Investment update
Weekly insight into the marketplace.
August 19 to 23, 2024
Markets bounced between gains and losses
Riding a wave of optimism that carried over from the previous week, markets opened on a high note Monday. Led by interest rate-sensitive tech stocks, Canada’s TSX closed 0.27% higher, the Dow gained 0.6%, the S&P 500 was up 1%, and the Nasdaq surged 1.4%. Investor and market confidence that the U.S. Federal Reserve (the Fed) will start cutting rates in September has helped the major North American stock indexes recover losses from the selloff in early August. Despite the upward trend, markets showed last week that they are still susceptible to daily fluctuations. On Tuesday, the S&P 500 and the Nasdaq snapped eight-day win streaks. The Dow and the TSX also declined as investors stayed on the sideline ahead of two key events: the Fed’s July meeting minutes released on Wednesday, and Fed Chair Jerome Powell speaking at the Jackson Hole Economic Policy Symposium on Friday. Wednesday’s meeting minutes reinforced expectations for a rate cut, which propelled all four major North American indexes to a daily gain. Markets then fell back again on Thursday as investors braced for Powell’s pivotal speech on Friday. His commentary was definitive, though, stating "the time has come" to cut interest rates. Markets surged following his remarks, closing the week near all-time highs.
Canadian inflation continued to cool
According to Statistics Canada’s latest Consumer Price Index (CPI) report, the annual inflation rate in Canada slowed to 2.5% in July. That’s down from 2.7% in June, and the slowest pace of inflation since March 2021 when inflation was 2.2%. The CPI report noted that the deceleration in July’s headline inflation was broad-based, led by lower prices for travel, passenger vehicles, and electricity. Prices for travel tours specifically, led all other CPI items with a 2.8% year-over-year decrease. The price for gasoline moved in the opposite direction, rising 1.9% annually (up from the 0.4% increase in June). On a monthly basis, CPI increased 0.4% in July. The July report strengthens the argument for the Bank of Canada to make a third consecutive interest-rate reduction at its next meeting in September. Prime Minister Justin Trudeau also acknowledged the July figures, writing on his X social media account: "We've still got a lot more work to do to make sure Canadians feel that relief in their bank accounts. But inflation is cooling, and that's welcome news."
Fed commentary supported September rate-cut expectations
The U.S. inflation data released August 14, went a long way to solidify expectations that the Fed will begin cutting interest rates at its next meeting in September. The central bank’s meeting minutes from its July 30-31 meeting, released last Wednesday, confirmed that is the direction policymakers are currently heading. The release also indicated that many policymakers supported a rate cut in July: “Several observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision” the minutes revealed. “The vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.” Speaking at the Jackson Hole Economic Policy Symposium on Friday, Fed Chair Jerome Powell confirmed expectations, saying "The upside risks to inflation have diminished. And the downside risks to employment have increased. The time has come for policy to adjust."
The stock and bond market*
| Index | Close | Week | YTD |
|---|---|---|---|
| S&P/TSX Composite | 23,286.08 | 1.00% | 11.11% |
| Dow Jones Industrial Average | 41,175.08 | 1.27% | 9.25% |
| S&P 500 Index | 5,634.61 | 1.45% | 18.13% |
| NASDAQ Composite | 17,877.79 | 1.40% | 19.10% |
| 10-year Canadian Bond Yield | 3.01% | -0.05% | -0.09% |
| 10-year U.S. Treasury Yield | 3.81% | -0.08% | -0.07% |
| WTI Crude Oil (US$/barrel) | $74.83 | -2.37% | 4.44% |
| Canadian Dollar | US$0.7403 | 1.27% | -1.96% |
| Bank of Canada Prime Rate 6.70% | |||
*Weekly performance ending August 23, 2024. Source: Bloomberg.
Canadian and U.S. economic data: This week, Canadian and U.S. Gross Domestic Product data will provide a temperature check on the health of the respective economies. The Fed’s preferred inflation gauge, the Personal Consumption Expenditure Price Index, will also be in the spotlight.
Circle these dates
September 2: Canadian and U.S. markets closed for Labour Day
September 17: Bank of Canada interest-rate decision
September 17-18: U.S. Federal Reserve interest-rate decision
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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