not have enough evidence yet” to give them confidence that inflation will remain in a downward trend.

• Japan’s economy has unexpectedly fallen into recession, with GDP contracting for a second consecutive quarter. Provisional GDP declined 0.4% in Q4 2023, following a downwardly revised 3.3% slump in Q3. Japan slipped to the world’s fourth-largest economy in dollar terms, behind Germany.

 

Notes About Companies in Model Portfolio

• The Coca-Cola Company (KO) reported Tuesday fourth quarter and full-year 2023 results. For the full year, net revenues grew 6% to $45.8 billion, and organic revenues (non-GAAP) grew 12%, driven by 10% growth in price/mix and 2% growth in concentrate sales. For the full year, EPS grew 13% to $2.47, and comparable EPS (non-GAAP) grew 8% to $2.69.

• Intact Financial Corporation (IFC) reports Q4-2023 results. Net operating income per share1 up 45% to $4.22, driven by strong underwriting, investment and distribution results. Adjusted ROE1 of 11.7% (and ROE1 of 8.8%) after absorbing elevated catastrophe losses and UK personal lines exit costs.

• Waste Connections (WCN) announced Tuesday its results for the fourth quarter of 2023 and outlook for 2024. Revenue of $8.022 billion for the year, up 11.2% year over year, with net income of $762.8 million, and adjusted net income of $1.081 billion.

 

 

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