November 8-12, 2021

What happened last week in financial markets

The Fed’s stance on raising interest rates helped alleviate inflationary concerns

From the onset, investors had little doubt that October’s U.S. inflation data would come in high. The real debate centred on how markets would react when the Labour Department released the official numbers on Wednesday morning. As expected, the report showed U.S. consumer prices increased 6.2% on a year-over-year basis, the fastest rise since 1990. On a monthly basis, the Consumer Price Index (CPI) was up 0.9% from September, the largest increase in four months. Stocks in Canada and the U.S. fell on the news, but the volatility was largely contained to one day of trading.

Two main factors helped markets reach record highs on Monday and Tuesday, while offsetting the declines commonly seen in the days leading up to, and directly following, the release of inflation data: Lingering optimism from the Federal Reserve’s (the Fed) most recent policy announcement, in which it restated its position that rising inflation will be transitory. Economists continue to believe the U.S. central bank won’t raise interest rates until late 2022. And, President Biden’s US$1 trillion infrastructure bill, which Congress passed on November 5.

Tesla continued making headlines, along with gold and oil prices

No stranger to controversy, Elon Musk thrust the world’s most valuable vehicle manufacturer back into the spotlight last week, after polling his 63.3 million Twitter followers on whether they support him selling 10% of his Tesla stock. Fifty-eight percent answered “Yes,” and Musk pledged to abide by the results. This decision resulted in the worst day for Tesla stock in eight months. The company lost US$60 billion in market value and sunk below the US$1 trillion milestone it had recently surpassed. By Friday, Musk had sold US$5.7 billion worth of Tesla stock. Despite positioning the sale as part of a debate on avoiding taxes, filings released Wednesday showed some of the transactions were prearranged in September.

Charting a similar course to its U.S. counterparts, Canada’s TSX hit record levels on Monday and Tuesday, as oil and gold prices climbed. On Tuesday, both West Texas Intermediate and Canada’s crude benchmark, Western Canada Select, jumped over 3%. Prices became choppy later in the week, as political pressure mounted on Joe Biden to reduce the price strain on motorists. On Thursday, spot gold, which is often viewed as a hedge against inflation, climbed to its highest level since June. It also marked sixth consecutive day of gains for gold and provided a boost for the material sector.


The stock and bond market*
Index Close Week YTD
S&P/TSX Composite 21,768.53 1.46% 24.87%
Dow Jones Industrial Avg. 36,100.31 -0.63% 17.95%
S&P 500 Index 4,682.85 -0.31% 24.67%
Nasdaq Composite 15,860.96 -0.69% 23.06%
10-yr GoC Yield 1.67% 0.08% 1.00%
10-yr U.S. Treasury Yield 1.58% 0.13% 0.65%
WTI Crude Oil (US$/bbl) 80.69 -0.71% 66.30%
Canadian Dollar US$0.7959 -0.90% 1.34%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending November 12, 2021. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.


What’s ahead

Canadian inflation data (November 17): Canadian inflation reached an 18-year high in September, driven by soaring gas, housing and food prices. Canadian markets are likely to react, when Statistics Canada releases October’s data on Wednesday.

Circle these dates

  • November 25: U.S. markets closed for Thanksgiving Day
  • December 8: Bank of Canada interest rate announcement
  • December 27 to 28: North American markets closed for Christmas holidays

Key take-away

Stay Informed. It’s easy to forget that market fluctuations happen through every phase of the market cycle. We simply notice it more when markets go down. Understanding how market cycles work can help you maintain perspective during times of uncertainty – like when inflation is rising – so you can focus on an investment plan that’s geared toward your personal goals and timelines.


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