By Scotia Wealth Management - The Zukiwsky Group

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Market Watch: Oct. 22

Oct 22, 2021 | 11:47 AM

Big Picture

Investor Concerns Ease as Strong Corporate Earnings Lift Equity Markets

Canada’s TSX climbed to a record high on Monday as investors moved away from defensive stocks in favour of tech names. It was much the same story in the U.S., with key tech and communications companies boosting the S&P 500 and Nasdaq. By Monday’s close, the TSX added 57 points, while the S&P 500 and Nasdaq rose 15 and 124 points, respectively. The Dow ended the day essentially flat.

Another round of strong performances from tech and financials led the TSX to a record close on Tuesday, topping the 21,000 mark for the first time. In the U.S., investor sentiment continued to strengthen, thanks in large part to a strong start to corporate earning season, despite ongoing supply-chain disruptions and inflation worries. With about 10% of S&P 500 companies reporting by Tuesday, roughly 80% had beaten profit forecasts, according to FactSet. By Tuesday’s close, all four North American equity markets had posted solid gains. Meanwhile, the loonie on Tuesday hit its highest level in more than three months against the greenback as oil prices rose and the U.S. dollar slipped.

In Canadian inflation news, the consumer price index rose 4.4% in September from a year earlier, up slightly from 4.1% in August. Rising gas prices and housing costs continue to fuel much of the surge. It was the sixth consecutive month that inflation had overshot the BoC’s target range of 1% to 3%. In Canada, the TSX climbed 101 points, lifted by industrials and resource names. Meanwhile, the Dow and S&P 500 registered minor gains, while the Nasdaq inched down 7 points. On Thursday, the U.S. Labor Department reported that initial jobless claims for the prior week fell slightly, down 6,000 to 290,000, the lowest level since the pandemic struck in March 2020. By Thursday’s close, the TSX, Nasdaq and S&P 500 recorded modest gains, while the Dow ended flat.

Prevention, Access, Recovery, and Coordination

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

12h ago

lacombe and sylvan lake

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

13h ago

21 years with WCPS

Darcy Blum appointed principal of Lacombe Outreach School

15h ago

A Strong Week for Markets

For the four trading days covered in this report, the Dow rose 308 points to close at 35,603, the S&P 500 added 79 points to settle at 4,550, while the tech-heavy Nasdaq jumped 319 points to close at 15,216. In Canada, the TSX surged 284 points to end at 21,212.

Strategy

Fiscal policy supports, increased savings, and consumer deleveraging has greatly improved the health of U.S. household balance sheets

U.S. household balance sheets are in their best shape in years, giving Americans greater capacity to propel consumer spending and, in some cases, to make life-altering decisions. Across a number of measures, consumers are flush. Their debt-servicing costs have tumbled as a share of after-tax income and swelling wealth has made their liabilities shrink in relative terms. Federal stimulus payments and social support programs have contributed significantly to the improvement observed in household balance sheets, as did rent moratoriums and student debt extensions. Now that the suspension periods have lapsed, low interest rates and extra savings are expected to have the financial wherewithal to absorb their impact. Further, U.S. households are spending less of their disposable income on debt. The debt-to-income ratio is the lowest since at least the 1980s, as far back as a Federal Reserve series goes. Financial and other household assets, including investment accounts and home values, have also climbed during the economic recovery from the pandemic. That has the effect of lowering the aggregate liability-to-asset ratio, making Americans feel better off. And consumer debt as a percentage of GDP is now well below the latest peak and back to levels seen on average in the early 2000s. The post-COVID environment has created the potential for a lot dynamism, at least in terms of consumer intentions, potentially adding some upside risk to growth.

Disclaimer

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