Investment update
Weekly insight into the marketplace.
May 15 to 19, 2023
Canada’s TSX lagged, as U.S. stock markets gained
On Monday, Canada’s main stock index, the S&P/TSX Composite, gained 0.59% – helped by strengthening oil and gold prices. The tech-heavy Nasdaq led the benchmarks on Wall Street, posting a 0.66% gain. Tuesday brought a sharp reversal for the TSX, with the resource-heavy index posting a 1.45% loss (its worst performance in two months), following a hotter-than-expected domestic-inflation reading. The U.S. equity benchmarks also closed lower on the day. Stock markets were back in rally mode on Wednesday, as sentiment was lifted by news that U.S. lawmakers were making progress on a deal to raise the debt ceiling (and avoid a default). Both the S&P 500 and Nasdaq gained more than 1% on the day. The TSX turned in a more-modest gain of 0.27%. Treasuries declined, with yields on U.S. 10-year notes topping 3.5%. The Nasdaq continued to lead gains for the major North American stock indexes on Thursday, and government-bond yields continued to climb on speculation that central banks will keep rates higher for longer, as inflation remains elevated. The energy and tech sectors helped the TSX close with a modest gain on Friday, but the two-day rally on Wall Street fizzled and the U.S. benchmark indexes pared their weekly gains into the closing bells.
StatsCan reported that inflation ticked up in April
On Tuesday, Statistics Canada announced that its consumer price index (CPI) rose 4.4%, year-over-year, in April. While data showed that core measures continued to decelerate, it was the first increase in headline inflation reported since June 2022, and it exceeded the 4.1% forecast in a recent Bloomberg survey of economists. "Price re-acceleration, combined with continued strength in the labour market, suggests that the economy remains out of balance," according to the Co-operators Financial Investment Services (CFIS) analyst team. "We believe that the Canadian economy is yet to feel the full effects of last year’s historic interest-rate increases, but the April data suggest that the process to bring inflation down could take longer than previously anticipated." Last month, the Bank of Canada left its policy rate unchanged at 4.5%, for the second-straight decision, citing recent data that shows slowing inflation.
Hope for a debt-ceiling deal buoyed U.S. markets
Financial markets got a mid-week lift from reports that, after months of political stalemate, U.S lawmakers were making progress on a deal that could be passed by Congress before June 1. The deal would provide the U.S. government with the money it needs to meet its debt obligations. "We're going to come together because there's no alternative," President Biden told media on Wednesday. "To be clear, this negotiation is about the outlines of the budget, not about whether or not we're going to [pay our debts]," the President said. "The leaders have all agreed: We will not default. Every leader has said that." For months, the Republican majority in the House has demanded that Democrats agree to spending cuts, in exchange for a deal to raise Congress's self-imposed debt limit. When asked by reporters if it's possible to reach a debt-ceiling deal by the time President Biden returns from the G7 meetings in Asia (on Sunday, May 21), Republican Speaker of the House Kevin McCarthy replied, "It's doable." On Friday, reports that talks between the two-sides were breaking down halted stock market rallies on Wall Street.
The stock and bond market*
| Index | Close | Week | YTD |
|---|---|---|---|
| S&P/TSX Composite | 19,920.31 | -2.12% | 2.76% |
| Dow Jones Industrial Average | 33,093.34 | -1.00% | -0.16% |
| S&P 500 Index | 4,205.45 | 0.32% | 9.53% |
| NASDAQ Composite | 12,975.69 | 2.51% | 23.97% |
| 10-year Canadian Bond Yield | 3.33% | 0.20% | 0.04% |
| 10-year U.S. Treasury Yield | 3.82% | 0.13% | -0.01% |
| WTI Crude Oil (US$/barrel) | $72.87 | 1.67% | -9.49% |
| Canadian Dollar | US$ 0.7344 | -0.84% | -0.46% |
| Bank of Canada Prime Rate 6.70% | |||
*Weekly performance ending May 26, 2023. Source: Refinitiv.
Stay calm. The market volatility that we’ve seen in recent days is a normal part of investing. At the same time, our fund managers are experienced experts, equipped with long-term strategies that are designed to outlast market declines. If you have questions, a Co-operators financial representative is always ready to help.
Canadian GDP (May 31): Following a 0.7% expansion in Q3 of 2022, the Canadian economy unexpectedly stalled in Q4 2022 – putting an end to five-consecutive quarters of growth. With recent inflation ticking higher, this year’s Q1 GDP report, scheduled for release on Wednesday, is likely to garner a lot of attention.
Circle these dates
June 7: Bank of Canada interest-rate announcementJune 13 to 14: U.S. Federal Reserve meetings and statement
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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