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Blog - 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?

  • It was a difficult week for equities; the TSX gained ½ point while the American indices lost 3-4%.  The S&P 500 achieved its seventh consecutive weekly loss and is approaching a 20% drop of a Bear Market.  The Dow has had eight weeks since it last gained on a week-to-week basis. All the indexes have lost ground in 2022,

  • The economic news that predicated the U.S. stock losses last week was mixed.  Walmart and Target disappointed on the earnings front but indicated that foot traffic and spending remains positive as consumers moved away from pandemic necessities.  Demand is strong while supply-chain issues remain.  Further, consumer spending that comprises about two-thirds of U.S. Gross Domestic Product (GDP) is healthy, a tight labour market with rising wages and low unemployment, and moderating, yet historically strong, corporate earnings. 

  • Canada’s Consumer Price Index (CPI) rose in April slightly to 6.8% compared to March’s 6.7%.  Food and shelter were two categories that drove the increase.  “With the unemployment rate falling to a record low in April, strong employment figures tend to put upward pressure on prices.  In April, average hourly wages for employees rose 3.3% on a year-over-year basis, meaning that, on average, prices rose faster than wages, and Canadians experienced a decline in purchasing power.” (Source)

  • Both the Bank of Canada and the Federal Reserve have mandates to fight inflation, and both have indicated their intention to combat rapidly rising prices with higher interest rates. (Source1, Source2)

What’s ahead for this week?

  • Markets were closed in Canada Monday May 23rd, 2022  to observe Victoria Day, the four-day week will include announcements of April’s manufacturing sales, wholesale trade, and March’s retail sales and employment survey.  Also, the major Canadian banks will release their latest quarterly earnings.

  • In the U.S., April’s new home sales, pending home sales, durable goods orders and core orders, personal income and spending and goods trade deficit will be announced.  The minutes from the Federal Reserve’s FOMC meeting that raised interest rates ½ point will be released.

  • Globally, Germany’s business climate, Gross Domestic Product and consumer confidence will be released along with the Eurozone’s Purchasing Managers Indices in a light week for economic announcements.

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?

  • It was not a positive week with full-week losses exceeding 2%; however, Friday saw North American equity indices rising between 1½% and nearly 4%,

  • The release of the U.S. Consumer Price Index (CPI) on Wednesday morning was a significant contributor to equity volatility and losses last week.  Thankfully, price increases during April were less than March, but the annual and monthly inflation rate remains at a historically high level.  Inflation of 8.3% over the past year was led by shelter, food, airline fares and new vehicles.  Ongoing inflation at this high rate indicates that the Federal Reserve may remain aggressive on monetary policy, especially for short-term interest rates.  With the monthly rate dropping to 0.3% in March from 1.2% in April, it appears that inflation may have peaked, which is a small measure of positive news. (Source

  • The Producer Price Index (PPI), which is the measure of inflation at the wholesale level, is beginning to slow.  In April the PPI fell to 0.5% after February’s 1.1% and March’s 1.6% rise in prices.  Interestingly the price increase for goods was 1.3% as services prices remained unchanged.  (Source)

  • China’s CPI and PPI in April arrived above estimates at annualized rates of 2.1% and 8%, respectively.  These prices were driven by increasing demand due to panic buying as another pandemic wave hit, continuing supply chain issues, and rising commodity prices driven by the invasion of Ukraine.  (Source)

  • The supply chain and commodity price issues affecting China are global, and until they are resolved inflation will persist in North America and globally.  Central banks will seek to temper inflation by increasing interest rates.  The Federal Reserve has telegraphed ½% increases at its next two monetary policy meetings on June 15th and July 27th.  While interest rates rise and the fear of stagflation or recession loom, capital markets will continue to deliver volatile results.  (Source1,  Source2)

What’s ahead for this week?

  • In Canada, March’s manufacturing sales and new orders, construction investment, and April’s housing starts, existing home sales, MLS Home Price Index and new housing price index will be announced.  CPI will also be released and will be next week’s most influential indicator for Canadian investors.

