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Independent Accountants' Investment Counsel Inc.

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

 

What happened last week?

  • Canadian consumer inflation for August led domestic news briefly.  The Consumer Price Index (CPI) fell 0.3% in August and sits at 7.0% on a year-over-year basis.  This is the second consecutive month when the annualized rate and month-to-month inflation has fallen.

  • According to the StatsCan Release, much of the monthly decline can be attributed to the dropping price for gasoline, which lowered by 9.6% in August, but is still 22% higher than August 2021.  Another contributor to slowing inflation was the cost of shelter, which has had its year-over-year rate drop from 9.7% in July to 7.4% in August.  Food purchased in stores has risen 10.8% over the past year. (Source)

  • On Wednesday the financial world was tightly focused on the U.S. Federal Reserve’s monetary policy announcement.  For the fifth consecutive meeting, dating back to March 17th, the U.S. Federal Reserve has increased short-term interest rates.  Following previous increases, the Federal Open Market Committee (FOMC) approved a third increase of ¾% (75 basis points) in a row.  (Source)

  • The Fed will “take into account a wide range of information, including readings on public health, labour market conditions, inflation pressures and inflation expectations, and financial and international developments” as it contemplates future monetary policy actions.  Although the 75-basis point increase was widely expected, the commentary that accompanied the rate hike, that the Fed was committing to slowing inflation, and not as concerned about negative effects on jobs and economic output, contributed to much of the post-announcement losses. (Source)

 

What’s ahead for this week?

  • In Canada, the most significant economic news scheduled is the release of July’s Gross Domestic Product (GDP) data.  The federal government will also announce its Budget Balance for the same month.

  • In the U.S., durable goods orders, new home sales and pending home sales for August will be released.  More importantly, Q2 GDP and Personal Consumption and Expenditures Index will also be released.

  • Globally, China will reveal its business confidence through several Purchasing Managers’ Indexes, including the especially important manufacturing sector.  The Eurozone will release September’s Consumer Price Index and August’s unemployment rate.

For more information contact: [email protected]

www.iaic.ca | Tel (519) 291-2817 | 135 Main Street, East | PO Box 68 | Listowel, ON N4W 3H2

 

This report is produced by Independent Accountants' Investment Counsel Inc (“IAIC”) in conjunction with ARG Inc.  All graph and chart statistical data contained in this report has been supplied by ARG Inc. The views and opinions expressed in this report are based on market statistics.  No guarantee of outcome is implied, and opinions may change without notice.  Investors should not base any of their investment decisions solely on this report nor should any opinions expressed within this report be construed as a solicitation or offer to buy or sell any securities mentioned herein.  Although the information contained in this report has been obtained from sources that IAIC believes to be reliable, we do not guarantee its accuracy, and as such, the information may be incomplete or condensed. All opinions, estimates and other information included in this report constitute our judgment as of the date hereof and are subject to change without notice.

Please contact your IAIC representative if you have any questions regarding this report. 

 

©Copyright 2022 Independent Accountants’ Investment Counsel Inc. All rights reserved.

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

 

What happened last week?

  • Inflation news dominated markets. After holding steady in July, the U.S. Consumer Price Index (CPI) rose 0.1% in August and 8.3% over the last 12 months according to the Bureau of Labor Statistics.  For comparison, the Canadian CPI for the last reported period of July from StatsCan rose 7.6% year-over-year.  Canadian consumer inflation data for August will be released during the coming week to allow a more compelling comparison between the two neighbouring countries.

  • The widely held belief that U.S. consumer inflation peaked has been shown as inaccurate.  Markets had expected inflation to have levelled off, or even declined.  Since Monday’s closing, the major North American indexes have fallen an additional 1 to 2% more than their performance for the week.  These most recent losses have erased the gains made since September 6th.

 

What’s ahead for this week?

  • In Canada, consumer inflation for August will be announced on Tuesday morning.  The new housing price index, retail and wholesale sales will be released by the end of the week.

