Both equity and bond markets were weaker this week with a mixed bag of economic news and Easter / Spring Break to contend with. The real action has been in commodities with records being set for a variety of hard and soft commodities.
| Index | Close Mar. 28th 2024 | Close Apr. 5th 2024 |
| S&P500 | 5,254 | 5,146 |
| TSX60 | 22,167 | 22,052 |
| Canada 10 yr. Bond Yield | 3.49% | 3.58% |
| US 10 yr. Treasury Yield | 4.19% | 4.31% |
| USD/CAD | $1.35380 | $1.35539 |
| Brent Crude | $87.00 | $91.07 |
| Gold | $2,232 | $2,291 |
| Bitcoin | $70,702 | $67,829 |
Source: Trading Economics & S&P Cap IQ
Interest rate prognostications are being pulled in different directions. Jobless claims are moving up in the US, easing upward pressure on wages and by extension inflation. Layoffs also ticked up with over 90,000 US workers being laid off in March. The redundancies are spread out between the private and public sector with the tech sector taking the biggest hit.
Countering the disinflationary trends of the current labour market is a rise in commodity prices. If Easter chocolates seemed more expensive this year, that’s because they were. Cocoa prices have climbed to over $10,000 per tonne in March. Climate change exacerbated drought in western Africa (responsible for 80% of production) has shrunk supplies. It is a similar story with coffee where Vietnam has experienced a 20% drought caused drop in production. Brazil’s production is also in jeopardy, this time thanks to a wet growing season.
Oil has risen sharply again due to supply constraints. Production cuts by OPEC, a Ukrainian offensive against Russian refineries, and geopolitical tensions all play into the mix. Copper is up as well. The immediate reason is a rise in manufacturing activity. The longer-term reason is under-investment in new mines. That under-investment can be seen in several metals. Lastly, gold broke through $2,300 earlier this week to set a record.
It’s not just commodities that are showing signs of supply shortage. The US is short an estimated 340,000 accountants. Like most professions, there is a wave of retirements as the boomers age out. The challenge is that the next generations aren’t coming into the profession. Wages are part of the issue, with a career in finance or investment banking paying a lot more with lower barriers to entry. (although the attrition rate can be horrible). The shortage is influencing public company reporting and performance. If you can’t measure it, you can’t manage it. If there is no one there to measure…..
At the risk of outing myself… I used to help my dad in his TV repair business, where I would help test vacuum tubes, resistors, and the occasional transistor. (We had one of the first colour TVs on the block and were early adopters of cable TV!!). Last month Nvidia announced the launch of “Blackwell” its latest graphics processing unit (GPU) and chip. This next generation of computing power will contain 208 billion transistors in one GPU. It will have a 32% increase in computing power over the previous generation (Hopper H100) GPU. All this innovation is driven by the need for more computer power to run the growing range of “AI” enabled programs.
We were lucky enough to spend Easter weekend with my youngest son and his family in Alberta, so even though we are no longer Alberta Bound, I’ll leave you with this classic from Gordon Lightfoot… Enjoy
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
