Lidder Wealth Weekly Market Update and Insights Newsletter | 12 April 2024

Weekly Market Wrap-Up: King Dollar

Hello from Lidder Wealth Advisory! I trust this message finds you well. In my role as your Senior Wealth Advisor and Associate Portfolio Manager at Canaccord Genuity Wealth Management. Welcome to another edition of our weekly newsletter, where we bring you the latest insights and updates on the financial markets. Let’s dive into the highlights of the week:

Hope you’re all having a fantastic week! Let’s dive into what’s been shaking up the markets lately:

Market Overview: Navigating Volatility

It’s been another rollercoaster week in the markets, with the S&P 500 experiencing a dip of around 1.7% driven by higher-than-expected CPI inflation figures. Investor sentiment took a hit as odds of a June rate cut were reevaluated, leading to shifts in bond yields and the yield curve. Geopolitical tensions between Israel and Iran added to the uncertainty.

Sector Performance: Finding Resilience

Canadian equities faced similar pressures, falling approximately 1.7%. Notably, the energy and material sectors provided some downside risk protection. In the commodities market, crude oil prices remained firm despite increased US inventories, while gold and copper prices edged up despite a strengthening US dollar.

Corporate Insights: Mixed Earnings Results

US banks kicked off the earnings season with mixed results. While JPM (JP Morgan), WFC (Wells Fargo), and Citibank exceeded consensus estimates, JPM’s softer-than-expected outlook on net interest income led to profit-taking by investors and a subsequent sell off in the stock.

Central Bank Focus: Decoupling Policy Rates

Our attention this week is on the potential divergence in policy rates among G7 central banks. Both the Bank of Canada (BoC) and the European Central Bank (ECB) left their target rates unchanged, hinting at possible cuts in June due to declining inflation and slowing economic growth. This contrasts with the Federal Reserve, where odds of a June rate cut have diminished following the latest CPI report.

Currency and Rate Dynamics: Charting Trends

Examining historical data, we observe a tight correlation between policy rate spreads and currency movements, particularly for the Canadian dollar (CAD) and the Euro. With the Fed’s outlook shifting due to inflation data, we anticipate potential support levels being tested for CAD/USD and EUR/USD exchange rates.

Economic Indicators: Assessing Inflation and Momentum

US CPI figures came in above expectations, indicating persistent inflationary pressures, particularly in services like shelter and transportation. Producer prices also saw a pickup, while the NFIB Small Business Optimism Index dipped to its lowest level since 2012. In China, both exports and imports declined, reflecting soft demand despite stimulus efforts.

Looking Ahead: Key Releases

In the coming week, we’ll be closely watching Canada’s CPI data, US retail sales and industrial production figures, European industrial production, the German ZEW survey, and various economic indicators from China and Japan.

As always, we remain vigilant in monitoring market developments and their potential impact on your investments. If you have any questions or concerns, please don’t hesitate to reach out.

Warmest regards

Kamal