  • In the U.S., April’s retail sales, industrial production, business inventories, housing starts, building permits and existing home sales are scheduled for release as earnings season winds down.

  • Globally, China’s retail sales and industrial production, Japan’s machine tool orders, CPI, and Gross Domestic Product (GDP), Eurozone’s trade deficit, GDP, CPI and PPI will 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?

  • At 2 pm Eastern on Wednesday the U.S. Federal Reserve increased short term interest rates.  The 50-basis point increase (+0.50%) to the federal funds rate was the largest increase since 2000. (Source)

  • Immediately after the Fed’s announcement, equity markets reacted positively, but the gains achieved on Wednesday were reversed on Thursday.  The Dow rose 932 points before losing 1,063, the S&P 500 gained 125 points, then lost 154.  The TSX gained a total of 473 points on Tuesday and Wednesday before dropping 489 on Thursday.  The NASDAQ gained 402 points on Wednesday before dropping 764 by week’s end.

  • The VIX Volatility Index rose during the second half of last week and now sits near its highest level since March 2020 when the pandemic was in its early, most unpredictable stages.  Until inflation is tempered, supply chain issues resolved, and energy costs are more stable, volatility will likely remain above average. 

  • The Federal Reserve’s increasing of interest rates was further justified on Friday when April’s non-farm payrolls showed that employment had increased by 428,000.  With the unemployment rate (3.6%) and number of employed (5.9 million) holding steady, the Bureau of Labor Statistics indicated the similarity of these numbers to pre-pandemic data in February 2020.  The labor force participation rate is 1.2 percentage points below the February 2020 level of 63.4%. (Source)

  • In Canada, the employment numbers also released on Friday provided a mixture of positive and negative news.  The number of jobs remained unchanged in April, as did the employment rate (61.9%) and the unemployment rate edged downward by 0.1% to 5.2%.  Average hourly wages rose at an annualized rate of 3.3%, also unchanged from March. (Source)

What’s ahead for this week?

  • In Canada, March’s building permits are part of a light week for economic announcements amid the quarterly earnings season.  Several large entities like Boardwalk and RioCan REIT, George Weston, Suncor, Manulife, Quebecor, and Canadian Tire will report their most recent performance.

  • In the U.S., inflation will dominate the economic releases.  The Consumer Price Index (CPI) for April will be announced on Wednesday, followed by the Producer Price Index (PPI) on Thursday.  Import and Export Price Indexes will be released on Friday.

  • Globally, scheduled announcements include China’s Consumer and Producer Price Indexes, trade surplus and money supply, Japan’s Purchasing Managers Indexes, household spending and bank lending, Germany’s CPI, and the Eurozone’s industrial production.

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?

  • For the fourth consecutive week, all equity indices in our reporting table lost value; decline has ranged between 5% – 13%.  The TSX, which has been supported by rising commodity prices and lost 5% in April, has delivered a relatively strong performance among equity indices.  The reasons for the negative performance include:

    • Domestic, international, and global inflation remains high, and well beyond the goals set by central banks. 

    • As inflation rises, central banks have begun to act.  The Federal Reserve is likely to raise interest rates ½ point next week.  The Fed along with other central banks want to slow growth by raising the cost of borrowing for individuals, families and firms.  Increasing the cost of financed goods and services will temper economic growth, which may eventually cause inflation to slow.

    • Although the spread of the coronavirus has slowed and its effects have been less severe based on hospitalization and death rates, the pandemic continues in China.  Lockdowns are again affecting growth for the world’s second largest economy. 

    • Contradictory Gross Domestic Product (GDP) numbers in the U.S. require additional scrutiny to be understood.  The U.S. economy shrank at an annualized rate of 1.4% in the first quarter of 2022, after growing at a rate close to 7% at the end of last year.  The results were somewhat of a surprise with analysts predicting a growth of 1%. (Source1, Source2)

    • The protracted invasion of Ukraine continues to threaten global supply chains and economy.

    • Earnings season has delivered less than stellar results.

What’s ahead for this week?

