Investment update
Weekly insight into the marketplace.
September 11 to 15, 2023
Stock markets closed on a sour note
After a sluggish start to the month, the benchmark U.S. stock indexes appeared to be getting back on track through the middle of the week. Shrugging off hotter-than-expected inflation, retail sales and employment reports, the Wall Street benchmarks were positive across the board by Thursday’s close, as investors raised their bets that the U.S. Federal Reserve (the Fed) will decide to hold interest rates steady at its next policy meeting. A dismal Friday saw a spike in volatility fuelled by options expiring and index rebalancing. The S&P 500 and Nasdaq erased their weekly gains, tumbling 1.22% and 1.56% respectively, led by losses from the tech sector. Closer to home, a surge in global oil prices helped the TSX climb 2.73% through the week.
Data showed core inflation decelerated in the U.S.
Investors absorbed a great deal of U.S. economic data as they braced for the interest-rate decision from the Fed on September 20. The latest consumer price index (CPI) and Producer Price Index (PPI) updates took centre stage, with both readings showing that while inflation remains elevated, that the rate of price increases is slowing. CPI rose 3.7% year-over-year in August, up from a 3.2% annually in July. However, core prices (excluding volatile food and energy costs) rose 4.3%, down from 4.7% in July – the smallest increase in nearly two years. PPI, which measures what producers are paid for their goods and services, increased 0.7% in August (seasonally adjusted) and 1.6% on a year-over-year basis. Although the monthly increase was higher than analysts expected, when food and energy are removed, the PPI aligns with estimates. On an annual basis, core PPI increased 2.1%, its lowest level since January 2021. The Fed views core prices a better indicator of the future path of inflation.
Oil prices reached a year-to-date high
Futures for benchmark West Texas Intermediate crude rose above US$90 a barrel on Thursday. OPEC+ reported that the market for oil is tracking toward a deficit of more than 3 million barrels a day next quarter, the largest in more than a decade. An International Energy Agency report warned that continued supply cuts, led by OPEC+ members Russia and Saudi Arabia, will create a “significant supply shortfall” and lead to further price volatility. Crude prices have already risen more than 30% since late June, as demand from the world’s top two consumers — the U.S. and China – remains strong in the face of decreasing supply. This has fuelled concerns that rising oil prices could derail efforts by central banks around the world to bring inflation under control.
The stock and bond market*
| Index | Close | Week | YTD |
|---|---|---|---|
| S&P/TSX Composite | 19,779.97 | -4.08% | 2.04% |
| Dow Jones Industrial Average | 33,963.84 | -1.89% | 2.46% |
| S&P 500 Index | 4,320.06 | -2.93% | 12.52% |
| NASDAQ Composite | 13,211.81 | -3.62% | 26.23% |
| 10-year Canadian Bond Yield | 3.88% | 0.14% | 0.58% |
| 10-year U.S. Treasury Yield | 4.44% | 0.11% | 0.56% |
| WTI Crude Oil (US$/barrel) | $90.03 | -0.82% | 12.17% |
| Canadian Dollar | US$0.7417 | 0.31% | 0.53% |
| Bank of Canada Prime Rate 7.20% | |||
*Weekly performance ending September 22, 2023. Source: Bloomberg.
Canadian and U.S. unemployment data (October 6): The Canadian unemployment rate stayed put at 5.5% in August, matching data from July (which was an 18-month high). In the U.S., August’s unemployment rate climbed to 3.8%, up from 3.5% the previous month. If unemployment rates remain elevated for September, it may remove some of the inflationary pressures (i.e., high employment and wages) that are motivating central bankers, in both nations, to keep rates high.
Circle these dates
October 9: Canadian markets closed for Thanksgiving Day
October 25: Bank of Canada interest-rate announcement and Monetary Policy Report
October 31 to November 1: 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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