Market Pulse
The Canadian economy grew at an annualized rate of 1.7% in the first quarter, below the anticipated 2.2%, due to weaker inventory growth despite robust consumption. The Bank of Canada cut its key policy rate to 4.75% in June, with many economists advocating for further cuts. Business investment showed mixed results, with growth in engineering and oil and gas but slowdowns in inventory investment.
Investors are optimistic about a rally in US Treasuries as inflation and the labor market cool, with potential Federal Reserve rate cuts by September. However, a key bond market indicator suggests caution, with a higher “neutral rate” – the theoretical level of interest rates that neither stimulates nor slows the economy – projected around 3.6%, potentially limiting bond gains.
Global investors are likely to continue investing in record-high stock markets. A Bank of America survey among 206 participants managing US$640 billion revealed a strong preference for US stocks. Investor bullishness is at its highest since November 2021, and cash levels in money-market funds are at a three-year low, currently totaling around US$6.1 trillion. The enthusiasm is particularly pronounced in technology stocks, with significant investments in tech companies like Microsoft and Nvidia.
The Canadian government is considering tariffs on Chinese-made electric vehicles (EVs), following actions by the US and European Union, to counteract China’s overproduction strategy. With the value of Chinese EVs imported by Canada surging to $2.2 billion last year, there are concerns about market flooding and domestic job threats. Some advocate for tariffs to protect local manufacturing, while others argue for keeping EV costs low to boost consumer adoption.
The copper market has been turbulent due to conflicting signals from Chinese traders and Western hedge funds. Despite China accounting for over half of global copper demand, Chinese traders struggled with the recent price surge driven by bullish Western investors. Attention has shifted back to China’s weak physical market, with concerns about the long-term strength of Chinese copper consumption, particularly due to the sluggish property sector and shifts towards aluminum as a substitute.
New data centers in Silicon Valley are set to significantly increase electricity demand, adding 3.5 gigawatts. The San Francisco Bay Area, home to tech giants like Meta, Alphabet, and Apple, will host over two dozen new projects. This surge is driven by growing AI needs, increasing power consumption after decades of stagnation.
All data sourced from FACTSET and SIACharts.
All data is for the reported month and in local currentestcy.
The Ups & Downs
- Shares of Apple Inc. (AAPL) continued their climb, adding another 14.57% in June. The company held its annual Worldwide Developers Conference where it showcased ‘Apple Intelligence’, their newest stride in the AI race.
- Microsoft (MSFT) followed suit, gaining another 10.64% in the month. Optimism surrounding the rapid advancement of AI and the efficiency gains it could generate have pushed the stock to an all-time high.
- Nutrien Ltd. (NTR) shares dropped 13.52% in June after announcing they will halt work on their clean Ammonia project. Management cited rising costs and the need to prioritize its core agricultural segments.
- Nucor Corp. (NUE) was down 7.02% this past month. Concerns surrounding global steel production overcapacity continue to be an ongoing risk for the company. China continues to be a significant contributor to excess steel.
All data sourced from FACTSET and SIACharts. All data is for the reported month and in local currency.
Portfolio Returns
As of June 30th, 2024