  • In Canada, the merchandise trade balance will be released along with April’s employment numbers. 

  • In the U.S., March’s construction spending, factory orders, trade deficit and consumer credit will be announced.  Purchasing Managers Indexes (PMI) from Markit and ISM will be released for goods and services.  On Wednesday at 2 pm Eastern the Federal Open Market Committee of the Federal Reserve will release its latest monetary policy for short-term interest rates and bond-buying.  Non-farm payrolls will be announced on Friday.

  • Globally, PMIs for China, Japan and Eurozone will be released.  Germany’s joblessness, trade surplus, retail sales and factory orders will be announced.  OPEC+ will hold a production and pricing meeting.

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?

  • North American equity indices started the week flat; rose on Tuesday and Wednesday before tumbling on Thursday and Friday.  The NASDAQ dropped nearly 4% for the week.  Friday saw the other indices lose between 2%-3% and 3%-4% for the week.  The reasons coalesce around inflation and interest rates:

    • StatsCan released Consumer Price Index (CPI) data for March on Wednesday.  Prices increased 1% during over the past month and 6.7% over the past year.  It is the largest, annual reading in 31 years.  Gasoline has been a major contributor to the growing rate of inflation after rising more than 19% since February 1st.  Rising inflation is further justification of the Bank of Canada’s interest rate increases. (Source)

    • Fed Chair, Jerome Powell, indicated that inflation may have peaked in March as wages have increased, housing costs have climbed rapidly, and service industry price jumps amid continued supply chain problems. (Source)

    • The Fed’s moves are making equities less attractive than bonds and other fixed income investments.  The yield on 10 Year U.S. Treasuries has moved higher recently, doubling since early December, and gaining nearing 1½ points in the last five weeks. (Source)

    • The Federal Reserve next meets to discuss interest rates on May 3-4.

  • Additionally, the invasion of Ukraine continues to interrupt agricultural production and increases the threat for oil and gas shortages that has oil over $100/barrel despite a drop last week.

What’s ahead for this week?

  • In Canada, February’s Gross Domestic Product (GDP) and survey of employment, and March’s wholesale trade, and manufacturing sales will be announced. 

  • In the U.S., announcements of quarterly earnings will include results from Coca-Cola, GE, UPS, Alphabet, Amazon, Apple, Microsoft, McDonald’s, Exxon Mobil, and Caterpillar.  Durable goods and core orders, new home sales, pending home sales, goods trade deficit, and wholesale and retail inventories will be released.

  • Globally, Japan’s department store sales, jobless rate and monetary policy from its central bank, Germany’s GDP, business climate, consumer confidence and CPI, Eurozone GDP, CPI and money supply are scheduled for release.

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.


INVESTING IN UNSETTLING TIMES

Our recent Quarterly Commentaries have focused on the market impact of inflation, interest rates and the Covid pandemic. As the economic impact of Covid recedes, a terrible new event in the first quarter of 2022 has captured the world’s attention – Russia’s attempted invasion of Ukraine. With financial and military supply assistance from the Western world, Ukraine has at least temporarily thwarted Russian President Putin’s plans to unseat its Western-leaning government; however, military analysts expect a fierce and renewed Russian military effort to seize at least some eastern regions of the country. Expectations now are for a protracted bloody conflict and for the West’s ongoing relations with Russia to be affected for years to come.

 

In this article we’ll assess the impact of these world events on investment markets and our investing strategy.

 

The Impact of Russia’s Actions on the Global Economy

 

Although it represents only about 1% of global economic output, Russia has a significant impact on three key global commodities markets:

 

1. Oil - Russia produces about 10% of the global oil supply, 50% of which is exported. This translates into a potential supply shortfall outside of Russia of 4 to 5 million barrels per day. To counter this, countries around the world are working to make up any shortfall and reduce further reliance on Russian energy.

 

2. Natural gas – Russia is the largest exporter of natural gas in the world, with three-quarters of its exports going to Europe. This dependency is significant for electricity, particularly in the wake of the shutting down by some European countries of nuclear and coal-fired plants.

