Last Week in the Markets: July 8th– 12th, 2019
· The TSX lost one-third of a percentage point while the three major U.S. indices all hit new all-time highs. The Dow and the S&P 500 cleared two milestones, 27,000 and 3,000 points, respectively for the first time. Although the TSX is only 1% below its own record high, the success of equities south of the border casts a shadow over the 15% gain for the TSX in 2019.
· Most of the increase for the American indices is being attributed to monetary policy. The Federal Reserve (Fed) Chair, Jerome Powell, reiterated his position that the Fed could counteract the negative effects of trade tensions in his semi-annual testimony before Congress. The Fed “strongly supports the goals of maximum employment and price stability (inflation)”. Currently, inflation is below their target of 2%, therefore an opportunity exists to cut rates to drive economic growth and increase employment should the uncertainty in global economics and politics continue. https://www.federalreserve.gov/newsevents/testimony/powell20190710a.htm
· Here at home, the Bank of Canada (BoC) kept its key interest rate unchanged at 1.75% in its announcement on Wednesday. Although global trade tensions have lowered predictions for Canadian economic growth, our economy has rebounded slightly, employment and wage gains are positive, and prices are aligned with our central bank’s goals. A short video presentation is available for viewing at https://www.bankofcanada.ca/2019/07/mpr-2019-07-10/
· Three weeks ago, the Fed made the same decision to maintain their benchmark interest rate, but the allusions of a rate cut by Powell have driven their equity markets to new heights.
What’s ahead for this week?
· In Canada, manufacturing and retail sales figures for May along with June inflation, through the Consumer Price Index (CPI) will be released.
· In the U.S., a more robust and balanced week for economic news awaits with June’s import and export price indices, housing starts and building permits, retail sales and industrial production and capacity utilization scheduled for announcement.