August 17-21, 2020

What happened last week

The S&P 500 hit a new record high, entering a bull market

After several days of hovering just below its previous record close on Feb. 19, the S&P 500 made history on Tuesday when it reached an all-time closing high. The new record signaled the index had entered bull-market territory and marked the shortest bear market in the history of the S&P 500. Measured from peak to trough between Feb. 19 and March 23 (when the index hit its lowest point) the bear market lasted just 33 days. Supported by trillions of dollars in financial stimulus, the S&P 500 has gained 55% over the last five months.

In other market news, despite a rise in the weekly U.S. initial jobless claims (back up to 1.1 million after falling the previous week), the Federal Reserve’s concern over the direction of the U.S. economic recovery, and a new federal stimulus package that remains stuck in Congress, it was a good week for the major North American indexes.

The Nasdaq hit fresh record highs on Monday, Wednesday and Thursday, driven by the performance of tech giants Nvidia Corp, Tesla Inc. and Apple Inc. On Monday, Nvidia’s market capitalization – the total value of the company’s outstanding stock shares – crossed $300 billion for the first time, and shares of Tesla Inc. surpassed $1,800. By Thursday, Tesla shares were closing in on $2,000 per share. Not to be outdone, on Wednesday Apple Inc. became the first publicly listed U.S. company to pass $2 trillion in market capitalization.

Economic data made headlines north and south of the border

Canada’s inflation rate fell to 0.1% in July according to Statistics Canada. Gasoline prices, which were down 15% on a year-over-year basis, and the cost of air travel, which was down 8.6% (the first year-over year decline since December 2015) had the biggest impact on the consumer price index.

The inflation rate didn’t slow the Canadian dollar down as it reached its strongest level versus the U.S. dollar in nearly seven months on Wednesday. The Canadian dollar climbed 0.2% to 76.12 U.S. cents.

In the U.S., major retailers Walmart, Home Depot, Lowe’s and Target gave investors a boost of confidence with all four delivering better-than-expected quarterly earnings reports. Walmart reported a 97% increase in online sales during the second quarter and overall revenue of $137.7 billion. Home Depot’s sales growth doubled analyst expectations of 11.4%, hitting 23.4% for the quarter.

U.S. housing starts jumped 22.6% in July from the previous month, with home builders starting construction on homes at a seasonally adjusted rate of 1.496 million.

Bill Morneau resigned as Canada’s federal finance minister

On Monday, Bill Morneau resigned as Canada’s federal finance minister and was quickly replaced by Chrystia Freeland. Morneau resigned amid controversy over his role in awarding a contract to the WE charity, as well as alleged tension between himself and Prime Minster Trudeau. Chrystia Freeland, who now serves as both deputy prime minister and the minister of finance, takes over the task of leading Canada through the biggest economic recovery since the Great Depression.

The stock and bond market*
S&P/TSX Composite 16,517.85 0.02% -3.20%
Dow Jones Industrial Avg. 27,930.33 0.00% -2.13%
S&P 500 Index 3,397.16 0.72% 5.15%
NASDAQ Composite 11,311.80 2.65% 26.07%
S&P Global 1200 Index 2,646.49 0.17% 0.67%
10-yr GoC Yield 0.56% -0.05% -1.14%
10-yr U.S. Treasury Yield 0.64% -0.07% -1.28%
WTI Crude Oil (US$/bbl) 42.34 0.79% -30.66%
Canadian Dollar US$0.7589 0.69% -1.42%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending August 21, 2020. Source: Bloomberg.

What’s ahead

Canada’s Q2 Gross Domestic Product (GDP): This week, Statistics Canada is scheduled to release a second quarter GDP report. In the first three months of 2020, the Canadian economy shrank 2.1%. A flash estimate by Statistics Canada in late July warned the Q2 GDP could plunge by a record 12%.

Circle these dates

  • Sept. 9: Bank of Canada interest-rate announcement
  • Sept. 15-16: U.S. Federal Reserve meetings and statement
  • Nov. 3: U.S. presidential election

Key take-away

Achieving your financial goals easier with a roadmap. There are no right or wrong answers when defining your goals. Nor is one style of investing – more conservative or more aggressive – better than another. The trick is to choose a path that works and stay the course.

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