  • In the U.S., the National Association of Home Builders will release their market index, and building permits, housing starts, and existing home sales will also be announced.  The Federal Reserve will issue its economic projects and a statement on Wednesday along with its interest rate announcement.

  • Globally, Japan’s consumer inflation is scheduled for release.  Also, the European Central Bank will conduct a non-monetary policy meeting as the region’s consumer confidence, purchasing managers indexes for both goods and services is announced.

For more information contact: [email protected]

www.iaic.ca | Tel (519) 291-2817 | 135 Main Street, East | PO Box 68 | Listowel, ON N4W 3H2

 

This report is produced by Independent Accountants' Investment Counsel Inc (“IAIC”) in conjunction with ARG Inc.  All graph and chart statistical data contained in this report has been supplied by ARG Inc. The views and opinions expressed in this report are based on market statistics.  No guarantee of outcome is implied, and opinions may change without notice.  Investors should not base any of their investment decisions solely on this report nor should any opinions expressed within this report be construed as a solicitation or offer to buy or sell any securities mentioned herein.  Although the information contained in this report has been obtained from sources that IAIC believes to be reliable, we do not guarantee its accuracy, and as such, the information may be incomplete or condensed. All opinions, estimates and other information included in this report constitute our judgment as of the date hereof and are subject to change without notice.

Please contact your IAIC representative if you have any questions regarding this report. 

 

©Copyright 2022 Independent Accountants’ Investment Counsel Inc. All rights reserved.

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

 

What happened last week?

  • Equities rebounded this past week. The predictions for inflation, economic growth, employment, and monetary policy responses will continue, and the effect on markets from all these factors will most likely continue.

  • The Bank of Canada increased its policy interest rate, the overnight rate, by ¾% (75 basis points) on September 7th, one day before the European Central Bank (ECB) delivered an identically sized increase.  “The Canadian economy continues to operate in excess demand and labour markets remain tight” according to the Bank of Canada’s press release.  In both geographies, interest rate increases are intended to temper inflation by reducing demand. (Source

  • On Friday morning, StatsCan released the latest employment data.  In August, the Canadian economy lost 40,000 jobs, the fourth consecutive month with declining employment levels.  The unemployment rate increased 0.5% to 5.4% in August up from the record lows of June and July.  Despite the recent downturn for employment, the number of employees exceeds pre-pandemic levels. (Source)

 

What’s ahead for this week?

  • In Canada, manufacturing and wholesale sales, and housing starts are scheduled to be announced.

  • In the U.S., Tuesday will bring the consumer and producer inflation numbers and import and export price indexes, which may foreshadow the Federal Reserve’s next monetary policy move.

  • The heavily influential Federal Reserve will release new monetary policy on September 21st.

  • Globally, industrial production, wages, trade balance and consumer inflation (particularly Germany, France, and Italy) for the Eurozone will be released.  China’s retail sales for August will be announced.

For more information contact: [email protected]

www.iaic.ca | Tel (519) 291-2817 | 135 Main Street, East | PO Box 68 | Listowel, ON N4W 3H2

 

This report is produced by Independent Accountants' Investment Counsel Inc (“IAIC”) in conjunction with ARG Inc.  All graph and chart statistical data contained in this report has been supplied by ARG Inc. The views and opinions expressed in this report are based on market statistics.  No guarantee of outcome is implied, and opinions may change without notice.  Investors should not base any of their investment decisions solely on this report nor should any opinions expressed within this report be construed as a solicitation or offer to buy or sell any securities mentioned herein.  Although the information contained in this report has been obtained from sources that IAIC believes to be reliable, we do not guarantee its accuracy, and as such, the information may be incomplete or condensed. All opinions, estimates and other information included in this report constitute our judgment as of the date hereof and are subject to change without notice.

Please contact your IAIC representative if you have any questions regarding this report. 

 

©Copyright 2022 Independent Accountants’ Investment Counsel Inc. All rights reserved.

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

 

What happened last week?

