It was a good week for investors as equity markets maintained their bullish momentum. The bond market, despite some intra-week volatility was basically flat. Earnings, increasingly benign inflation, and investor sentiment all contributed to the rise. Bitcoin bucked the trend falling from its recent highs.


Index Close Mar. 14th 2024 Close Mar. 21st 2024
S&P500 5,150 5,249
TSX60 21,830 22,087
Canada 10 yr. Bond Yield 3.53% 3.55%
US 10 yr. Treasury Yield 4.30% 4.27%
USD/CAD $1.35320 $1.35290
Brent Crude $85.42 $85.70
Gold $2,161 $2,182
Bitcoin $70,674 $65,493

Source: Trading Economics & S&P Cap IQ

Inflation in Canada dropped more than expected in February. It didn’t much matter which measure you chose; all came in under expectations. Headline CPI was 2.8% vs. an expected 3.1%. Despite the good numbers, the Bank of Canada held rates steady and declined to posit on when they may start easing. Most economists place a 70% probability of a first cut in June. One I would agree with.


South of the 49th the story was a bit different. The prior weeks inflation report had prices higher than expected. Despite this, the Federal Reserve opted to keep rates where they are and maintain their forward guidance of 3 rate cuts this year. Again, economists are betting on a June start to cuts. The Fed will probably wind down their quantitative tightening program before any cuts in the overnight rate.


Overseas, the UK had a much lower inflation rate, giving the Bank of England room to start talking about rate cuts. A bit further east, the Swiss National Bank announced a surprise 25bps cut in rates. The UK still has the highest headline inflation of the G7 nations. Bucking the move towards easing, the Bank of Japan announced an end to their Negative Interest Policy (NIRP) and yield curve control (YCC). The BoJ will also halt purchases of ETFs and REITs that had supported the local markets. The rise in Japanese rates will be felt outside their borders.


Low or negative rates in Japan have engendered a very profitable carry-trade where investors borrowed in yen and invested in dollars (or Euros). The spread, if you controlled for currency fluctuations, was a gift to the institutional investment crowd. While it is not dead, it will not be quite so attractive in the future.


China’s domestic economy may be struggling but it is still a manufacturing and exporting behemoth. With the local economy struggling, China is “starting” to flood the rest of the world with ever cheaper goods. In February US imports from Chine cost 3.1% less than a year earlier. While this might be good for inflation, it doesn’t do much for trade relations between the 2 countries. It is not just the US. Europe, Mexico, and Brazil are all getting a bit restive. China has surpassed Germany in auto exports. Accusations of dumping if not a trade war are lurking just over the horizon.


Intel was awarded an $8.5 billion grant under the US CHIPS Act. It is also eligible to a further $11 billion in low-cost loans. This is all part of the Biden Administrations efforts to ramp up domestic semi-conductor manufacturing. Meanwhile the US Government is suing Apple for smartphone anti-trust violations. This isn’t the first time Apple has been taken to task for anti-competitive practices.


What do rum and financial planning have in common? Not much, except for this song from Rum Ragged….. enjoy (with or without the rum)

Russ Lazaruk, RIAC, CIWM, CIM, FCSI
Managing Director & Portfolio Manager