Good Morning
We’re back in Victoria and settling into our West Coast routine. Our European interlude was fun, and I can attest that the concept of a digital nomad works. The trip home from Montpellier took a bit longer than originally planned but had some perks along the way. That included 3 days in Barcelona, a chance to visit friends in the UK, and being upgraded on the flight from Gatwick to Calgary. Thank you Westjet!!
In the markets, volatility has returned as investors digest news about 2 wars, congressional dysfunction, inflation-growth-interest rates, and earnings. Equities dropped throughout the week while 10 yr. yields swung between 5% and 4.7%. The winner for the week was Bitcoin, up almost 15% at Thursday’s close.
| Index | Close Oct. 20th 2023 | Close Oct 26th 2023 |
| S&P500 | 4,224 | 4,138 |
| TSX60 | 19,116 | 18,875 |
| Canada 10 yr. Bond Yield | 4.07% | 4.01% |
| US 10 yr. Treasury Yield | 4.92% | 4.85% |
| USD/CAD | $1.37160 | $1.38310 |
| Brent Crude | $92.16 | $88.27 |
| Gold | $1,981 | $1,985 |
| Bitcoin | $29,700 | $34,116 |
The Bank of Canada allowed everyone to breathe a sigh of relief, holding rates steady at 5% this week. Earlier, September’s inflation rate had been reported at 3.8%, falling from August’s 4%. In the Bank’s press release, they cited slowing global growth and reduced inflation pressures in most areas except for housing. Their expectation is that inflation will average 3.5% in 2024 before gradually easing to 2% in 2025. Future rate hikes are not off the table as the Bank’s preferred measures of inflation (core+) have not declined as quickly as the headline CPI number.
The US, which had an inflation rate of 3.7% in September, reported 3rd quarter GDP growth of 4.9%. The jump in GDP was driven in large part by consumers empowered by higher wages and a tight labour market. This keeps the prospects of higher interest rate in the US front and centre. Never discount the ability of the American consumer to spend.
Overseas, the European Central Bank (ECB) opted to hold rates steady in the face of a weakening economy. Inflation in the Euro area was at 4.3% in September while 3rd quarter GDP growth is expected to be an anemic 0.6%.
On the North American labour front, the United Auto Workers (UAW) and Ford have reached a tentative agreement. This is the first in this round of negotiations. The UAW won a 25% pay increase over 4 ½ years for its members along with a bump in the starting wage to $28 per hr. GM and Stellantis are still in negotiations, but Ford’s deal will set the bar. The agreement still needs to be ratified by Ford’s 57,000 UAW members.
While one strike may be ending another one is just getting underway. Workers on the St. Lawrence Seaway walked off the job on Sunday. The 300 km system of locks, canals, and channels handled $16.7 billion of cargo last year. The main contention is wages where both parties remain far apart.
The clown show that passes for the Republican caucus got its act together this week and elected a new House of Representatives speaker, Mike Johnson. This takes several risks off the table including a possible government shutdown in November when the current spending bill expires. Nothing like having a family scrap when the house is on fire.
Also weighing on equity markets this week were mixed results from the tech sector. More correctly, it is the outlook for some of the big names that have investors feeling a bit queasy. Ballooning capital expenditures on AI and softening ad revenue are both contributing to the ill ease. Microsoft bucked the trend with solid results from its cloud services and AI. Amazon reported better than expected earing after the close on Thursday.
Our all too short stay in Barcelona was a history lesson for me. I’ll admit that most of my history classes in school were about the “pink parts” of the map. The history of Catalunya was new to me. It revealed a rich and vibrant culture that survives as a distinct part of Spain today. With that in mind I’ll leave you with this medley of 3 Catalan folksongs played by the great classical guitarist, John Williams…. Enjoy.
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
Tel 250.999.3329.
www.ncpdfo.com