  • The reality of the inflation environment and central bank positioning continued to control equity markets last week.  When Federal Reserve Chair, Jerome Powell, stated his resolve to tame inflation in his August 26th speech at the Jackson Hole Symposium, markets took notice, and continue to do so.  He stated that the negative effects of long-term inflation, the accompanying instability, and the inclusion of inflationary considerations into economic decision-making by individuals and firms, will deliver far more damage than measured monetary policy.  His stance to stop inflation with his central bank’s actions is firm.

  • The Bank of Canada, European Central Bank and Federal Reserve will announce interest rate decisions within the next three weeks (September 7, 8 and 21, respectively), and equity markets seem to have taken Powell at his word.  North American indexes have reacted with an uptick in volatility and sizeable overall losses.  Last week was the second consecutive week that American stocks lost 4%, while the TSX has dropped less at 1 and 3 % for the last two weeks. 

  • The U.S. labour market continued its strong performance as 315,000 jobs were added in August.  The unemployment rate rose 0.2% to 3.7%, which is still below February 2020 levels.  The rise in the unemployment rate was partially driven by an increase in the Labour Force Participation Rate. (Source

  • Canada’s economic health represented by Gross Domestic Product (GDP) rose 0.1% in July, 0.8% during the second quarter and at an annual rate of 3.3%.   This was the fourth consecutive quarter of increasing domestic economic output as the pandemic recovery continues. (Source

  • The robust U.S. jobs market and the health of the Canadian economy support the tightening of monetary policy that Powell stated and has reiterated, which has resulted in losses for equity investors. (Source)

 

What’s ahead for this week?

  • In Canada, following Labour Day on Monday, the economic news shift into high gear with the Bank of Canada announcing its interest rate decision at 10 am Eastern on Wednesday.  Employment numbers for August will also be released.

  • In the U.S., Purchasing Managers Indexes from ISM for services, manufacturing and non-manufacturing industries, July’s imports, exports, and trade balance are scheduled for release after Labor Day.

  • Globally, the European Central Bank will announce its latest interest rate decision on Thursday, one day after second quarter employment and GDP data for the Eurozone is released.  China’s consumer and producer inflation, and imports, exports and trade balance for August is scheduled.

For more information contact: [email protected]

www.iaic.ca | Tel (519) 291-2817 | 135 Main Street, East | PO Box 68 | Listowel, ON N4W 3H2

 

This report is produced by Independent Accountants' Investment Counsel Inc (“IAIC”) in conjunction with ARG Inc.  All graph and chart statistical data contained in this report has been supplied by ARG Inc. The views and opinions expressed in this report are based on market statistics.  No guarantee of outcome is implied, and opinions may change without notice.  Investors should not base any of their investment decisions solely on this report nor should any opinions expressed within this report be construed as a solicitation or offer to buy or sell any securities mentioned herein.  Although the information contained in this report has been obtained from sources that IAIC believes to be reliable, we do not guarantee its accuracy, and as such, the information may be incomplete or condensed. All opinions, estimates and other information included in this report constitute our judgment as of the date hereof and are subject to change without notice.

Please contact your IAIC representative if you have any questions regarding this report. 

 

©Copyright 2022 Independent Accountants’ Investment Counsel Inc. All rights reserved.

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

 

What happened last week?

  • After a short rally on Wednesday and Thursday, equity markets stumbled on Friday.  At 10 am Eastern, Jerome Powell, Chair of the U.S. Federal Reserve Bank delivered brief remarks at the annual Jackson Hole Symposium.  He believes that the benchmark “federal funds” rate has reached its long-run neutral level, and further rate increases will be required to return consumer inflation to the Fed’s long-term target of 2%.  In a shorter, more narrowly focused, and direct message, he stated that three lessons from previous periods apply to the current situation:
  1. Central banks can and should take responsibility for low and stable inflation.  Although, the Fed’s actions only address the demand-side of the supply/demand imbalance that is driving current inflation, their responsibility is not reduced.
  2. The public’s expectations about future inflation can play a key role in setting the path of inflation over time.  The anticipation of high inflation can become entrenched in decision making for businesses and households, because “inflation feeds, in part, on itself”.
  3. The Federal Reserve “must keep at it until the job is done”.  The Fed must act with resolve now by taking forceful and rapid steps to moderate demand, align it with supply, and lower expectations of high inflation.

