By ScotiaWealth - The Zukiwsky Group (Sponsored)

Market Watch – July 20, 2018

Jul 20, 2018 | 11:15 AM

Big Picture By Bill Curry

Canada to Retaliate If Trump Targets Auto Imports

Canada will respond proportionally if the U.S. Administration makes good on threats to impose 25% tariffs on all imported vehicles and auto parts. That’s according to Canada’s deputy ambassador to the U.S., who spoke Thursday at a Commerce Department hearing in Washington. Such a move would up the ante in what has evolved into the most punishing trade war in recent memory between the U.S. and Canada. According to a study by the Center for Automotive Research, proposed U.S. tariffs would send vehicle prices soaring in the U.S., wiping out more than 700,000 jobs at U.S. car companies, parts makers and dealerships. Despite the multi-front trade war, the U.S. economy remains strong, boosted by healthy U.S. retail sales. U.S. markets climbed on Tuesday and Wednesday but declined Thursday as a round of lukewarm corporate earnings reports and renewed trade tensions weighed on sentiment. Major indexes briefly jumped Thursday after President Trump, during an interview on CNBC, said he hoped the Federal Reserve would stop raising rates. His comments depart from a convention in which presidents have refrained from commenting specifically on monetary policy. Meanwhile, China’s currency has now hit lows not seen since last July. The yuan has been hurt by a worsening trade conflict between the U.S. and China, and expectations that Beijing will ease monetary policy. In other currency news, the British pound fell to a 10-month low on Thursday and remains especially vulnerable should the U.K. leave the European Union without a trade deal. Finally, U.S. oil prices plunged over 4% on Monday, the latest indication that oil markets could be in for prolonged volatility as traders struggle with a range of supply issues.

Markets

U.S. Markets Flat; TSX Down Slightly

February 2024 Incidents

Red Deer County man sentenced in local armed robberies

4h ago

18 Months

Former teacher convicted of sexual interference given Conditional Sentence

5h ago

reconciliation

Student-designed eagle feather becomes symbol of change at Hunting Hills

6h ago

Trade concerns and some lacklustre earnings weighed on markets. For the four days covered in this report, the Dow gained 45 points to close at 25,064, the S&P 500 inched 4 points higher to end at 2,805 while the Nasdaq shed 1 point to settle at 7,825. In Canada, the TSX declined 16 points over the period to close at 16,543.

Equities/Strategy

Equities

Global equity markets continue upward trend despite trade concerns. While global trade rhetoric continues to weigh on investor sentiment, the S&P500 index is a mere 2% away from its all-time high, and the S&P/TSX Composite Index –assisted recently by energy sector strength – reached a new all-time high last week. Q2/2018 U.S. earnings season has commenced with consensus forecasts implying YOY EPS growth of 20%, a healthy pace to be sure albeit slightly lower than last quarter’s 25% growth rate. In our view, earnings growth should persist provided global economic conditions remain favorable. Top-down Wall Street strategists expect a price return of approximately 5% for the S&P 500 Index through year-end, while equity analyst target prices imply a one-year price return for the index of ~10%. We reiterate our overweight to equities relative to bonds. 

This publication has been prepared by ScotiaMcLeod, a division of Scotia Capital Inc. (SCI). This publication is intended as a general source of information and should not be considered as personal investment or tax advice. We are not tax advisors and we recommend that individuals consult with their professional tax advisor before taking any action based upon the information found in this publication. Opinions, estimates, and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein 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. Neither SCI nor its affiliates accepts liability whatsoever for any loss arising from any use of this publication or its contents. This publication is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity futures contracts. SCI, 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. SCI and/or its affiliates may have acted as financial advisor and/or underwriter for certain of the corporations mentioned herein and may have received and may receive remuneration for same. All insurance products are sold through Scotia Wealth Insurance Services Inc., the insurance subsidiary of Scotia Capital Inc., a member of the Scotiabank Group. When discussing life insurance products, ScotiaMcLeod advisors are acting as Insurance Advisors (Financial Security Advisors in Quebec) representing Scotia Wealth Insurance Services Inc. This publication and all the information, opinions, and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without in each case the prior express consent of SCI.