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 Q3 2024 edition covers Market Review for first half of 2024, and a list of questions for those thinking about their retirement. Shiuman’s Corner is about my favourite podcasts.

 

Markets

Market scorecard as of close on Friday August 2^nd, 2024.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	22,228	-2.6%	6.1%
U.S.	S&P 500	5,347	-2.1%	12.1%
U.S.	NASDAQ	16,776	-3.4%	11.8%
Europe/Asia	MSCI EAFE	2,342	0.7%	4.7%

Source: FactSet

• TSX closed lower in Friday afternoon trading, off worst levels. Most sectors lower. Canadian equities recorded a 2.6% weekly drop.

• US equities were sharply lower in Friday trading, though ended off session lows. Thursday’s selloff was the second big decline in a row and capped off a week that saw all the major indexes lower, including Russell 2000 posting the worst week since Mar-23 and Nasdaq now more than 10% off 10-Jul record close.

• Risk off continued amid recent pickup in growth worries. Big focus on softer July jobs report along with some disappointing earnings takeaways from a number of the higher-profile reporters. Fits with recent narrative flip to "bad news is bad news". Some of that flip driven by concerns consumer spending slowdown broadening.

• On Monday August 5, Canadian markets were closed. In the U.S. the S&P 500 sold off 3%. Please refer the attached article ‘Stock market selloff: A “growth scare,” or more?’ by RBC Global Portfolio Advisory Committee.

 

Economy

Canada

• Canadian GDP expanded another 0.2% in May after a 0.3% increase in April. The May increase was slightly higher than both Statistics Canada's preliminary estimate of 0.1% growth released last month, and our own expectations of a flat reading. We (RBC Economics) think the economic backdrop should give the Bank of Canada room to deliver another interest rate cut in their next meeting in September.

• Relief to the Canadian housing market from lower borrowing costs is likely to be modest. The rate cutting cycle has begun in Canada with the Bank of Canada’s overnight interest rate now sitting at 4.5%, 50 basis points (bps) below the cycle peak following back-to-back 25 bps reductions. While the housing market is starting to see some of the knock-on effects, overall activity levels remain tepid.

U.S.

• The U.S. Federal Reserve held the fed funds target rate unchanged in Wednesday’s policy announcement as expected, while signalling the possibility of a rate cut in its next meeting in September. Fed Chair Powell said explicitly that should this progress (inflation and employment) continue, “a reduction of the policy rate could be on the table, as soon as September”.

• In July, payroll job gains of 114k (consensus 175k), and the unemployment rate of 4.3% (consensus 4.1%) both pointed to larger deterioration in the U.S. labour market than expected.

Further Afield

• The Bank of England (BoE) delivered a “finely balanced” cut on Thursday, lowering the Bank Rate by 25 basis points (bps) to 5.00% from 5.25%—the first cut in four years.

• In the euro area, Q2 economic growth and headline inflation surprised to the upside. Eurozone GDP growth increased to 0.6% y/y, but recent economic activity indicators show signs of weakness emerging.

• The Bank of Japan (BoJ) raised its benchmark interest rate to around 0.25%, from a 0%–0.10% range, and announced plans to halve its bond purchases to around ¥3 trillion (US$19.6 billion) by Q1 2026. BoJ Governor Kazuo Ueda demonstrated his will to proceed with normalization after years in which the central bank pursued an ultra-easy policy.

 

Notes About Companies in Model Portfolio

• Second-quarter earnings season is well underway with nearly 70% of the S&P 500 having already reported. Over 47% of companies have reported sales that exceeded analyst expectations, beating by an average of 0.8%.

• Apple (AAPL) announced Thursday financial results for its fiscal 2024 third quarter ended June 29, 2024. The Company posted quarterly revenue of $85.8 billion, up 5 percent year over year, and quarterly earnings per diluted share of $1.40, up 11 percent year over year.

• Berkshire Hathaway Inc. (BRK.A and BRK.B) and its consolidated subsidiaries released on Saturday operating results for the second quarter and first six months of 2024. Operating earnings was $11.75 billion in Q2 compared with $10.04 billion same period last year. Net earnings in Q2 was $30.35 billion ($35.91 billion prior year). Earnings included investment gains which were higher in 2023 than in 2024.

• Brookfield Infrastructure (BIP) announced Thursday its results for the second quarter ended June 30, 2024. Net income was $8 million for the three-month period ended June 30, 2024 compared to $378 million in the prior year (the prior comparative period included gains on capital recycling program).

• Intact Financial (IFC) reports Tuesday Q2-2024 results. Net operating income per share increased to $4.86 (and EPS of $4.04) driven by very strong underwriting results, as well as solid growth in investment and distribution income. Overall operating Direct Premiums Written (DPW) increased 6% led by rate increases and unit growth in hard market conditions across personal lines. Within commercial lines, growth was led by rates in the mid-single digits, with market conditions varying by line of business.

 

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