Investment update
Weekly insight into the marketplace.
October 14 to 18, 2024
Stock markets climbed to record highs
With Canada’s TSX and U.S. bond markets closed for holidays, Wall Street’s benchmark stock indexes had the stage to themselves and added to the prior week’s gains to close at record levels. The tech-heavy Nasdaq led the charge upward, notching a 0.9% return for the day. On Tuesday, the TSX ran into headwinds as it came back online, with falling oil prices weighing on the energy sector. This offset strong performance by tech and base metal stocks following better-than-expected inflation data. The U.S. benchmarks also pulled back, as shares of AI chipmakers Nvidia and ASML cooled. Wednesday saw the TSX rebound after a broad-based rally led by financial and utilities stocks outstripped weakness in the energy sector. In the U.S., the Dow gained 0.79% and closed at a record high, followed by the S&P 500 and Nasdaq, which rose 0.47% and 0.28% respectively, with shares of bank and airline companies outperforming big-tech stocks. On Thursday, the Dow led the U.S. benchmarks with a gain of 0.37% and recorded its fourth record close in the last five sessions. The TSX was up 0.53% at the closing bells, supported by strong performance from the financial and resource sectors. Record closes kept coming on Friday, with shares of Netflix surging more than 11% following a strong earnings report, which helped lift the S&P 500 to an all-time high and close out a sixth-straight week of gains. The TSX also closed at a record level, supported by strong returns from the materials sector.
Cooling Canadian inflation raised rate cut expectations
According to the consumer price index (CPI) report released by Statistics Canada on Tuesday, the inflation rate fell to 1.6% in September, placing it well within the Bank of Canada's 1% to 3% target range. This marks the smallest year-over-year increase to CPI since February 2021. The decline was driven in large part by gasoline prices, which fell by 10.7% on a yearly basis. Excluding gasoline, the inflation rate was flat from August at 2.2%. Food and rent prices continue to outpace headline inflation. Rent prices rose 8.2% from September of last year, compared to 8.9% in August. Overall, the news was positive for markets, with many economists and investors raising expectations for the Bank of Canada to announce a 50-basis-point cut following its October 23 policy meeting.
U.S. economic data cheered markets
On Thursday, investors received data supporting the view that the world’s largest economy will avoid recession and achieve a “soft landing” as inflation declines to the U.S. Federal Reserve’s target level after years of elevated interest rates. According to a Commerce Department report, U.S. retail sales rose 0.4% in September (higher than the 0.3% economists had forecast) and were up 1.7% on a year-over-year basis. While retail sales are not adjusted for inflation, and are made up of mostly goods, the “food and drinking places” service component rose 1% last month, following a 0.5% gain in August. Dining out is interpreted as a key indicator of household spending by economists. A separate Labor Department report showed new claims for unemployment benefits fell by 19,000 to a seasonally adjusted 241,000 last week, better than the 260,000 claims forecast by economists.
The stock and bond market*
| Index | Close | Week | YTD |
|---|---|---|---|
| S&P/TSX Composite | 24,822.54 | 1.44% | 18.44% |
| Dow Jones Industrial Average | 42,275.91 | 0.96% | 14.82% |
| S&P 500 Index | 5,864.67 | 0.85% | 22.95% |
| NASDAQ Composite | 18,489.55 | 0.80% | 23.17% |
| 10-year Canadian Bond Yield | 3.15% | -0.06% | 0.05% |
| 10-year U.S. Treasury Yield | 4.08% | 0.00% | 0.20% |
| WTI Crude Oil (US$/barrel) | 69.22 | -8.39% | -3.39% |
| Canadian Dollar | US$0.7247 | -0.28% | -4.03% |
| Bank of Canada Prime Rate 6.45% | |||
*Weekly performance ending October 18, 2024. Source: Bloomberg.
Bank of Canada interest-rate announcement (October 23): At its September meeting, the Bank of Canada lowered its policy interest rate by 25-basis points for a third consecutive time. Economists and investors are widely expecting a fourth cut to follow this Wednesday.
Circle these dates
November 6 to 7: U.S. Federal Reserve policy meetings and interest-rate announcement
November 28: U.S. markets closed for Thanksgiving Day
The commentary in this report is based on current market conditions and market media sources available to the public and may change without prior warning at any time. The forecasts provided herein are not guarantees of future performance and include risks, uncertainty and assumptions. While Co-operators Life Insurance Company (“Co-operators”) believes these assumptions are reasonable, there is no guarantee they will be confirmed. This report is not a guarantee of future investment performance, nor should undue reliance be placed on this report. This report is provided as a general source of information for a specific point in time and should not be considered solicitation to buy or sell any investment. Nothing contained in this report constitutes investment, legal, tax or other advice. The content in this report should not be relied upon in making an investment or other decision, and individuals should obtain relevant and specific professional advice and read the terms and conditions contained in the relevant offering documents carefully before any investment decision is made. Co-operators is not responsible for any loss or damage as a result of reliance on the information contained in this report. Co-operators makes no representations or warranties as to the information contained herein and does not guarantee its accuracy, timeliness, completeness or usefulness. Co-operators is committed to protecting the privacy, confidentiality, accuracy and security of the personal information it collects, uses, retains and discloses in the course of conducting business. Please visit cooperators.ca/privacy for more information. Co-operators® is a registered trademark of Co-operators Group Limited and is used with permission. Investing in your future. Together.TM is a trademark of Co-operators Group Limited. If you are a client who has received this, and you have questions or want to discuss your investments, please contact your Financial Advisor.
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