Market Pulse - The week in review - April 15th 2024

THIS WEEK’S RECAP:

 

▪ The Bank of Canada kept its target rate unchanged but adopted a slightly dovish tone, indicating constructive progress towards its inflation target, now forecasted at 2.8% for Q1, with expectations of a continued decline. The Bank revised its Q1 GDP growth estimate upwards to 2.8%, driven by strong international trade and population growth from immigration, although this is expected to decrease, resulting in a projected 1.5% GDP growth in the second half of the year. Notably, Governor Macklem hinted at the possibility of a rate cut in June, reiterating the importance of data (inflation, employment, growth, consumer expectations, etc.) between now and their June policy meeting.

 

▪ The disinflation story south of the border has hit a snag. The US Consumer Price Index (CPI) for March came in stronger than expected, contributing to concerns about sticky inflationary pressures, particularly from the services sector. Despite a drop in core goods prices influenced by many factors including decreasing used car prices and easing supply chain issues, services prices in areas such as auto insurance and health care continue to offset downward momentum. The lack of progress has pushed out the timing of a potential easing cycle from the Federal Reserve.

 

▪ Market reaction: the US inflation data triggered a pullback in rate cut expectations both in timing and magnitude, which in turn sparked a considerable increase in US bond yields across all durations. Equities pulled back in the wake of the inflation surprise, though they have since recovered. Big winners in the mid-week events have been the US dollar, and gold. Meanwhile, geopolitical escalation in the Middle East is still a major risk as shown by heightened prices for gold and oil.

 

▪ Echoing the stance of the Bank of Canada, the European Central Bank is positioning itself for the possibility of lowering interest rates as early as June, considering a sluggish economy and decelerating inflation.

 

 

ON DECK FOR NEXT WEEK:

 

▪ On Tuesday, Tiff Macklem, Governor of the Bank of Canada, and Jerome Powell, Federal Reserve Chair will speak at an event on the sidelines of the IMF-WB spring meetings in Washington.

 

▪ The latest read on Canadian CPI will be released Tuesday as well. ▪ In the US, Q1 earnings season begins in earnest. On the economic data front, retail and home sales activity for March will be shared.

 

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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. 2024. All rights reserved.