  Powell’s full remarks can be found here.

  • The remarks, which indicated that interest rates will go higher and remain high until inflation is tamed, caused equity markets to drop.  The S&P 500 tumbled 3.4%, the Dow fell 3%, the NASDAQ lost 3.9%, while the TSX dripped 1.5% on Friday following Powell’s speech. (Source

 

What’s ahead for this week?

  • In Canada, Gross Domestic Product for June and for the second quarter will be released with July’s building permits, manufacturing Purchasing Managers Index (PMI) and labour productivity.

  • In the U.S., following the Fed’s Jackson Hole meeting several members of the FOMC (Brainard, Barkin, Bostic, Williams) will deliver speeches this week.  The JOLTs job opening, housing price index, mortgage marketing and mortgage refinance indexes, PMIs, factory orders and August non-farm payroll numbers will be released.

  • Globally, Eurozone business climate, consumer confidence and consumer inflation expectation will be announced along with their consumer inflation figures.  Also, Japan’s unemployment, industrial production, retail sales, housing starts, and construction orders will be released along with China’s industrial profit, manufacturing, and non-manufacturing PMIs.

For more information contact: [email protected]

www.iaic.ca | Tel (519) 291-2817 | 135 Main Street, East | PO Box 68 | Listowel, ON N4W 3H2

 

This report is produced by Independent Accountants' Investment Counsel Inc (“IAIC”) in conjunction with ARG Inc.  All graph and chart statistical data contained in this report has been supplied by ARG Inc. The views and opinions expressed in this report are based on market statistics.  No guarantee of outcome is implied, and opinions may change without notice.  Investors should not base any of their investment decisions solely on this report nor should any opinions expressed within this report be construed as a solicitation or offer to buy or sell any securities mentioned herein.  Although the information contained in this report has been obtained from sources that IAIC believes to be reliable, we do not guarantee its accuracy, and as such, the information may be incomplete or condensed. All opinions, estimates and other information included in this report constitute our judgment as of the date hereof and are subject to change without notice.

Please contact your IAIC representative if you have any questions regarding this report. 

 

©Copyright 2022 Independent Accountants’ Investment Counsel Inc. All rights reserved.

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

 

What happened last week?

  • Canadian consumer inflation data was released last week, and it continued the trend of tempering which is also occurring in the U.S.  Falling gasoline prices offset rising food costs to drop July’s year-over-year inflation rate to 7.6%, down from 8.1% in June.  For the seventh consecutive month, price rose on a month-to-month basis, but only slightly at 0.1% over the course of July.  Gasoline prices dropped 9.2% in July while groceries (food bought at stores) rose by 9.4%.  Even after removing the two most volatile categories, food and energy, consumer inflation is still running at 5.5%, which much higher than the Bank of Canada’s 2% target. (Source)

  • The pressure on the Bank of Canada to rapidly raise interest rates is easing, but it has not abated as inflation is well above the 2% target. 

  • Rising interest rates resulting from monetary policy actions already undertaken by the Bank of Canada and the Federal Reserve have contributed to a slowdown in the U.S. housing market.  In July, residential building permits fell by 1.3% overall and 4.3% for single family homes.  Housing starts dropped 9.6% in July and have fallen by 8.1% compared to July 2021.  Similar effects are expected to occur across Canada when comprehensive housing data is released here. (Source)

  • The higher interest rates, which will increase further despite slowing inflation, are expected to negatively affect corporate earnings.  The highly resilient corporate profits are predicted to fall as the second half of 2022 is reported.  The equity markets reflected that sentiment last week. (Source)

 

What’s ahead for this week?

  • In Canada, after several busy weeks for economic announcements, a light week is planned with the new housing price index, wholesale sales and the federal government’s budget balance scheduled.

  • In the U.S., Purchasing Managers Indexes from PMI will be announced and accompany pending home sales, new home sales, durable goods orders, personal income and spending, and Gross Domestic Product for the second quarter.  The Federal Reserve will hold its annual Jackson Hole Symposium.

