(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?

• Last week produced another all-green week for our grid, above.

  • A primary driver in the rise of equities last week was the announcement on Friday by the Chair of the Federal Reserve, Jerome Powell, at the conclusion of the annual Jackson Hole Symposium.  Some changes are on the horizon for monetary policy but are not imminent.  The Fed’s current program of buying $120 Billion in bonds each month, which injects liquidity into capital markets, will likely be “tapered” by the end of 2021.  The liquidity (along with low interest rates) encourages personal and corporate borrowing to fuel economic growth. 

  • Secondarily, the need to temper inflation with an interest rate increase is being handled with extreme care.  The major concern is that a rate rise now will cause lasting damage to a temporary, pandemic-recovery related period of price increases.  The need to act is reduced because inflation is limited to a narrow band of goods and services, the areas with the highest inflation are moderating, and wages are not positioned to support further inflation growth. (Source)

• After hitting an 8-month low on August 20th, the Canadian dollar has risen sharply; 1.6% last week and outpaced the TSX’s 1.5% gain.  The TSX relied heavily on the results of the major banks who bested profit expectations based on reduced loan-loss provisions and increasing retail banking performance.  The banks’ collective performance of quarterly profit above $15 Billion caused Prime Minister Trudeau to propose increased taxation. (Source)

What’s ahead for this week?

• In Canada, real Gross Domestic Product (GDP), for the second quarter, is scheduled for release along with July’s trade balance, labour productivity and building permits.

• In the U.S., pending home sales, construction spending, goods and services trade balance and factory orders will be announced.  The most important data, especially affecting monetary policy, on the schedule is August employment numbers, which includes labour force participation and unemployment.  A number of Purchasing Managers Indices (PMI) will also be released by Markit and ISM.

• Globally, Japan retail sales, industrial production, unemployment and consumer confidence will be released.  Eurozone inflation, Germany consumer inflation U.K. markets are closed for the Summer Bank Holiday.

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