Investment update

Weekly insight into the marketplace.

Markets closed February in the red

Canada’s TSX and the Wall Street benchmark stock indexes continued a familiar pattern last week: jostling between gains and losses, depending on how the day’s news and economic data could influence the pace of future U.S. Federal Reserve (the Fed) interest-rate decisions. Both Canadian and U.S. equity markets moved higher on Monday, bouncing back from the heavy losses incurred at the close of the previous week. Economic data released by the U.S. Census Bureau, on Monday, showed a 4.5% drop in new orders for manufactured durable goods. Equity markets declined on Tuesday to mark the end of February – a losing month for all four North American benchmarks. After an optimistic start to the year, supported by slowing inflation in Canada and the U.S., sentiment shifted in February; it became apparent that, while slowing, inflation could remain stubbornly high for longer than anticipated. The Fed, after raising its key rate on February 1, also resolved to continue raising rates until it sees clear signs of a healthy labour market as well as inflation moving safely toward its target range. U.S. markets declined again on Wednesday (March 1) over mixed manufacturing data, but rallied back through Thursday and Friday, ending the week with a strong performance.

Canada’s Gross Domestic Product was flat in Q4

After five consecutive quarters of growth, Canada’s economy unexpectedly stalled in the fourth quarter of 2022. According to the Statistics Canada (StatsCan) report released on Tuesday, Gross Domestic Product (GDP) was “nearly unchanged” in the three-month period ending December 31. On a monthly basis, the economy contracted by 0.1% in December, though a preliminary estimate from StatsCan is forecasting a bounce-back of 0.3% growth in January. The slowdown in Q4 caught many economists off guard, as estimates from StatsCan predicted 1.6% annualized growth and with the Bank of Canada anticipating a 1.3% expansion. The biggest drag on GDP in Q4 was a lower accumulation of inventory, as businesses slowed production due to looming recession fears. On the positive side, household spending increased 0.5% in the fourth quarter, and rose 4.8% overall in 2022.

Canadian banks reported their quarterly earnings

Quarterly results from Canada’s “big six” banks were in focus last week – with the exception of CIBC, which opened earnings season for Canadian banks on February 24 (reporting a revenue surge of 82% from the previous quarter). Scotiabank reported first-quarter profits that missed analysts’ expectations; its net income declined 35%, down to $1.77 billion from $2.74 billion a year earlier. TD reported a decline, with its $1.58-billion profit well below the $3.73 billion reported for Q1 in 2022. Earlier in the week, TD announced that it had agreed to pay more than US$1.2 billion to settle a lawsuit related to the Stanford Financial Group Ponzi scheme – one of several charges that affected the bank’s bottom line in the quarter. Royal Bank, the country’s largest lender, also saw its profits decline, from $4.10 billion in Q1 last year to $3.21 billion. Provisions for credit losses, which increased to $532 million (versus $105 million last quarter), were a key factor. Bank of Montreal saw its net income fall to $247 million, from $2.9 billion this time last year, though it still bested analysts’ expectations. National Bank’s Q1 profit was $881 million, down from $930 million a year ago.

The stock and bond market^*

Index	Close	Week	YTD
S&P/TSX Composite	20,581.58	1.79%	6.17%
Dow Jones Industrial Average	33,390.97	1.75%	0.74%
S&P 500 Index	4,045.64	1.90%	5.37%
NASDAQ Composite	11,689.01	2.58%	11.68%
10-year Canadian Bond Yield	3.34%	-0.04%	0.05%
10-year U.S. Treasury Yield	3.96%	0.01%	0.13%
WTI Crude Oil (US$/barrel)	$79.85	4.45%	-0.82%
Canadian Dollar	US$ 0.7355	0.14%	-0.31%
Bank of Canada Prime Rate 6.70%

*Weekly performance ending March 3, 2023. Source: Refinitiv.

Key take-away

A professionally managed portfolio provides advantages during uncertain economic times. The major benefit? Strategic diversification through different asset classes, and across industries and geographies, reduces the chance that you’ll experience heavy losses in unfavourable market conditions. If necessary, portfolio managers also have the flexibility to adjust allocations when market conditions change. Speak with a Co-operators financial representative to learn more about our managed-portfolio solutions. 

What’s ahead

Bank of Canada interest-rate decision (March 8): Canada’s central bank, led by Governor Tiff Macklem, raised its overnight rate by 25 basis points at its first meeting of the year, in January. The bank has signalled that it will now pause its rate-hiking cycle, as long as key economic indicators continue to show that inflation is slowing and that the economy is in line with the bank’s outlook.

Circle these dates

March 21 to 22: U.S. Federal Reserve interest-rate decision

April 7: North American markets closed for Good Friday

The commentary in this report is based on current market conditions and market media sources available to the public and may change without prior warning at any time. The forecasts provided herein are not guarantees of future performance and include risks, uncertainty and assumptions. While Co-operators Life Insurance Company (“Co-operators”) believes these assumptions are reasonable, there is no guarantee they will be confirmed. This report is not a guarantee of future investment performance, nor should undue reliance be placed on this report. This report is provided as a general source of information for a specific point in time and should not be considered solicitation to buy or sell any investment. Nothing contained in this report constitutes investment, legal, tax or other advice. The content in this report should not be relied upon in making an investment or other decision, and individuals should obtain relevant and specific professional advice and read the terms and conditions contained in the relevant offering documents carefully before any investment decision is made. Co-operators is not responsible for any loss or damage as a result of reliance on the information contained in this report. Co-operators makes no representations or warranties as to the information contained herein and does not guarantee its accuracy, timeliness, completeness or usefulness. Co-operators is committed to protecting the privacy, confidentiality, accuracy and security of the personal information it collects, uses, retains and discloses in the course of conducting business. Please visit cooperators.ca/privacy for more information. Co-operators® is a registered trademark of Co-operators Group Limited and is used with permission. Investing in your future. Together.TM is a trademark of Co-operators Group Limited. If you are a client who has received this, and you have questions or want to discuss your investments, please contact your Financial Advisor.

The Dow Jones Industrial Average and S&P 500 ("Indices") are products of S&P Dow Jones Indices LLC, its affiliates and/or their licensors and has been licensed for use by Co-operators Financial Services Limited. Copyright © 2023 S&P Dow Jones Indices LLC, its affiliates and/or their licensors. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.

The S&P/TSX Composite is a product of TSX Inc., its affiliates and/or their licensors and has been licensed for use by Co-operators Financial Services Limited. Copyright © 2023 TSX Inc. All Rights reserved. Neither TSX Inc., their affiliates, nor their third party licensors make any representation or warranty, express or implied, as to the accuracy of market representation of any index, or the context from which they are drawn, and shall not be liable for any errors, omissions or interruptions of any index or the data included therein.