We’re back. A combination of holidays (Sam) and family duties in Toronto (Russ) have kept us offline for the past few weeks. We are back with our regular edition of the Week that Was, and playing catch-up won some other initiatives.
The past (few) week(s) were interesting to say the least. Markets have ignored the expansion of the war in the Middle East, instead focusing on inflation, rates, employment, and earnings. This week may be a bit of an exception, as markets worry that Israel may make a major strike against Iranian oil facilities, potentially taking 1.5 million barrels per day out of production. Also playing into this week’s action were debates on how fast the US Fed will continue to cut interest rates. We are getting mixed messages.
| Index | Close Sept. 26th 2024 | Close Oct. 3rd 2024 |
| S&P500 | 5,745 | 5,697 |
| TSX60 | 24,034 | 23,969 |
| Canada 10 yr. Bond Yield | 3.02% | 3.12% |
| US 10 yr. Treasury Yield | 3.80% | 3.85% |
| USD/CAD | $1.34763 | $1.35568 |
| Brent Crude | $71.09 | $77.75 |
| Gold | $2,673 | $2,556 |
| Bitcoin | $65,089 | $60,821 |
Source: Trading Economics & Factset
The US rate cut of 50bps on September 18th had the bulls rampaging through the streets. In a speech to the National Association for Business Economics, Federal Reserve Chair Jerome Powell appeared to take a more nuanced stance, falling back on the Fed being data dependant. There are risks of inflation being re-ignited including wage demands, supply chain disruption, and a spike in the price of oil.
The labour market, while tightening up, is seeing more job action this year than we have seen in some time. In Canada, dockworkers in Montreal just finished a 3-day strike and will return to the bargaining table. We have had hard bargaining and strikes or threats of strikes in the airline industry, railways, and west coast ports. According to Statistics Canada work stoppages have tripled from 2022 to 2024.
But we are not alone, East Coast dockworkers in the US have just ended a 3 day strike after reaching a wage settlement of 62% over 6 years with their employers. Boeing’s 33,000 workers are currently on the picket line seeking both higher wages and re-instated pension benefits. Inflation is largely responsible for the renewed militancy amongst the trade unions. Each round of negotiations allows members to catch up in terms of purchasing power. It does, however, have the potential to spark another round of inflation.
Despite the potential pressures from wage demands and oil prices to spark inflation, the picture overall remains benign. In the EU, inflation fell below the ECB’s 2% target to 1.8%. With a soft economy throughout the Common Market, more rate cuts are almost certain.
China’s economy has been struggling for some time. Last week the central government announced a massive stimulus package the resulted in a 25% rally in the local stock market. Elements in the package included a reduction in the reserve requirements of banks and drop in the benchmark lending rate. These may not be enough to rekindle growth, and the government may need to roll out more fiscal measure.
Sam’s holiday included a safari in South Africa (yes, I’m jealous). So, we’ll close of with this from the Lion King… enjoy
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
