(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.

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