By Scotia Wealth Management - The Zukiwsky Group

SPONSORED

Market Watch: Aug. 21

Aug 21, 2020 | 12:20 PM

Big Picture

S&P 500, Nasdaq Hit New Closing Highs; U.S. Jobless Claims Increase

U.S. tech stocks turned in another powerful performance Monday, helping the Nasdaq to a record-high close, while the S&P 500 approached its own record. In Canada, the TSX rose 141 points, powered by a 5% jump in the materials sector, as gold stocks rallied.

It was another strong showing for the S&P 500 on Tuesday, as the index closed at its highest level ever. The S&P’s stunning turnaround, in just 126 trading days, marked the index’s fastest-ever recovery from a bear market. As of Tuesday, the S&P was up 5% for the year, while the Dow was still down more than 2% in 2020. One reason for the day’s optimism was a strong showing from the U.S. housing sector, with new construction hitting levels not seen in four years. By Tuesday’s close, the S&P and Nasdaq finished in positive territory, while the Dow and TSX retreated.

All four major N.A. markets lost ground on Wednesday, however, as the Fed released the minutes of its July meeting, which underscored the deep uncertainty regarding the U.S. economic recovery. The TSX finished down by nearly 50 points as declining gold prices weighed down the materials sector.

mayor hopes to meet housing minister this month

Alberta demands Ottawa back off on housing funding stripped from Red Deer

9h ago

Last seen Jan. 15

Missing: Courtney Cattleman, 17, of Maskwacis

14h ago

eyes up

Air Spray training around Red Deer Regional Airport

15h ago

Hopes for a quick recovery waned even further Thursday as the number of new U.S. jobless claims increased by 135,00 to 1.1 million for the week ended August 15. Despite the jobs data, U.S. markets ended the day in positive territory, with the Nasdaq hitting another record high. In Canada, the TSX was up slightly, while the loonie declined against the greenback on Thursday after hitting a seven-month high on Wednesday.

Nasdaq Keeps Climbing, While Dow Loses Ground

For the four days covered in this report, the Dow lost 191 points to close at 27,740, the S&P 500 rose 12 points to settle at 3,385, while the tech-heavy Nasdaq surged 246 points to close at 11,265. In Canada, the TSX added 93 points to end at 16,607.

Strategy

Canadian inflation falls back to near-zero in July as energy and transportation categories drag on the headline

Inflationary pressures in Canada fell back to near zero in July as headline consumer price inflation rose 0.1% on a year-over-year basis in July, after an increase of 0.7% in June. Excluding gasoline, the CPI rose 0.7%. Prices rose in five of the eight major components on a year-over-year basis in July. The CPI grew at a slower pace than in June as a result of a broad-based slowdown in price growth, spanning both goods and services.

Declines in air transportation prices were a major downward contributor to the headline inflation figure. Airlines were offering various incentives to promote travel such as reduced fees, discounts and promotions, according to the Statistics Canada data release Wednesday morning.

Gasoline prices fell 14.9% on a year-over-year basis in July, following a 15.7% decline in June. Although gasoline prices rose 4.4% on a month over month basis amid the reopening of many businesses and services, crude oil prices were largely unchanged in July due to concerns that surging COVID-19 cases around the world could jeopardize a recovery in fuel demand.

Core measures of inflation, which knockout the volatile food and energy components, edged lower in July, down to 1.63% from 1.70% Average core inflation has been running at 1.6-1.8% for the past four months and 1.6-1.7% for the past three, signaling that the sharp initial deterioration may have passed. Still, with a tremendous amount of excess capacity introduced throughout the lockdown period, we expect overall inflationary pressures to remain muted.

Indeed, the Bank of Canada (BoC) has pledged to not raise its policy rate “until economic slack is absorbed so that the 2% inflation target is sustainably achieved”. The bank’s outlook projects inflation to average 0.6% in 2020, 1.2% in 2021 and 1.7% in 2022.

Policymakers expect the economy will need two full years to bounce back and while members of the Governing Council acknowledged the initial rebound from lockdowns has been strong, they highlighted their expectation for a long and slow recovery. Consumers are likely to remain cautious, which should limit inflationary pressures, excess capacity will persist, and business investment will be weak.

