It was a modestly positive week on equity markets while other markets were essentially flat on the week. The chaos out of Washington is understandably causing some confusion in the markets. Economic stats from the US were a bit softer than expected at the start of the year. Nothing to panic about but markets and economies are driven to a large degree by confidence or lack thereof.
| Index | Close Feb. 13th 2025 | Close Feb. 20th 2025 |
| S&P500 | 6,116 | 6,122 |
| TSX60 | 25,699 | 25,514 |
| Canada 10 yr. Bond Yield | 3.14% | 3.24% |
| US 10 yr. Treasury Yield | 4.54% | 4.51% |
| USD/CAD | $1.41925 | $1.41765 |
| Brent Crude | $75.23 | $76.44 |
| Gold | $2,929 | $2,938 |
| Bitcoin | $96,461 | $98,350 |
Source: Trading Economics & Factset
Inflation ticked up slightly in Canada to 1.9% in January. Most of the rise was attributable to higher energy prices. You probably noticed that the last time you filled up the car. The rate would have been higher, but the 2-month GST holiday helped keep things in check. Core CPI was also up. Markets are starting to price in a pause in rate cuts by the Bank of Canada at its March meeting.
Construction in Canada picked up a bit in January with a 3% rise in housing starts over December. Year over year starts were up 7% in centres with 10,000+ populations. The increase was not evenly distributed. Both Vancouver (41%) and Montreal (112%) had year over increases while Toronto fell by 41%. I expect February & perhaps March’s numbers to be skewed to the downside as central Canada digs out from the latest snowstorms.
In the US retail sales fell in January as consumers retrenched in the face of persistent inflation. Cold weather was also a factor as parts of the country were (are) caught in a polar vortex. Jobless claims also rose by 5,000 this week. The rise is not significant by itself, but we are watching to see if it is the start of a trend. Government layoffs are not included in this number as their claims are filed under a different system.
Three paragraphs in and we haven’t mentioned tariffs yet….. Confusion remains the theme as the amount, who, and what will be affected seems to change day by day. First it was 25% on Canada and Mexico, which got a reprieve. Next it was a global tariff on steel and aluminum. Now the latest prognostication from the Whitehouse is “reciprocal” tariffs. Reciprocity is a concept from the 19th century that did not work and was abandoned in 1922. The Trump administration is inclined to include Value Added Taxes (VAT) as tariffs to be reciprocated. In some countries VAT can be as high as 20%. Canada’s GST, which is a value added tax, seems cheap at 5%. Even adding in BC’s 7% PST brings us well under the OECD average of 19.3%.
Intel has long been synonymous with the semi-conductor (computer chip) sector. In recent years the company has been eclipsed by rivals such as Nvidia and Taiwan Semiconductor. Now it looks like the vultures are circling. It has been reported that Broadcom (AVGO) and Taiwan Semiconductor (TSMC) are looking at a deal that would split Intel in two. AVGO would take the design side of the business while TSMC the foundry (manufacturing) side. This is by no means a done deal and there are a lot of hurdles to overcome.
Apple is moving away from its “low price” iPhone option. The iPhone SE ($579) will be retired, and the new “low-cost” option will be the 16E at $899. By comparison, Samsung Galaxy starts at $279 and the Google Pixel at $599. Admittedly that may be an apples to oranges comparison if you take functionality into account. Our ability to function without a smartphone is becoming more difficult everyday and the phone is becoming a necessity rather than a convenience (or annoyance depending on your point of view).
I am finishing this off just before the Canada / USA hockey final, so we’ll close off with this classic from Stompin’ Tom Connors….. GO CANADA!!
Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager
