By Scotia Wealth Management- The Zukisky Group

sponsored

Market Watch: Sept. 10, 2021

Sep 10, 2021 | 2:25 PM

Investor Sentiment Wanes as Delta Variant Impacts Global Economy

Investor optimism has taken a minor hit this week following a jobs report last Friday that showed a marked drop in the pace of U.S. hiring, along with signs that the Delta variant is negatively impacting the pace of recovery in North America and around the globe.

Following Monday’s holiday, North American markets took a step back on Tuesday as investors surveyed the surging U.S. infection rate. The Dow fell 269 points, the S&P and TSX were off 15 apiece, while the Nasdaq was slightly up. Also on Tuesday, Morgan Stanley lowered its rating on U.S. equities to underweight, citing risks related to economic growth and possible volatility.

All three major U.S. markets were in the red Wednesday as COVID cases continue to climb, especially in the southern U.S. states, where vaccination rates remain low. The TSX also lost ground as commodities were mixed. As expected, the BoC on Wednesday kept its key interest rate steady at 0.25 per cent, warning of COVID’s persistent drag on the recovery.

Meanwhile in Europe, the ECB signaled that the bank will keep the easy money flowing for some time amid a resurgence in COVID-19 cases globally and signs of economic slowdown in China and the U.S.

Prevention, Access, Recovery, and Coordination

Safe Harbour officially hands over shelter keys, establishes accessible navigation hub

10h ago

lacombe and sylvan lake

December 2025 (un)employment data released for Alberta sub-regions

11h ago

21 years with WCPS

Darcy Blum appointed principal of Lacombe Outreach School

13h ago

Thursday began with a bit of upbeat U.S. jobs data, as initial unemployment claims continued to trend lower, falling to 310,000 for the prior week. However, markets failed to hold early gains, steadily drifting lower as the trading day progressed. By Thursday’s close, all four major N.A. markets had registered slight losses.

N.A. Markets in the Red

For the four trading days covered in this report, the Dow lost 490 points to close at 34,879, the S&P 500 dropped 41 points to settle at 4,494, while the technology-heavy Nasdaq declined 115 points to close at 15,248. In Canada, the TSX surrendered 116 points to end at 20,705.

Strategy

The BoC strengthens forward guidance for policy normalization

On Thursday, Bank of Canada (BoC) Governor Tiff Macklem spoke before the Quebec Chamber of Commerce and offered some key insights into how the bank sees policy evolving over the coming months and years ahead. Mr. Macklem reinforced previous exit guidance from Deputy Governor Toni Gravelle from March which stated policymakers will move in a gradual, measured fashion to adjust bond purchases based on the outlook and strength and durability of the recovery with decisions distinct from determining when to raise the policy rate.

After the completion of net purchases, they will shift to reinvesting “for a period of time, at least until we raise the policy interest rate.” Following a reinvestment period, the BoC intends to raise the policy rate when slack has been absorbed. Raising the policy rate will be the “first move” in tightening policy as opposed to shrinking the balance sheet. Recall, the BoC continues to purchase bonds at a weekly rate of $2 billion and the most recent forecasts indicate the bank expects slack to close by the second half of 2022.

Working backwards from reinvesting for a meaningful period of time before getting to this point means ending net purchases fairly soon over coming meetings and likely this year, in our view. On the growth outlook, Mr. Macklem acknowledge that output had moderated by more than expected in 2Q but reiterated his encouragement with overall domestic demand and he plans to look through the weakness.

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 2021 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.