Market Watch: June 24, 2022

U.S. stocks retreated slightly Wednesday after Fed Chairman Jerome Powell, testifying before a congressional hearing on Wednesday, acknowledged that the central bank’s campaign to battle inflation raised the risk of recession. According to economists surveyed by The Wall Street Journal, the likelihood of a recession has increased rapidly this year in light of inflationary pressures and aggressive tightening by the Fed. Economists now see a 44 per cent probability of recession over the next 12 months, up from 28 per cent in the Journal’s last survey in April. In U.S. bond markets, the yield on 10-year Treasurys declined Wednesday to 3.155 per cent as some investors fled to safe-haven assets. In Canada, the TSX fell about 250 points, as copper and oil prices both dropped about 3 per cent over fears of a slowing global economy. According to Statistics Canada, the consumer price index rose 7.7 per cent in May from a year earlier, the highest rate in nearly four decades. Meanwhile many expect the Bank of Canada to match the Fed’s recent 75-basis-point hike when Canada’s central bank meets on July 13.

Powell’s testimony continued Thursday as the Fed Chair reiterated that the central bank would be reluctant to cut interest rates until there is clear evidence inflation is coming down. U.S. markets took the day’s testimony in stride, recording modest gains. The Nasdaq added 1.6 per cent on the day’s session, while the S&P 500 rose nearly one per cent and the Dow added 0.64 per cent. In Canada, the TSX declined 287 points, as resource shares fell on mounting fears of a global recession.

U.S. Markets Gain Modest Ground; TSX Slips

For the four trading days covered in this report, the Dow gained 788 points to close at 30,677, the S&P 500 added 120 points to settle at 3,795, while the tech-heavy Nasdaq rose 434 points to close at 11,232. In Canada, the TSX lost 213 points to end at 18,717.

Strategy

Consumer prices reach a new multi-decade high, upping pressure on the Bank of Canada to continue hiking aggressively – price pressures appear to be broadening with services ticking higher

Consumer prices in Canada quickened to 7.7 per cent YoY in May (7.3 per cent expected/6.8 per cent in April), the highest since 1983, and rose 1.4 per cent compared to the previous month (1.0 per cent expected/0.6 per cent in April), according to data released by Statistics Canada. Gasoline continued to lead the charge rising 12.0 per cent MoM, along with higher prices for services such as hotels and restaurants. Groceries were up 9.7 per cent YoY matching April’s gain as supply chain disruptions and higher transportation costs put upward pressure on nearly all food products. Shelter increased 7.4 per cent YoY while homeowner’s replacement cost moderated slightly to 11.1 per cent (13.0 per cent in April) as prices for new homes showed signs of cooling amid higher borrowing costs. Services continued to accelerate, rising 5.2 per cent YoY (4.6 per cent in April) as traveller accommodation was up 40.2 per cent with more Canadians spending on leisure activities. Consumers also paid more to furnish their living spaces with the price of furniture rising 15.8 per cent YoY amid higher shipping and input costs. The average of the three core measures – often seen as a better gauge of price pressures – rose to 4.73 per cent, the highest since 1990. Other data from StatsCan showed that headline CPI excluding gasoline was up 6.3 per cent YoY (5.8 per cent in April) and 5.2 per cent YoY excluding both food and energy.

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.}

_{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.}

by Scotia Wealth Management - The Zukiwsky Group

Market Watch: June 24, 2022

What's Trending