A modestly positive week that masked a short sharp sell-off on Tuesday. Higher than expected inflation numbers in the US drove bond yields up, and equity prices down. The next day the trade reversed with continuing jobless claims increasing and retail sales dropping in January. Climbing a wall of worry or whistling past the graveyard? Pick your metaphor.
| Index | Close Feb. 8th 2024 | Close Feb. 15th 2024 |
| S&P500 | 4,998 | 5,034 |
| TSX60 | 20,920 | 21,222 |
| Canada 10 yr. Bond Yield | 3.55% | 3.55% |
| US 10 yr. Treasury Yield | 4.17% | 4.24% |
| USD/CAD | $1.34550 | $1.34700 |
| Brent Crude | $81.63 | $82.90 |
| Gold | $2,033 | $2,004 |
| Bitcoin | $45,329 | $51,835 |
Source: Trading Economics & S&P Cap IQ
US inflation came in hotter for the month of January than expected. Headline CPI rose 0.3% month over month compared to 0.2% in December. The annualized rate was 3.1% vs. expectations of 0.2% for the month and 2.9% for the year. Core CPI was steady at 3.9%. Markets “expect” a rate cut in May, I think June or July more likely.
Consumers dialled it back in January with retail sales dropping 0.8% in January well short of economists’ expectations of a 0.1% decline. Some are blaming the cold weather but that was a pretty big miss. On the jobs front the numbers were mixed with initial jobless claims falling (good news for the economy) but continuing claims ticking up (bad news).
In Canada, the latest employment numbers were mixed. The country added 37,000 jobs in January and the unemployment rate dropped to 5.7%. This was the first drop in the unemployment rate since December 2022. BUT (and there is always a but), we lost 12,000 full time jobs with the gain driven by part-time employment.
Looking overseas, both the UK and Japan slipped into recession by the end of last year. Both economies saw falling consumers retrenching in the face of higher inflation and economic uncertainty. Japan lost its spot as the world’s 3rd largest economy to Germany. The latest numbers don’t bode well for UK Prime Minister Rishi Sunak who faces an election this year.
The Canadian real estate market may be turning a corner. Activity is up with January sales 22% higher than in January 2023. The activity is still below the 10 yr. average but trending upwards. Prices are mixed depending on location. Supply continues to be an issue with listings only increasing 1.5% over December and close to the lowest level since last June.
Demand for oil continues to decline while non-OPEC supply has increased. China’s slowing economy, recessions in the UK and Japan, and the shift to clean energy are all contributing factors. There are 2 divergent opinions on “peak consumption”. The International Energy Agency sees peak consumption in 2030, while OPEC expects demand to continue rising for the next 2 decades.
The deadline for 2023 RRSP contributions is closing in quickly. The last day to contribute is February29th. (yes, it’s a Leap Year) To contribute electronically, you can set your NCP RRSP up as a bill payment through your on-line banking. For most the payee will be Fidelity Clearing Canada ULC, the custodian of the account. (If you have a different custodian, you will need to set them up. The account number should be entered with now spaces or dashes. If you have questions, just reach out to Sam and she can walk you through the process.
My wife, Hilary, is a chorister at Christ Church Cathedral here in Victoria. The past month she has been busy rehearsing J.S. Bach’s St. John’s Passion for a performance on March 24th. It’s a challenging piece of choral music but she is up for it. I’ll leave you with a sample, the opening chorus performed by the Netherlands Bach Society…. Enjoy
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
Tel 250.999.3329.
www.ncpdfo.com