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 9, 2024.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	22,311	0.4%	6.5%
U.S.	S&P 500	5,344	0.0%	12.0%
U.S.	NASDAQ	16,745	-0.2%	11.6%
Europe/Asia	MSCI EAFE	2,284	-2.5%	2.1%

Source: FactSet

• TSX closed higher in Friday afternoon rangebound trading. Most sectors higher. Materials the best performer.

• US equities ended mostly higher in Friday trading, a bit off session highs, and down on the week. Though S&P 500 ended just below unchanged mark for the week as today's gains built on big Thursday rally that saw S&P post biggest jump since November 2022. It was a quiet session with nothing particular behind Friday’s gains amid a lack of catalysts as stocks continue to claw back from big Monday selloff. Thursday's upside driven by soft-landing narrative traction following initial claims.

 

Economy

Canada

• The Canadian dollar is once again trading near the lower end of the $0.72–$0.76 range that has prevailed against the U.S. dollar since September 2022. The ongoing market expectation of a divergence in monetary policy between the Bank of Canada (BoC), which appears eager to continue cutting interest rates, and the U.S. Federal Reserve, which has been slow to begin cuts, has continued to weigh on the Loonie, as yield-seeking investors are moving their capital to the higher-yielding U.S. dollar.

• Employment was little changed in July - edging slightly lower (-3k) for a second consecutive month after the 1k dip in June. The unemployment rate held steady at 6.4% - still up almost a full percentage point from a year ago and 1.6 percentage points from post-pandemic lows.

 

U.S.

• The prospect of U.S. interest rates falling faster and deeper than expected makes the dollar less attractive relative to other currencies and August has, so far, seen a significant drop in the greenback’s value. The move was most notable against the yen, where U.S. currency shed over 5% of its value at the intraday lows, although it has subsequently recaptured most of that lost ground.

• All eyes will be on Wednesday’s U.S. inflation print after a larger-than-expected increase in the unemployment rate and softening in the manufacturing sector a week ago heightened concerns that the Federal Reserve may need to respond with more aggressive interest rate cuts than previously thought.

 

Further Afield

• The UK and European markets have not been immune to the selloff in equities and strong rally in bonds during the week. The rally in UK Gilts and German Bunds continued into Monday’s trading from last week, with yields (which are the inverse of bond prices) reaching intraday lows of 3.72% and 2.07% in 10-year Gilts and Bunds, respectively.

• Bank of Japan (BoJ) Governor Kazuo Ueda then suggested the possibility of an additional rate hike. The hawkish BoJ comment, combined with expectations of a U.S. Federal Reserve rate cut, caused the yen to surge by over 10% to around 145 against the U.S. dollar from its previous low of around 160. This has led to an unwinding of the yen carry trade, triggering a global selloff in risk assets.

 

Notes About Companies in Model Portfolio

Excerpt from Global Insight Weekly, Global Portfolio Advisory Committee (August 8, 2024):

• RBC Capital Markets, LLC’s Head of U.S. Equity Strategy Lori Calvasina correctly points out that the S&P 500 Q2 earnings season statistics have been relatively good overall and management team commentaries have been balanced, not negative. Both the Magnificent 7 and non-Magnificent 7 categories have posted earnings growth in Q2, and the S&P 500 consensus forecasts of $242 per share this year and $277 per share next year have been stable over a period when they have historically eroded.

• There are, however, pockets of weakness. Softer consumer trends have been revealed within a number of company reports. Sean Naughton, who leads the team that manages RBC Wealth Management’s proprietary equity portfolios and who was previously a capital markets analyst covering large retail firms, points out that when it comes to consumer spending slowdowns, such indicators of weaker demand “have a tendency to be melting icebergs.”

 

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