Market Pulse - The week in review - April 17th 2023

THIS WEEK’S RECAP:

 

▪ The US added 236,000 new jobs in March resulting in a decrease in the unemployment rate to 3.5% (-0.1%).  While the creation of new jobs is a positive, the trend for the labour market does appear to be slowing. This will be viewed favourably by Fed officials, as they keenly want to see inflation lower, and need the economy to slow (via higher unemployment) to achieve this objective. 

 

▪ The National Federation of Independent Businesses (NFIB) in the US has published its monthly survey report, which assesses the condition of small to medium-sized businesses. The report revealed that the Business Optimism Index is still at its lowest level in several years, and there has been a further decline in expectations for credit conditions. These surveys are typically considered as leading indicators for the economy because smaller businesses have less financial resilience to cope with a downturn, and therefore, can indicate a potential slowdown in the broader economy.

 

▪ US CPI confirmed expectations, showing improvement in the inflation measure (lower CPI).  Rent, which is a crucial and challenging component of the services section of the CPI calculation, finally showed some minor improvement.  Lower energy and food prices also contributed to the decline in headline CPI in March.  This data, in isolation, will not likely be enough to push the FOMC to the sidelines when they next meet (May 3rd).   

 

▪ The Bank of Canada decided to maintain their target overnight rate at 4.5% and issued their latest economic projections in the quarterly Monetary Policy Report. According to the report, inflation is expected to gradually decrease to 2.3% by 2024, while growth will decelerate throughout this year and into 2024. The bank reiterated their stance on the necessity of keeping rates high for an extended period to address inflation, and they indicated that the impact of these higher rates is evident in the housing sector, reduced consumption in high-value purchases and weaker business investment. They anticipate that a slowdown of the US economy will weigh on the Canadian economy, particularly on exports (energy and goods). Governor Macklem emphasized the bank's objective and mandate to restore price stability and stated their readiness to increase rates further if inflation continues to remain elevated.

 

ON DECK FOR NEXT WEEK:

 

▪ US earnings season begins, with the big banks reporting first.  As a result of the turmoil in March, there will be heightened focus on deposit flows and interest margins for the banks. The initial read we got on Friday morning looks quite positive for big banks (JP Morgan and Citigroup) and not so great for smaller institutions (PNC). We will get more colour next week with a broader set of companies reporting.

 

▪ On the data front, we will see updates on housing and manufacturing south of the border while Canada will release CPI data for March.

 

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IMPORTANT DISCLAIMERS

 

This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. Certain statements contained in this communication are based in whole or in part on information provided by third parties andCI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document. CI Global Asset Management is a registered business name of CI Investments Inc. © CI Investments Inc. 2023.

 

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