  • Globally, Japan’s Consumer Price Index and China’s industrial profit will be released.  The European Central Bank will publish their monetary policy meeting minutes.  Consumer confidence numbers will be announced by Italy, France, and Germany.

For more information contact: [email protected]

www.iaic.ca | Tel (519) 291-2817 | 135 Main Street, East | PO Box 68 | Listowel, ON N4W 3H2

 

This report is produced by Independent Accountants' Investment Counsel Inc (“IAIC”) in conjunction with ARG Inc.  All graph and chart statistical data contained in this report has been supplied by ARG Inc. The views and opinions expressed in this report are based on market statistics.  No guarantee of outcome is implied, and opinions may change without notice.  Investors should not base any of their investment decisions solely on this report nor should any opinions expressed within this report be construed as a solicitation or offer to buy or sell any securities mentioned herein.  Although the information contained in this report has been obtained from sources that IAIC believes to be reliable, we do not guarantee its accuracy, and as such, the information may be incomplete or condensed. All opinions, estimates and other information included in this report constitute our judgment as of the date hereof and are subject to change without notice.

Please contact your IAIC representative if you have any questions regarding this report. 

 

©Copyright 2022 Independent Accountants’ Investment Counsel Inc. All rights reserved.

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

 

What happened last week?

  • Markets reacted swiftly to the better-than-expected and declining U.S. consumer and producer inflation news released last week.  The year-over-year rates of inflation represented by the Consumer Price Index (CPI) and Producer Price Index (PPI) fell slightly.  Inflation was expected to have risen last month.  Prices for consumers were unchanged in July compared to June and the year-over-year inflation rate dropped from 9.1% to 8.5%.  Prices for producers rose 9.8% in July on an annualized basis, which is below the reading in June of 11.3%. The response from equities was overwhelmingly positive

  • Even at this lowered level, inflation remains historically high and well beyond the Bank of Canada and Federal Reserve’s 2% target level and 1 to 3% range.  The Fed is expected to continue to raise interest rates, but the lessening of inflation suggests that interest rates may not be raised as quickly or as high.

  • The market has priced-in a 50-basis point (0.50%) increase by the Federal Reserve to its federal funds rate at its next monetary policy meeting on September 21st.  The Bank of Canada will provide its next interest rate and monetary policy update on September 7th. 

  • Policy rates are expected to rise to about 3½ or 3¾% before pausing in 2023, allowing time for the interest rates to affect the economy.  The Federal Reserve is also ending its bond-purchasing program, which had provided additional liquidity to capital markets.  This "quantitative tightening" will also work to slow the growth of the economy and in-turn inflation.

  • Corporate returns are expected to follow the path of the economy and inflation and have profits pressured downward by the economic slowdown.

Source - https://www.reuters.com/markets/us/us-consumer-price-growth-expected-slow-due-lower-gasoline-costs-2022-08-10/

 

What’s ahead for this week?

  • In Canada, manufacturing, wholesale, and retail sales will be announced tomorrow.  July’s consumer inflation will be released on August 16th. 

  • In the U.S., building permits, housing starts, existing home sales, industrial production, capacity utilization, manufacturing production, business inventories and retail sales will be released, and form a wide representation of economic health.

  • Globally, Japan’s Gross Domestic Product (GDP), capacity utilization, industrial production, machine orders and consumer inflation will be announced.  China’s house prices, industrial production, retail sales and unemployment figures are scheduled for release.  The Eurozone’s GDP and consumer inflation, two very important economic indicators will be announced this week.

For more information contact: [email protected]

www.iaic.ca | Tel (519) 291-2817 | 135 Main Street, East | PO Box 68 | Listowel, ON N4W 3H2

 

This report is produced by Independent Accountants' Investment Counsel Inc (“IAIC”) in conjunction with ARG Inc.  All graph and chart statistical data contained in this report has been supplied by ARG Inc. The views and opinions expressed in this report are based on market statistics.  No guarantee of outcome is implied, and opinions may change without notice.  Investors should not base any of their investment decisions solely on this report nor should any opinions expressed within this report be construed as a solicitation or offer to buy or sell any securities mentioned herein.  Although the information contained in this report has been obtained from sources that IAIC believes to be reliable, we do not guarantee its accuracy, and as such, the information may be incomplete or condensed. All opinions, estimates and other information included in this report constitute our judgment as of the date hereof and are subject to change without notice.