 

3. Potash – Russia produces about 40% of the world’s total potash supply, which directly affects agriculture production.

 

In addition, Ukrainian production of a significant portion of the world’s supply of neon gas, used in making computer semi-conductor chips, has halted because of the conflict with Russia.

It is important to note that Canada is a significant producer of oil, natural gas, potash and neon gas.

 

The international sanctions being applied against Russia will impact supply chains, creating dislocations and the shifting of supply and demand further away from equilibrium, adding to global inflationary pressures.

 

Russia’s invasion of Ukraine may have indirect consequences for relations between major global powers. China’s and India’s passive reactions to date to the Russian invasion may contribute to an expansion of future military action beyond Ukraine and damage international relations and global economic growth.

 

Inflation and Interest Rates

 

In January, annual inflation rates among developed countries rose to about 7%, reaching the highest levels in the last 30 years. We’ve discussed in past newsletters the reasons for the increase in inflation, many of which resulted from the economic impact of the pandemic.

 

Here in North America, after nearly two years of keeping their overnight lending rates at historic lows, both the U.S. Federal Reserve (“the Fed”) and the Bank of Canada (“BOC”) increased interest rates during the first quarter of 2022, a first move to reset rates to within an “acceptable range” and to address inflationary pressures. Markets are anticipating up to six additional hikes in 2022 and possibly three more in 2023. These most recent moves by the Fed and the BOC, and the tone of their communications, indicates a clear shifting away from the pandemic-induced “stimulus at any cost” mindset to one of tempering the economy and reigning in inflation. The BOC may have a little more latitude than the Fed given the economic boost provided to the Canadian economy by rising commodity prices.

 

The Impact of Ukraine, Inflation and Interest Rates on Financial Markets

 

As the financial markets absorbed information on Ukraine, inflation, interest rates, forward growth rates, and the strength of the consumer, the first quarter of 2022 saw substantial changes to valuations in the equity and fixed-income markets.

 

Many growth stocks, where valuations are based more on future-based earnings flows than current inflows, experienced notable declines. Corporate earnings across the board are beginning to reflect slowing top-line growth (although this is not totally unexpected due to rapid drop and then rise in earnings in the first 12 months of the pandemic). Some industries and companies are less able than others to pass on rising labour and borrowing costs.

 

The economic environment has also impacted the normally “boring” bond market, which suffered losses in the first quarter due mainly to rising interest rates and a rare occurrence known as the “flattening yield curve.” While long-term rates are increasing, they are doing so at a slower pace than short-term rates, resulting in a flatter curve when plotted on a graph. In the past, this inversion has been an often-reliable leading indicator of economic decline or recession.

 

Investing in this Unsettling Environment

 

History has shown us that economic shocks, for the most part, are unforeseen and their duration and impact difficult to project. As a result, we invest our clients’ savings in a way that we believe will best respond to such unpredictable disruptions. Nevertheless, as events unfold, we adapt to new information with tactical adjustments to our investing strategies. Here are some of the guiding principles our portfolio management team is following:

 

• While rising interest rates have had an impact on the bond market, we maintain a relatively short bond ladder (1-to-5-year issues, held to maturity) for our clients, which ensures a locked-in yield despite some price volatility. We do not pay large premiums for bond purchases, which helps protect our clients from large swings in the price of their bonds as they come to maturity.

 

• We continually monitor the shape of the yield curve. Analyzing the spreads between various fixed-income instruments, equity markets and overall economic growth rates helps to guide us in our strategic allocation of our clients’ investments.

• We carefully select the companies that our clients own. We look for companies and industries that have pricing power, that can pass increased costs through to their customers. These companies can sustain earnings and dividend growth and provide a partial hedge for our clients against inflation.

 

• We assess the changing profile and outlook of the overall economy. To paraphrase a Wayne Gretzky quote: “Focus not on where the puck is, but where it is going.” The economy is evolving faster than ever before: new technologies, consumer preferences, a renewed awareness of our vulnerabilities, social responsibilities, and future global growth and prosperity means the “economic pie” will look different in the future than it does today.

