Market Pulse
The Bank of Canada has cut its benchmark interest rate by 0.25% for the second consecutive meeting, bringing it to 4.5%, and signaled further easing due to waning inflation concerns. Governor Tiff Macklem emphasized that economic headwinds and excess supply are shifting the focus towards preventing inflation from falling below the 2% target. With the consumer price index dropping to 2.7% annually in June, the bank is confident in managing price pressures and aims for a soft economic landing. The dovish stance has led to a bond rally and a drop in the Canadian dollar, while economic growth projections have been revised down to 1.2% for 2024.
Toronto condo rents fell in the second quarter for the first time since 2021, with a 1.2% annual decline driven by a surge in listings. This drop in rent provides some relief to renters amidst Canada’s broader trend of record-high rents due to increased immigration. The influx of condo completions boosted rental listings by 47% year-over-year, easing costs. While condo rents are easing, rents for newer purpose-built rental apartments still show modest growth amid rising vacancies.
The euro-area economy grew by 0.3% in the second quarter, exceeding forecasts, as robust performances in France and Spain offset Germany’s 0.1% contraction. This growth highlights the challenges facing the European Central Bank (ECB) as it prepares for a possible interest rate cut in September amidst uneven regional growth and inflation dynamics. Spain’s inflation dropped to 2.9% in July due to lower energy and food prices, while Germany’s economic struggles continue. Despite muted growth projections for 2024, strong domestic demand and net trade have supported economic expansion in key countries, with Ireland showing the strongest GDP growth at 1.2%.
The tech-led stock rally that boosted markets for the past year and a half faltered last month, with the Nasdaq 100 experiencing its worst day since October 2022, ending a 17-month streak without such a decline. Recent tech losses might signal a rotation into assets better suited for a slower growth economy.
Cruise vacations are gaining popularity among younger travelers, with Millennials and Gen Z now constituting half of Royal Caribbean Cruise Ltd.’s passengers. This demographic shift has decreased the average age of cruise passengers for two consecutive years. Royal Caribbean has benefited the most from this trend, recovering quickly post-pandemic with new large ships and enhanced amenities. The appeal of cruises lies in their cost-effectiveness and all-inclusive nature, making them attractive to budget-conscious young travelers. Virgin Voyages, targeting Millennials with its adult-only cruises and inclusive pricing, has seen a 45% increase in sales and expects profitability within 18 months. This growing interest from younger travelers is crucial for the cruise industry, still recovering from the pandemic.
Walt Disney Co.’s “Deadpool & Wolverine” achieved a record-breaking $211.4 million in ticket sales in the US and Canada during its opening weekend, marking the highest domestic debut of the year and setting a new record for R-rated films, surpassing the previous record held by Warner Bros. Discovery Inc.’s “Joker.”
All data sourced from FACTSET and SIACharts.
All data is for the reported month and in local currentestcy.
The Ups & Downs
- Granite Real Estate Investment Trust (GRT.UN) rose 10.92% in July, attracting scores of investors in this new falling interest rate environment.
- CGI Inc. (GIB.A) climbed 9.56% after releasing a strong Q3 result. The company has initiated a dividend and announced two strategic acquisitions due to improved margins and strong cash generation.
- Shares of Alphabet Inc. (GOOG) dropped 9.00% in this past month, despite a positive earnings report. The drop was fueled by a perceived over-investment by the company into Artificial Intelligence.
- Waste Management (WM) faltered on its earnings release in July, declining 7.39%. The company posted Q2 earnings and revenue below analyst estimates for the quarter.
All data sourced from FACTSET and SIACharts. All data is for the reported month and in local currency.
Portfolio Returns
As of July 31st, 2024