_Disclaimer

_{This report is provided to you for informational purposes only and is not intended to provide personal investment advice. This report does not include or constitute an investment recommendation and does not take into account the particular investment objectives, financial conditions, or specific needs of individual clients. Any statements regarding future prospects may not be realized. Before acting on this material, you should consider whether it is suitable for your particular circumstances and talk to your investment advisor. The author(s) of the report and the supervisors of the Global Portfolio Advisory Group may own securities of the companies included herein. Scotia Capital Inc. is what is referred to as an “integrated” investment firm since we provide a broad range of corporate finance, investment banking, institutional trading and retail client services and products. As a result we recognize that there are inherent conflicts of interest in our business since we often represent both sides to a transaction, namely the buyer and the seller. While we have policies and procedures in place to manage these conflicts, we also disclose certain conflicts to you so that you are aware of them. Please note that we may have, from time to time, relationships with the companies that are discussed in this report. The Global Portfolio Advisory Group prepared this report by analyzing information from various sources. Information obtained in the preparation of this report may have been obtained from the Equity Research and Fixed Income Research departments of the Global Banking and Markets division of Scotiabank. Information may be also obtained from the Foreign Exchange Research and Scotia Economics departments within Scotiabank. In addition to information obtained from members of the Scotiabank group, information may be obtained from the following third party sources: Standard & Poor’s, Morningstar, Bloomberg, Credit Suisse AG, Perimeter Markets Inc., and FactSet. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc., which includes the Global Portfolio Advisory Group, nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained herein are those of the Global Portfolio Advisory Group as of the date hereof and are subject to change without notice. For that reason, it cannot be guaranteed by The Bank of Nova Scotia or any of its subsidiaries, including Scotia Capital Inc. This report is not, and is not to be construed as: (i) an offer to sell or solicitation of an offer to buy securities and/or commodity futures contracts; (ii) an offer to transact business in any jurisdiction; or (iii) investment advice to any party. Products and services described herein are only available where they can be lawfully provided. Scotia Capital Inc. and its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities and/or commodities and/or commodity futures contracts mentioned herein as principal or agent. Trademarks are the property of their respective owners. Copyright 2019 Scotia Capital Inc. All rights reserved. This report is distributed by Scotia Capital Inc., a subsidiary of The Bank of Nova Scotia. Scotia Capital Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. ® Registered trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management® consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank®); The Bank of Nova Scotia Trust Company (Scotiatrust®); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod®, a division of Scotia Capital Inc. Private banking and International private banking services are provided in Canada by The Bank of Nova Scotia. Estate and trust services are provided by The Bank of Nova Scotia Trust Company. Portfolio management is provided by 1832 Asset Management L.P. and 1832 Asset Management U.S. Inc. Insurance services are provided by Scotia Wealth Management Insurance Services Inc. Wealth advisory and brokerage services are provided by ScotiaMcLeod, a division of Scotia Capital Inc. International investment advisory services are provided in Canada by Scotia Capital Inc. Financial planning services are provided by The Bank of Nova Scotia, 1832 Asset Management L.P., and ScotiaMcLeod, a division of Scotia Capital Inc. Scotia Capital Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Scotia Wealth Insurance Services Inc. is the insurance subsidiary of Scotia Capital Inc., a member of the Scotiabank group of companies. When discussing life insurance products, ScotiaMcLeod advisors are acting as Life Insurance Agents (Financial Security Advisors in Quebec) representing Scotia Wealth Insurance Services Inc.Scotia Wealth Management consists of a range of financial services provided, in The Bahamas, by Scotiabank (Bahamas) Limited and The Bank of Nova Scotia Trust Company (Bahamas) Limited. International private banking services are provided in The Bahamas by Scotiabank (Bahamas) Limited, an entity registered with The Central Bank of The Bahamas. International investment advisory services are provided in The Bahamas by Scotiabank (Bahamas) Limited, an entity registered with The Securities Commission of The Bahamas. International wealth structuring solutions are provided in The Bahamas by The Bank of Nova Scotia Trust Company (Bahamas) Limited, an entity registered with The Central Bank of The Bahamas. Scotia Wealth Management consists of international investment advisory services provided, in Barbados, by The Bank of Nova Scotia, Barbados Branch, an entity licensed by the Barbados Financial Services Commission. Scotia Wealth Management consists of a range of financial services provided, in the Cayman Islands, by Scotiabank & Trust (Cayman) Ltd. International private banking services, international investment advisory services and international wealth structuring solutions are provided in the Cayman Islands by Scotiabank & Trust (Cayman) Ltd., an entity licensed by the Cayman Islands Monetary Authority. Scotia Wealth Management consists of international private banking services provided, in Peru, by Scotiabank Peru S.A.A, an entity supervised by the Peru Superintendence of Banking and Insurance.}