Please contact your IAIC representative if you have any questions regarding this report. 

 

©Copyright 2022 Independent Accountants’ Investment Counsel Inc. All rights reserved.

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

 

What happened last week?

  • The news last week centred around jobs reports and quarterly earnings for the S&P 500, and their implications for upcoming monetary policy balanced against current corporate performance.

    • “Employment in Canada was little changed (-31,000) in July, and the unemployment rate was unchanged at 4.9%” according to July's Labour Force Survey released by StatsCan.  The services sector lost jobs, while the goods producing sector added employment.  The unemployment rate maintained its record low, and long-term unemployment fell 23,000 as average hourly wages rose 5.2% on a year-over-year basis. (Source)

    • In the U.S., “total non-farm payroll employment rose by 528,000 in July, and the unemployment rate edged down to 3.5 percent” the Bureau of Labor Statistics reported in their Employment Situation Summary.  Long-term unemployment is below February 2020 levels, and temporarily laid-off workers have returned to pre-pandemic levels at 791,000.  The American economy has now regained the 22 million jobs that were lost in early 2020 when the pandemic was beginning. (Source

    • Additionally, second quarter earnings of the S&P 500 companies that have reported so far show profits are up nearly 7% over last year. (Source)

    • The robust U.S. jobs market and strong earnings show that central bank actions have not taken effect yet.  The continued strength in U.S. jobs and the indication that employment is growing rapidly could spur the Federal Reserve to continue to act aggressively at its next monetary policy meeting in September. 

  • Consequently, markets were mixed with strong performance providing some positive influence while the threat of tightening monetary policy delivers a negative tone.  This positive/negative teeter-totter will likely continue for the next few months.

What’s ahead for this week?

  • In Canada, the next major economic announcement will occur on August 16th with the release of July’s consumer inflation.  The next scheduled opportunity for the Bank of Canada to adjust monetary policy in response to inflation is September 7th.

  • In the U.S., another week of important economic news follows as the latest Consumer Price Index (CPI) with month-to-month and year-to-year inflation numbers being released on Wednesday.  The Producer Price Index (PPI) and Import and Export price indices will also be released.

For more information contact: [email protected]

www.iaic.ca | Tel (519) 291-2817 | 135 Main Street, East | PO Box 68 | Listowel, ON N4W 3H2

 

This report is produced by Independent Accountants' Investment Counsel Inc (“IAIC”) in conjunction with ARG Inc.  All graph and chart statistical data contained in this report has been supplied by ARG Inc. The views and opinions expressed in this report are based on market statistics.  No guarantee of outcome is implied, and opinions may change without notice.  Investors should not base any of their investment decisions solely on this report nor should any opinions expressed within this report be construed as a solicitation or offer to buy or sell any securities mentioned herein.  Although the information contained in this report has been obtained from sources that IAIC believes to be reliable, we do not guarantee its accuracy, and as such, the information may be incomplete or condensed. All opinions, estimates and other information included in this report constitute our judgment as of the date hereof and are subject to change without notice.

Please contact your IAIC representative if you have any questions regarding this report. 

 

©Copyright 2022 Independent Accountants’ Investment Counsel Inc. All rights reserved.

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

 

What happened last week?

  • The end of July provided positive results for all the indicators in the grid.  Year-to-date the equity indexes still have losses, but they have been roughly halved lately.  Several factors are working together to deliver these positive results:

    • After raising benchmark interest rates by ¾ percent (75 basis points) July 27, 2022 the Federal Reserve indicated that interest rates would rise more gradually with smaller future rate hikes.(Source)

    • The economy in both Canada and the U.S. is slowing, which permits the slowing of interest rate increases as the slowdown reduces inflationary pressure.

