Investment update
Weekly insight into the marketplace.
April 15 to 19, 2024
Markets continued to slide
Despite retail-sales data matching economists’ highest estimates, and a first-quarter profit report from Goldman Sachs that outpaced forecasts, all four North American benchmark stock indexes closed with significant losses on Monday. The Dow and the TSX both dropped 0.7%, the S&P 500 fell 1.2% (or 2.64% from the previous Friday), while the Nasdaq lost 1.8%. Concerns over rising geopolitical tension in the Middle East and sagging optimism related to interest-rate cuts (which caused Treasury yields to spike) were a major factor behind the market slide. Stocks fell again through the next two sessions, after comments from U.S. Federal Reserve Chair Jerome Powell, on Tuesday, rattled investors: “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence,” Powell said at an event in Washington. "Given the strength of the labor market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us." After a mixed close on Thursday and major tech sell-off on Friday, the S&P 500 and the Nasdaq ended the week with dramatic losses of 3% and 5.5% respectively. The TSX was also down 0.4% for the week, while the Dow barely stayed afloat with a 0.01% gain.
Core Canadian inflation was down in March
Canadian inflation moved slightly higher in March, to 2.9% annually (versus 2.8% in February), but data released by Statistics Canada on Tuesday showed signs of consumer prices continuing to cool. Gas prices – driven up by the cost of crude oil, which has been impacted by supply concerns and geopolitical conflict – were a big factor in the March uptick. Mortgage interest and rental costs, which are directly related to the current interest-rate environment, also negatively influenced the March reading. Removing those components, year-over-year headline inflation was closer to 1.5% (and has been below the 2% target for the majority of the last six months). Core inflation, which removes volatile food and energy prices, and is the Bank of Canada’s preferred CPI inflation gauge, also cooled in March. CPI-Median slowed to 2.8% (down from 3.1% in February) and CPI-Trim was down to 3.1% (from 3.2%). Canada’s central bank also tracks CPI components that rise more than 3%; that number was down to 38% in March (versus 41% in February). Prices that increase less than 1% was up to 44% in March (versus 38% in February). These trends suggest that prices are naturally increasing less, and that growth is slowing across the board.
The government tabled its 2024 budget
On Tuesday, Finance Minister Chrystia Freeland tabled the Liberal government's 2024 federal budget, titled “Fairness for Every Generation.” In addition to introducing tax reforms, the budget proposed measures to address housing affordability and the cost of living, with a focus on supporting younger Canadians. To help with housing affordability, the government plans to allow 30-year mortgage amortizations (up from 25 years) for first-time home buyers on newly constructed homes. It also increased the RRSP Home Buyers’ Plan withdrawal limit from $35,000 to $60,000. Cost-of-living proposals include amendments to the Canada Pension Plan that would top up the death benefit for certain individuals, improve children’s benefits, and end eligibility to the survivor pension (after a CPP-credit split) for people who are legally separated. The government also wants to bolster free and affordable banking accounts. For taxes, the budget proposes changes to the capital-gains inclusion rate and the lifetime-capital-gains exemption, the Canadian Entrepreneurs’ Incentive, and the tax treatment of charitable donations for Alternative Minimum Tax (AMT).
The stock and bond market*
| Index | Close | Week | YTD |
|---|---|---|---|
| S&P/TSX Composite | 21,807.37 | -0.42% | 4.05% |
| Dow Jones Industrial Average | 37,986.40 | 0.01% | 0.79% |
| S&P 500 Index | 4,967.23 | -3.05% | 4.14% |
| NASDAQ Composite | 15,282.01 | -5.52% | 1.80% |
| 10-year Canadian Bond Yield | 3.69% | 0.05% | 0.59% |
| 10-year U.S. Treasury Yield | 4.62% | 0.12% | 0.74% |
| WTI Crude Oil (US$/barrel) | $83.14 | -2.83% | 16.18% |
| Canadian Dollar | US$0.7272 | 0.17% | -3.69% |
| Bank of Canada Prime Rate 7.20% | |||
*Weekly performance ending April 19, 2024. Source: Bloomberg.
Over the long term, the market goes up. That’s easy to lose sight of when markets stumble, but periods of uncertainty have happened before. History has consistently shown that markets will recover. Having an investment plan that’s geared toward your individual goals and objectives – and sticking to it – is the best defense against inevitable market downturns. If you have questions, a Co-operators financial representative is always ready to help.
U.S. GDP and producer price inflation (April 25 and 26): U.S. data will continue to be in focus, as investors search for signals that might compel the Federal Reserve to start lowering interest rates.
Circle these dates
April 30: 2023 income tax filing deadline
May 1: U.S. Federal Reserve interest-rate decision
May 20: Canadian stock markets closed for Victoria Day
May 27: U.S. stock markets closed for Memorial Day
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.
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