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 27, 2024.

Country	Equity Indices	Level	1 week	YTD
Canada	S&P/TSX Composite	23,957	0.4%	14.3%
U.S.	S&P 500	5,738	0.6%	20.3%
U.S.	NASDAQ	18,120	1.0%	20.7%
Europe/Asia	MSCI EAFE	2,507	3.5%	12.1%

Source: FactSet

• Most U.S. stock indexes have posted new highs during the week (the tech-heavy Nasdaq is the exception), as the prior week’s interest rate cut by the Federal Reserve has continued to drive bullish sentiment. Other supportive factors have included positive results and commentary from chipmaker Micron (MU) that rekindled AI-related enthusiasm, solid economic data, and relief about a Chinese economic stimulus package and its likely impact on global growth.

• The S&P/TSX also set new highs and ended the week up 0.4%. More than half of the year-to-date gain has come in the last three months, as a strong earnings season and the Bank of Canada’s (BoC) initiation of a rate-cutting cycle boosted investor optimism about the economic outlook.

• RBC Capital Markets, LLC Head of U.S. Equity Strategy Lori Calvasina weighed in on stock valuations during the week. While she thinks the S&P 500 is “already trading a little above where it deserves to be at year-end 2024…there are reasons to be optimistic about further upside for the S&P 500 in 2025 (and) various tests in our valuation model point to the S&P 500 reaching ~6,200 by year-end 2025 on our EPS forecast.”

 

Economy

Canada

• Canadian retail sales grew 0.9% m/m in July, ahead of Bloomberg consensus expectations of 0.6%, reversing a downward trend seen over the past two months. The rebound in retail sales and another month of projected growth are likely welcome news for the BoC, which has been concerned about downside risks to the economy.

• RBC Economics expects the BoC to continue its gradual rate cutting path of 25 basis points per meeting and bring the overnight rate down to 3% by Q2 of next year, which could help reduce borrowing costs for households and support consumer spending.

U.S.

• All eyes will be on U.S. jobs data on Friday for signs of weakness after the U.S. Federal Reserve kicked off its easing cycle with an outsized 50 basis point cut in September. Interest rates impact the economy with significant lags, and the Fed’s start to interest rate cuts will help limit headwinds from monetary policy in the year ahead.

• As the U.S. presidential election campaign sprints to November, the policy agendas of Kamala Harris and Donald Trump are taking shape. With the noise about the stark choice facing America louder than we’ve ever heard, we address the key policy differences between Harris and Trump that matter most to the economy and stock market. (See Global Insights attached, article, “Harris and Trump on the issues.”)

Further Afield

• The People’s Bank of China (PBoC), the country’s central bank, announced a series of monetary stimulus measures on Monday aimed at reviving China’s economy as concerns mount over slowing macroeconomic indicators and weak investor sentiment.

• Observers believe this flurry of stimulus suggests Beijing is concerned about missing its 5% GDP growth target. The new measures aim to accelerate growth, although it remains unclear to us how the changes can break the deflationary pressure and support the real estate sector.

• The Bank of Japan (BoJ) held its policy rates unchanged in September, as market participants expected. We reiterate our view that an interest rate hike at the BoJ’s October meeting remains unlikely, given the sharp market correction following the BoJ’s first rate hike in July and because a new leader to succeed outgoing Prime Minister Fumio Kishida will be formally elected by parliament on Oct. 1.

 

Notes About Companies in Model Portfolio

• Costco Wholesale Corporation (COST) Thursday announced its operating results for the 16-week fourth quarter and the 52-week fiscal year ended September 1, 2024. For the 52-week fiscal year, the Company reported net sales of $249.6 billion, an increase of 5.0 percent from $237.7 billion reported in the 53-week fiscal year 2023. Net income for the 52-week fiscal year was $7.367 billion, $16.56 per diluted share, compared to $6.292 billion, $14.16 per diluted share, in the 53-week prior year.

 

 

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