By Scotia Wealth Management - The Zukiwsky Group

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Market Watch: July 12, 2019

Jul 12, 2019 | 4:17 PM

Big Picture

Dow Crosses 27,000 Mark as Optimism Grows Over Fed Rate Cut

It’s been a record-setting week for U.S. indexes. On Thursday the Dow Jones Industrials Average crossed 27,000 for the first time, thanks in large part to a health care rally following the Trump administration’s decision to cancel a plan to rein in drug rebates. On Wednesday, the Nasdaq Composite hit a record close, while the S&P 500 briefly crossed the 30,000-point mark for the first time following dovish remarks from Federal Reserve Chairman Jerome Powell, who sent a strong signal that the central bank could cut interest rates later this month, citing weak inflation and global growth concerns.

Meanwhile, the Bank of Canada on Wednesday left its overnight rate unchanged as positive signs in the Canadian economy have been largely offset by global trade tensions, including China’s restrictions on Canadian canola and meat. Thanks to a strong jobs market and firming consumer confidence, the BoC slightly increased its 2019 growth forecast to 1.3%, up from the 1.2% projected in April. There was more good news for the Canadian economy on Wednesday as oil prices rose 4.5% a barrel in light of falling U.S. crude inventories and increasing supply risks in the Middle East. Finally, the loonie strengthened against the greenback on Thursday, approaching last week’s eight-month high.

While optimism is gaining traction in North America, there’s widespread pessimism among investors about Europe, where there’s little room for the ECB to cut rates further and local banks are struggling. The European Commission on Wednesday lowered its forecast for eurozone growth to 1.4% for next year, warning that growth could slow even further if the U.S. and China don’t resolve their ongoing trade war.

WASTE TRANSFER SITE CHANGING HOURS

Sylvan Lake kitchen and yard waste collections ending later this month

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"WE RISE AGAIN" PROGRAM

Red Deer Symphony Orchestra rises again for new performing season

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REFLECTS STUDENTS IN THEIR LITERATURE

Maskwacis school commission publishes Nehiyawewin books to prep students for school

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U.S. Indexes Up; TSX Slightly Off

For the four days covered in this report, the Dow added 166 points to close at 27,088, the S&P 500 gained 9 points to settle at 2,999, while the tech-heavy Nasdaq climbed 34 points to close at 8,196. In Canada, the TSX was down 18 points to end at 16,528.

Equities/Strategy

Strategy

The Atlanta Fed’s Wage Growth Tracker is a measure of nominal wage growth of individuals, constructed using microdata from the Current Population Survey (CPS). It represents the median percent change in the hourly wage of individuals observed 12 months apart. The unweighted headline index improved to 3.9% in June, from 3.7% previously, to equal the post-recession high. The weighted index, which corrects for the under representation of younger workers with fast growing wages, accelerated to 4.3%, also in-line with post-recession highs. Wage growth for low-skilled workers picked up to 3.4% from 3.3%, the highest level since 2009, while wage growth for high-skilled workers was flat at 3.8%.

The U.S. labour market has remained healthy despite mounting geopolitical tensions and deteriorating global demand. The unemployment rate is near multi-decade lows, job creation has averaged 170k in the past three months, and initial jobless claims, while volatile on a week-over-week basis, hit their second lowest post-recession level this week. Consumption represents ~65% of the U.S. economy and we are encouraged by continued labour market strength and wage growth.

(Bill Curry)

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