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 9, 2023.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	21,010	-0.4%	0.2%
U.S.	S&P 500	5,027	1.4%	5.4%
U.S.	NASDAQ	15,991	2.3%	6.5%
Europe/Asia	MSCI EAFE	2,225	0.1%	-0.5%

Source: FactSet

• Canadian equities ended higher Friday, near best levels. Most sectors higher. TSX logged a 0.4% weekly decline, now up just 0.2% on the year as the Canadian benchmark continued to lag US averages.

• US equities finished mostly higher in Friday trading, with S&P ending above the 5,000 level for the first time ever. Small-caps had a good session; major indices notched weekly gains.

• We think the U.S. stock market’s advance is persisting due to optimism about an economic soft landing and potential Fed rate cuts, declining inflation, solid Q4 earnings results, optimism about 2024 earnings, and sheer momentum. Since this rally began in late October, the S&P 500 has risen 21.3%.

 

Economy

Canada

• Employment rose by another 37k in January, and the unemployment rate ticked lower (to 5.7%) for the first time in more than a year. Growth in the economy still looks softer accounting for surging population growth. Canadian GDP is on track to post a 7th consecutive per-capita decline in Q1/2024.

• The Bank of Canada (BoC) remains concerned about reducing interest rates prematurely amid elevated shelter inflation and robust wage growth, according to the latest BoC meeting minutes. The minutes noted that shelter inflation remains a source of concern, given the possibility that a stronger-than-expected rebound in housing market activity could fuel shelter price pressures.

• The S&P Global Canada Manufacturing PMI rose to 48.3 in January, up from 45.4 in December and marking a three-month high. In our view, the Canadian economy will likely continue to soften as tighter financial conditions weigh on household spending and business investment.

U.S.

• U.S. retail sales and consumer price index reports for January will be closely watched for whether strong consumer spending and slowing inflation continue to unexpectedly coexist. The U.S. Federal Reserve remains wary that strong demand could reignite price growth, but to date, inflation has continued to edge broadly lower.

• Investors will turn their attention to the latest U.S. Consumer Price Index (Tuesday) and Producer Price Index (Friday) reports for an update on inflation, which could prompt markets to reassess the trajectory of interest rates.

Further Afield

• China’s Consumer Price Index (CPI) fell 0.8% y/y in January, the steepest decline since 2009 and below economists’ -0.5% y/y expectation. As the real estate crisis persists, we think the recent stock market decline adds to investors’ and consumers’ concerns. Economists broadly expect deflation pressure in China to continue for at least another six months, largely due to the real estate turmoil.

 

Notes About Companies in Model Portfolio

• Thus far, 67% of S&P 500 firms have released financial results, out of which 75% have beaten earnings expectations and 65% have reported a positive revenue surprise. Positive earnings surprises were led by firms in the Financial and Industrial sectors last week, which helped drive the S&P 500 to a new record high. Nevertheless, the S&P 500’s rally from the late-October low has been largely driven by valuation expansion rather than earnings, as the S&P 500 Index is up 22% since October 27 while forward 12-month EPS estimates have risen by just 2.0% since then, according to FactSet.

• Fortis (FTS) released its 2023 fourth quarter and annual financial results. Fortis reported net earnings of $1.5 billion, or $3.10 per common share for 2023, compared to $1.3 billion, or $2.78 per common share for 2022. Growth in earnings was primarily driven by rate base growth across utilities and the new cost of capital parameters.

• Telus (T) released its unaudited results for the fourth quarter of 2023. Consolidated operating revenues and other income increased by 2.8 per cent over the same period a year ago to $5.2 billion. Mobile and fixed customer growth of 404,000, up 103,000 over last year. Full year consolidated operating revenues growth of 9.4 per cent, and adjusted EBITDA growth of 7.6 per cent.

 

 

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