 

Although we employ tactical shifts to navigate the changes, challenges and opportunities the world continually presents, we do not abandon the disciplines of diversification and fundamental asset valuation. A properly diversified strategy during such turbulent global events remains paramount.

 

 

IAIC Disclosures

 

All graph and chart statistical data contained in this report has been supplied by Refinitiv and National Bank Financial. Sources used by Refinitiv and National Bank Financial to compile the data include: Global Insight, Thomson Financial, CPMS, Bloomberg, S&P/TSX Index Services, S&P Index Services, TSX, NYSE, NASD, and company reports. The views and opinions expressed in this newsletter are based on historical company fundamentals and 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.

 

This report is produced entirely by Independent Accountants' Investment Counsel Inc. Although the information contained in this report has been obtained from sources that IAIC Inc. 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 newsletter.

 

©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?

  • On Wednesday morning the Bank of Canada raised its interest rates again in 2022 to slow domestic inflation.  The rate was increased by 0.5%, which is the largest rate increase in more than two decades.  The target range for the deposit rate to the bank rate is now 0.75% to 1.25%.

  • The Bank will begin quantitative tightening on April 25th where maturing Government of Canada bonds held on its balance sheet will no longer be replaced.

    • “With the economy moving into excess demand and inflation persisting well above target, the Governing Council judges that interest rates will need to rise further. The policy interest rate is the Bank’s primary monetary policy instrument, and quantitative tightening will complement increases in the policy rate” (Source)

  • The U.S. Consumer Price Index (CPI) rose again last month.  Since February, prices for consumers rose 1.2% and in the past year prices have risen 8.5%.  May 1981 was the last time the inflation rate reached this level.  Like preceding months, the largest contributors were gasoline, housing, and food.  Energy costs have risen 32% over the past year, and groceries are up 10% since March 2021. 
  • The anticipation that inflation will slow is tied directly to the energy and commodity prices which have spiked due to the invasion of Ukraine and the resulting uncertainty associated with the global political response.

  • The Producer Price Index (PPI) for March sits at 11.2%, the highest recorded year-over-year increase ever recorded for American companies. (Source)

  • The Federal Reserve will meet May 34 to review and adjust monetary policy, including interest rates and bond-buying, to slow the economic growth and temper inflation.

What’s ahead for this week?

  • In Canada, housing starts, existing home sales, MLS home price index, new house price index and household and mortgage credit for March will be released.  March’s CPI will be announced.

  • In the U.S., March’s housing starts, building permits, and existing home sales will be released.

  • Globally, China’s GDP, retail sales, industrial production, Japan’s CPI, industrial production, machine tool orders and trade balance, Germany’s Producer Price Index, and Eurozone CPI are scheduled for release.  Also, G20 finance ministers and central bank governors meet in Washington, DC.

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 employment rose by 73,000 in the month of March, and the unemployment rate fell by 0.2% to 5.3%.  This is the lowest unemployment rate since 1976 when similar data was first collected and analyzed.  Labour Force Participation remained unchanged from February at 65.4%, total hours worked rose 1.3% and wages have risen 3.4% compared to March 2021.  As restrictions are lifted the percentage of employees who work exclusively from home fell 1.8% to 20.7%. (Source1, Source2)

  • Last Thursday afternoon, Minister of Finance, Chrystia Freeland, presented the governing Liberals latest budget. The highlights affecting Canadians’ finances include $56 Billion in new spending for national dental care, affordable housing incentives, reconciliation with Indigenous Peoples, and increased defense and climate initiatives.  A surtax on large banking profits and an increase to the corporate tax rate are also included in the proposed measures. (Source)

  • The Federal Reserve released the minutes from their mid-March monetary policy meeting that indicated committee members were taking a more aggressive stance against inflation than originally thought.  The Federal Open Market Committee members unanimously agreed to raise the federal funds rate ¼%, and the market has priced-in an increase of about 170 basis points (1.7%) for 2022.  A half-point increase, which has not occurred since 2000, is expected in the coming months, and maybe more than once.  The Federal Reserve will also allow close to $100 Billion in bonds to mature each month without being replaced.  The removal of this money from markets will tighten long-term borrowing and increase costs and yields.  With inflation expected to exceed 8%, and the robust jobs market and GDP growth, the U.S. economy needs price stability and no longer requires monetary supports to fuel growth. (Source)

What’s ahead for this week?

