Market Pulse - The week in review - April 24th 2023

THIS WEEK’S RECAP:

 

▪ The latest Canadian Consumer Price Index (CPI) report for March confirms that the trend of decreasing price pressures continues, with a drop of almost 1% (down to 4.3% YoY). The decline in energy prices and food costs played a significant role in this trend. Shelter and transportation costs also showed notable downticks. The baseyear effect has impacted various categories; high inflation rates from last year are no longer included in the latest annualized calculation. This effect will continue to influence inflation data in the upcoming months, as CPI peaked in June 2022. Overall, this is a positive outcome that should reassure the Bank of Canada that inflation is indeed trending lower and that their policy stance is appropriate.

 

▪ Economic data for both the US and the global economy are flashing mixed signals, highlighting the ongoing imbalance since the record monetary and fiscal response to the pandemic. Monthly business activity is at crosscurrents, reinforcing the difficulty in navigating the current economic backdrop for policymakers and investors alike. In Europe, German business expectations are still declining. In contrast, US regional manufacturing and general activity surveys show varying results. Meanwhile, Chinese GDP for Q1 exceeded expectations, emphasizing the increasing fragmentation of the global economy.

 

▪ Although the economic data is mixed, several Federal Reserve officials reiterated their view that US interest rates should be pushed higher at their May 3rd meeting. Whether or not they decide to raise rates or maintain current levels, it is becoming evident that rates have effectively reached their peak and are likely to remain at current levels for an extended period to ensure inflation continues to renormalize.

 

▪ The US debt ceiling has been a concern for some time, and there are now growing worries about how it will be resolved due to the partisan nature of the current Congress. We expect a negotiated settlement to come at the last minute, which means that this issue will dominate the market narrative in the coming weeks and months. Despite potential market volatility as the deadline approaches (sometime in late July), we are confident that the US will meet its debt repayment obligations.

 

 

ON DECK FOR NEXT WEEK:

 

▪ We will see a myriad of tier-two economic data out of the US, highlighted by Q1 GDP and Core PCE coming on Thursday. In Canada, we will see GDP for February on Friday.

 

▪ On the monetary policy front, the Bank of Japan will hold their first policy meeting under new leadership, Governor Ueda. Though it is possible the BoJ pivots to a less accommodative policy framework, early indications from Ueda’s comments at the IMF meetings last week would suggest the time is not yet here.

 

▪ The Q1 earnings season continues; results until now paint a mixed picture, consistent with the economic backdrop and the significant uncertainty that remains. Next week will bring the results of major tech companies, and will be very important for the general direction of markets, given their significant weight in the main indices.

 

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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 and CI 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. All rights reserved.