Lidder Wealth Weekly Market Update and Insights Newsletter | 8 March 2024

Weekly Market Wrap-Up: Global Broadening Underway

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:

Market Overview: 

The S&P 500 is powering through challenges, poised to achieve its 17th weekly gain in the last 19 weeks. Despite a rocky start, the S&P/TSX has notched its fourth consecutive weekly gain, inching close to its March 29, 2022, peak of 22,087. Notably, this week’s market advance occurred even in the face of declines from three MAG-7 members (AAPL, TSLA, and GOOGL), accounting for approximately 10% of the S&P 500. However, the decline in these tech giants is being offset by the strong performance of sectors like US energy, materials, REITs, and utilities, signaling a subtle sector rotation.

Sector Rotation and Federal Reserve Influence:

A stealth sector rotation is underway, driven in part by reassuring words from Fed Chair Powell. Powell’s recent statement on Capitol Hill, suggesting conditions for a Fed rate cut this summer, has resonated positively with the market. This sentiment has triggered a notable rotation, with the combined weight of the declining tech stocks equivalent to the combined weight of the US energy, materials, REITs, and utility sectors, all of which have performed well this week.

Bond Market and Currency Trends:

The bond market responded to Powell’s remarks, with yields falling by 10 basis points. Market expectations for a June rate cut have surged to approximately 75%. These easing vibes have led to a decline in the US dollar and a surge in gold prices, reaching a new all-time high at around $2,175 per ounce.

Reflation Missives and Economic Outlook:

Over the past few months, two key reflation missives have bolstered investor risk appetite: the December Fed pivot and easing financial conditions, coupled with Chinese fiscal reflation gaining momentum. Economic growth data has outperformed expectations, and the US Federal Reserve seems poised to accommodate politicians. The possibility of tax-cut extensions under a Trump Presidency adds another layer of optimism, raising questions about potential downsides to the economy and earnings.

Inflation and Market Outlook:

While inflation could pose a threat, most models point to a bottom in disinflation forces this summer, making the inflation scare for stocks likely an H2 story. Barring a significant correction, the window appears open for equity indexes outside the US to retrace their 2021 or 2022 peaks. Our Chart of the Week highlights potential fireworks for the S&P/TSX and EAFE indexes.

Economic Statistics:

In Canada, the BoC maintained its target rate at 5%, emphasizing the need to give higher interest rates more time. Economic data revealed a gain of 40.7k net new jobs in February, but population growth outpaced employment growth, leading to a slight increase in the unemployment rate to 5.8%. In the US, nonfarm payrolls exceeded expectations at 275k, with the unemployment rate at 3.9%. The ISM service PMI moderated slightly, but hourly earnings deceleration is viewed positively by the Fed.

Global Economic Highlights:

In Europe, the ECB held its target rate unchanged, with downward revisions to inflation and growth forecasts. Consumer price estimates and producer prices in Europe and Japan, as well as exports and imports in China, provided a mixed picture of global economic trends.

Upcoming Economic Events:

Looking ahead, we anticipate key economic indicators next week, including CPI, PPI, retail sales, industrial production, and NFIB data in the US. Additionally, industrial production statistics in Europe and consumer price inflation in China and India will be closely monitored.

International Women’s Day Tribute:

On this International Women’s Day, we pay tribute to Elaine Garzarelli, a trailblazer in the financial industry. One of the first women to break through the walls of Wall Street in the ’80s and ’90s, her work in quantitative strategy continues to inspire us. Merci Elaine.

Thank you for staying informed with our weekly updates. Wishing you a successful and profitable week ahead.

Best regards,

Kamal