  • In Canada, prior to the Good Friday holiday, the Bank of Canada will announce its monetary policy update on Wednesday morning.  All major Canadian banks predict a 50 basis points (½%) increase. (Source)

  • In the U.S., March’s Consumer Price Index (CPI), retail sales, import prices, business inventories, industrial production, and capacity utilization are scheduled for announcement.  Stock markets will be closed on Friday with bond markets trading limited. 

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?

  • Equity markets were mixed based on a blend of positive and negative news locally and internationally.  Inflation, and actions to control it, continue to be the primary driver of markets. 

    • The price of oil fell last week, however, is up 32% this year and 62% from one year ago.  Higher energy prices will filter through the economy and add to already rapid price increases. 

    • Central banks anticipate rising inflation and will raise short term interest rates.

    • Canadian Gross Domestic Product rebounded in February with 0.8% growth following January’s Omicron-induced results of 0.2%.  The strengthening economy coupled with jobs growth (report scheduled for Friday), and rapidly rising prices that are expected to continue to rise, forces the Bank of Canada to trim back economic growth with higher interest rates at their next meeting in mid-April. (Source1, Source2)            

    • The same economic situation exists in the U.S. (rising inflation, strong employment, GDP growth) except the next meeting of the Federal Reserve’s Open Market Committee is scheduled for early May.  President Biden has taken the unusual step to release 1 million barrels of oil daily for the next six months from strategic reserves, which illustrates many inflation-fighting actions are possible.

    • Underlying the mixed news and data is the geopolitical situation emanating from Ukraine’s invasion by Russia.  The disruption of energy shipments to western Europe, the rising cost of manufacturing inputs like electricity generated from natural gas, fiscal pressures for governments to increase military spending, and support for refugees will affect markets around the world. 

What’s ahead for this week?

  • In Canada, February’s building permits and merchandise trade balance will be announced prior to the federal budget on Thursday at 4 pm Eastern.  On Friday the February jobs report will be released.

  • In the U.S., factory orders, goods and services trade deficit, consumer credit and wholesale inventories for February, and Purchasing Managers Indexes from ISM and Markit for March will 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 continuing invasion of Ukraine and its resulting economic and energy implications, surging case counts in some areas for the Omicron BA.2 variant, and rising interest rates did not negatively impact the markets last week as may have been expected.

  • Overall rates are still historically low despite recent rise and promises of additional increases.  Fears of recession and stagflation remain low; at least for now.

  • Despite the headlines, the TSX is delivering healthy year-to-date and year-over-year results that outperform the American indices.  Notwithstanding the losses from U.S. equities to date in 2022, their performance over the past year (including Q1 2022) has been reasonable; especially the broad-based S&P 500.  The tech-heavy NASDAQ has delivered more than 10% over the past two weeks to overcome its deep losses that 2022 has produced.

What’s ahead for this week?

  • In Canada, the survey of employment and Gross Domestic Product (GDP) for January, March’s Purchasing Managers Indexes (PMI) and earnings from Dollarama, Blackberry will be released.

  • In the U.S., February’s wholesale and retail inventories, construction spending, goods trade deficit, personal spending and personal income will be announced.  PMIs from ISM and Markit for March along with consumer confidence, and the important non-farm payroll report are scheduled for release.

  • Globally, in a week with many varied data to be announced, Germany’s consumer confidence, retail sales, unemployment and consumer price index, Japan’s jobless rate, retail sales, PMIs and industrial production, China’s PMI, Eurozone jobless rate, consumer confidence and consumer inflation will be released.  OPEC+ will meet and an EU/China summit is planned. (Source)

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.


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