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 16, 2024.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	23,055	3.3%	10.0%
U.S.	S&P 500	5,554	3.9%	16.4%
U.S.	NASDAQ	17,632	5.3%	17.5%
Europe/Asia	MSCI EAFE	2,346	2.7%	4.9%

Source: FactSet

• TSX closed slightly higher in Friday afternoon trading close to levels not seen since the end of July. Most sectors higher. Canadian equities closed higher in Thursday afternoon trading, near best levels. TSX recorded a 3.3% weekly gain lifted by energy and tech.

• US equities finished higher in fairly quiet Friday trading, though ended off best levels. S&P and Nasdaq rose for seventh straight session and major indices logged strong weekly gains. It was a quiet session overall but stocks continued their recent upward trend. Firmness last week was driven by further support for the soft-landing narrative (retail sales, claims), disinflation traction (PPI, CPI, NY Fed inflation expectations) and some pushback against concerns about incremental softening in consumer spending.

 

Economy

Canada

• Canada’s labour market showed signs of further slowing in July, with overall employment remaining nearly unchanged from June (unemployment rate of 6.4%). Bank of Canada (BoC) officials expressed concerns that further labour market weakness could weigh on consumer spending and place downward pressure on growth and inflation.

• The BoC subsequently signaled that it would be appropriate to lower the policy rate further in the coming quarters, provided inflation data continues to align with the central bank’s projections.

U.S. 

• Headline CPI growth edged down to 2.9% in July (the lowest since March 2021) from 3.0% in June and with further signs that underlying inflation trends continue to slow after a worrying reacceleration earlier this year.

• While Fed officials will receive two more rounds of inflation readings before their next meeting in September, we believe Fed Chair Jerome Powell and his colleagues will direct their attention to the labor market front, especially after July’s jobs data reignited recession fears.

• The equities selloff since mid-July may have been exacerbated by a softening U.S. labour market but economic fundamentals in the U.S. have not crumbled. We (RBC Economics) continue to expect a normalization and not recession in the U.S., and the U.S. Federal Reserve will cut interest rates slowly this year by 25 basis points in each September and December.

• A key risk event this week is likely to be Friday when Fed Chair Jay Powell is expected to provide fresh insights on the path of U.S. monetary policy at the central bank’s annual economic policy symposium in Jackson Hole, Wyoming.

 

Further Afield

• The UK’s headline unemployment rate for the three months to June declined to 4.2%, beating consensus expectations of 4.5%. Wage growth continues to be sticky, with private sector regular pay growth for the same period still above 5%. RBC Capital Markets continues to expect one more BoE rate cut to 4.75% this year, and two next year.

• Japan’s GDP grew 3.1% in Q2 on an annualized basis, far ahead of the consensus estimate of 2.3% growth and the 2.3% contraction in Q1. The latest data seems to suggest the decline in private consumption over the past year may be reversing and consumers are finally spending more after the biggest wage increases in more than three decades.

 

Notes About Companies in Model Portfolio

• At this stage of the second quarter earnings season, the blended earnings growth rate - combining reported and estimated results, is at 10.9%, which would mark the highest y/y earnings growth rate reported by the index since Q4 2021 (31.4%).

• Google’s IPO was on August 19, 2004. In twenty years its stock has gone up 7,600% since its IPO price.

 

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