MARKET WATCH: Oct. 16

Wall Street indexes were down again on Wednesday as hopes for a pre-election fiscal stimulus package continue to fade. Key tech names faltered as the Nasdaq dropped nearly 100 points, while the Dow and TSX shed 166 and 55, respectively. Stocks opened lower Thursday and investors fled to U.S. treasuries as tightening coronavirus lockdowns in Europe and a weakening U.S. jobs picture weighed on markets.

On Wednesday, France declared a state of emergency and imposed a nightly curfew for Paris and other key regions areas across the country. Meanwhile, U.S. employers continue to shed workers at an alarming pace as a resurgent pandemic and lack of fiscal stimulus weigh on economic growth.

New jobless claims data released Thursday revealed that nearly 900,000 Americans last week filed for unemployment benefits–well above analysts’ initial estimates of 830,000. By Thursday’s close, all three major U.S. indexes were slightly in the red, while the TSX inched up 46 points.

N.A. Markets Mixed

For the four trading days covered in this report, the Dow shed 93 points to close at 28,494, the S&P 500 inched up 6 points to settle at 3,483, while the tech-heavy Nasdaq held on to a 133-point gain to close at 11,713. In three days of trading, the TSX dropped 62 points to end at 16,501.

Strategy

IMF published updated World Economic Outlook, taking up 2020 estimates and calling for continued support.

The world’s major economies have poured significant amounts of money into fighting the economic downturn stemming from the COVID-19 health crisis. Eventually, they will face the challenging questions of how and when to roll-back support.

Governments have pledged some US$12 trillion in spending this year, according to estimates from the International Monetary Fund (IMF). And while the Fund says it is too early to cut off support, it warned record debt levels would eventually pose a challenge for policymakers.

In its October World Economic Outlook published earlier this week, the organization outlined that it projects a somewhat less severe, though still deep, recession in 2020, relative to its June forecasts. Global growth is now projected at -4.4% in 2020 and 5.2% in 2021, up 0.8 percentage points and down 0.2 percentage points from June, respectively. In part, the upward revision to this year’s estimate reflected better-than-feared second-quarter GDP results in large advanced economies and China’s quicker-than-anticipated return to growth.

Indeed, GDP outturns would likely have been considerably weaker if not for sizeable and swift action from monetary, fiscal, and regulatory policy changes that maintained disposable income for households, protected cash flow for firms, and supported credit provision. The slight downward revision to next year’s estimate is reflective of the less severe downturn this year.

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by Scotia Wealth Management - The Zukiwsky Group

MARKET WATCH: Oct. 16

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