The Finish Line Commentaries: The First Green Week Since March
Author: Danny Popescu | May 30th, 2022
Good day,
Last week was the first heavy green week for the markets since the third week of March, and only the second since last year. Although the TSX is negative for 2022, it remains the best performing, broad-based index in North America. The TSX may have been outperformed by American and the All-Country World Index (ACWI) last week, but it is the clear leader for year-to-date and year-over-year results.
The economic news in the popular press was not much improved last week, so the positive equity results could seem unpredictable, but not if you examine the details more closely:
- Most major Canadian banks beat quarterly earnings expectations and remain upbeat with their forward guidance, particularly with their retail banking operations. RBC, TD, Scotiabank, BMO and National Bank beat expectations, while CIBC had growing expenses undermine their performance. The Finance sector comprises about one-third of the TSX, so the banks’ good news dominated. https://www.theglobeandmail.com/business/article-canadian-banks-benefit-from-consumer-spending-rebound/
- The second largest sector is Energy, which is also benefiting from higher oil prices.
- Inflation is slowing slightly. The price of gasoline, which is a bellwether for many consumers, continues to rise this month, but the overall inflation rate is moderating. Prices continue to climb, but at a lower rate in the U.S. – CPI source
- As inflation slows the need to trim economic growth with higher interest rates also slows. Inflation is at a 30-year high, and central banks, like the Federal Reserve, have indicated that their strongest action will be early 2022. As the year progresses the size of interest rate increases are expected to reduce. – FOMC Minutes
The continuing inflation/interest rate condition has been in-place for some time, and perhaps some overly enthusiastic pessimism has been beaten back by the better and no-worse than expected results.
What’s ahead:
In Canada, real Gross Domestic Product (GDP) and current account balance for the first quarter will be released next week. The Bank of Canada will release its latest monetary policy response on Wednesday.
In the U.S., after Monday’s market closure for Memorial Day. April’s construction spending, manufacturing indexes, factory orders will be released along with the non-farm payroll report for May.
Globally, Japan’s machine tool orders, jobless rate, retail sales, industrial production and consumer confidence, Eurozone’s Consumer Price Index (CPI), economic and consumer confidence, Germany’s CPI, unemployment, France’s CPI and GDP will be released. OPEC+ will conduct a meeting.
Have a great week!
Danny
“I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of Harbourfront Wealth Management. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by Harbourfront Wealth Management Inc.”
Disclaimer – This information transmitted is intended to provide general guidance on matters of interest for the personal use of the reader who accepts full responsibility for its use and is not to be considered a definitive analysis of the law and factual situation of any particular individual or entity. As such, it should not be used as a substitute for consultation with a professional accounting, tax, legal or other professional advisor. Laws and regulations are continually changing, and their application and impact can vary widely based on the specific facts involved and will vary based on the particular situation of an individual or entity. Prior to making any decision or taking any action, you should consult with a professional advisor. The information is provided with the understanding that Harbourfront Wealth Management is not herein engaged in rendering legal, accounting, tax or other professional advice. While we have made every attempt to ensure the information contained in this document is reliable, Harbourfront Wealth Management is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is,” with no guarantee of completeness, accuracy, timeliness or as to the outcome to be obtained from the use of this information, and is without warranty of any kind, express or implied. The opinions expressed herein do not necessarily reflect those of Harbourfront Wealth Management Inc. The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are not to be construed as a solicitation or offer to buy or sell any securities mentioned herein. Harbourfront or any of its connected or related parties may act as financial advisor or fiscal agent for certain companies mentioned herein and may receive remuneration for its services. The comments and information pertaining to any investment products (The Portfolios) sponsored by Willoughby Asset Management are not to be construed as a public offering of securities in any jurisdiction of Canada. The offering of units of The Portfolios is made pursuant to the Offering Memorandum or Simplified Prospectus and only to investors in Canadian jurisdictions. Important information about The Portfolios is contained in the Offering Memorandum or Simplified Prospectus available through Willoughby Asset Management. Commissions, trailing commissions, management fees, performance fees, and expenses all may be associated with investments in The Portfolios. Investments in The Portfolios are not guaranteed, their values change frequently, and past performance may not be repeated. Historical annual compounded total returns including changes in unit value and reinvestment of all distributions do not take into account sales, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Unit values and investment returns will fluctuate and there is no assurance that The Portfolios can maintain a specific net asset value. Harbourfront Wealth Management Inc. (“Harbourfront”) has relationships with related and /or connected issuers, which may include the securities or funds discussed in this commentary and are disclosed in our Statement of Policies Regarding Related and Connected Issuers. This policy is included in your new client package, on our website, or can be obtained from your investment advisor.