    • Canadian Gross Domestic Product (GDP) remained unchanged in May as transportation, agriculture, accommodation, and food services expanded while manufacturing, construction, and mining contracted.(Source)

    • Quarterly earnings reports from S&P 500 firms have been reduced, and several have missed predictions, most firms have exceeded lower expectations.  More than 50% of S&P 500 firms have reported and nearly three-quarters of them have beaten estimates.  Current earnings do not yet reflect increased interest rates. 

  • In both countries equity markets performed well on less than stellar news exemplifying the relativity between results and expectations, not results alone.  It appears that last week’s news was better than expected and resulted in positive returns for most investors. 

What’s ahead for this week?

  • In Canada, markets were closed for the Civic Holiday on Monday August 1, 2022.  Imports, exports, and trade balance will precede July’s employment report, which will signal the Canadian economy’s growth.

  • In the U.S., several purchasing managers indexes (PMI) that signify corporate buying optimism for expansion will be released.  Friday will include the announcement of the non-farm payroll report for July.

  • Globally, the Eurozone will also announce imports, exports and trade balance, PMIs and June’s unemployment rate, retail sales and producer price index.

For more information contact: [email protected]

www.iaic.ca | Tel (519) 291-2817 | 135 Main Street, East | PO Box 68 | Listowel, ON N4W 3H2

 

This report is produced by Independent Accountants' Investment Counsel Inc (“IAIC”) in conjunction with ARG Inc.  All graph and chart statistical data contained in this report has been supplied by ARG Inc. The views and opinions expressed in this report are based on market statistics.  No guarantee of outcome is implied, and opinions may change without notice.  Investors should not base any of their investment decisions solely on this report nor should any opinions expressed within this report be construed as a solicitation or offer to buy or sell any securities mentioned herein.  Although the information contained in this report has been obtained from sources that IAIC believes to be reliable, we do not guarantee its accuracy, and as such, the information may be incomplete or condensed. All opinions, estimates and other information included in this report constitute our judgment as of the date hereof and are subject to change without notice.

Please contact your IAIC representative if you have any questions regarding this report. 

 

©Copyright 2022 Independent Accountants’ Investment Counsel Inc. All rights reserved.

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

 

What happened last week?

  • Equities regained recent losses, but the major North American (DOW & NASDAQ) indexes remain 8-19% below their levels of one year ago, and 12-24% below their values year-to-date.  Last week’s rally echoes small periods of gain that have occurred several times in 2022 (late January/early February, mid-March, second half of May), and perhaps again now.  The recent positive results can be attributed to:

    • Inflation, which likely has not peaked, is seeing its growth rate lessen, and wage growth, which contributes to inflation, has also slowed.  Canadian consumer inflation hit a 39-year high at 8.1%, lower than expected. (Source)

    • Commodity prices are continuing to fall (oil, metals, lumber, corn, wheat, soybeans), which broadly lowers inflationary pressure for end consumers as well as companies.

    • The European Central Bank (ECB) raised its key interest rate for the first time in more than a decade by ½ percent (50 basis points).  Inflation woes are being exacerbated by the weakening Euro, and this increase is the first step in the “further normalization of interest rates” (i.e., rising back to more typical and traditional levels) at upcoming ECB meetings.  ECB Statement

  • Volatility has increased recently, as evidenced by the rapid swing from declines to gains in equity markets.  Year-to-date volatility is 39% higher.  Goal-based planning and discipline remain paramount. (Source)

What’s ahead for this week?

  • In Canada, Gross Domestic Product (GDP) figures for May will be announced along with the federal government’s budget balance for April.

  • In the U.S., the most important announcement will arrive from the Federal Reserve’s FOMC on Wednesday when the latest monetary policy statement and interest rate decision is released.

  • Globally, French, German, and Spanish GDP for the second quarter will be released.  German and Italian CPI for July will also be announced.

For more information contact: [email protected]

www.iaic.ca | Tel (519) 291-2817 | 135 Main Street, East | PO Box 68 | Listowel, ON N4W 3H2

 

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