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 September 20, 2024.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	23,867	1.3%	13.9%
U.S.	S&P 500	5,703	1.4%	19.6%
U.S.	NASDAQ	17,948	1.5%	19.6%
Europe/Asia	MSCI EAFE	2,421	1.4%	8.3%

Source: FactSet

• TSX ended little changed in Friday afternoon trading in rangebound session. Sectors mixed. TSX was up 1.3% for the week.

• US equities were mostly lower in Friday trading, ending a bit off best levels. Friday's fairly listless session came after big Thursday rally that saw Dow and S&P close at new record highs.

• Since the beginning of 2023, narrow market performance has been widely discussed, with strong performance out of the Magnificent 7 (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla) resulting in one of the narrowest markets seen in nearly 25 years. However, since peaking on July 10, the Magnificent 7 have begun to noticeably underperform the broader market—falling 9.2% while the S&P 500 has remained essentially flat over the same period.

 

Economy

Canada

• The Canadian economy has continued to underperform global peers with per-capita GDP continuing to decline and the unemployment rate rising. Canada’s labour market is softening at a pace and magnitude that is consistent with prior recessions, although more of the deterioration than usual has come from longer job search time for younger workers rather than layoffs.

• The silver lining is that a softening economy has reduced inflation pressures, and the Bank of Canada (and other advanced economy central banks) have begun a gradual interest rate-cutting cycle.

• Inflation in Canada surprised to the downside last week, falling to 2.0% on a year-over-year basis in August. The headline figure eased to the Bank of Canada’s (BoC) target rate for the first time since 2021, primarily on falling gas prices.

U.S.

• Debate ahead of the Fed's decision was not whether to cut but by how much - and policymakers opted to deliver a 50 basis point reduction that was close to market pricing ahead of the report, but larger than the 25 bp cut we assumed (and larger than initial 25 bp cuts from the BoC, BOE, ECB, and other advanced economy central banks).

• The Fed took pains to reinforce the view that this initial 50 basis point cut is the beginning of a "recalibration" cycle -designed to keep the economy in a strong pace rather than a response to rapid softening in the economic growth backdrop.

Further Afield

• The Bank of England (BoE) left interest rates unchanged at 5%, in line with the market’s and our expectations. Headline UK inflation was unchanged at 2.2% y/y in August, while services inflation accelerated to 5.6% y/y from 5.2% in July, both below the BoE’s forecasts in the August Monetary Policy Report (MPR).

• In China, consumer spending increased during the Mid-Autumn Festival, a major three-day holiday, compared to its pre-pandemic level. Total spending by domestic tourists during the holiday rose by 8% versus 2019, totaling RMB51 billion (US$7.2 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