Market and Investment Insights

Market Pulse

In April, the Canadian economy added 90,400 jobs, exceeding expectations of a 20,000 job increase. This growth, driven entirely by the services sector with 100,700 new jobs, left the unemployment rate unchanged at 6.1% despite a 10,400 job decline in the goods sector. High immigration since 2022 has raised the baseline for necessary employment growth, meaning substantial job increases are needed to maintain the current unemployment rate. This erratic labor market is unlikely to deter the Bank of Canada from reducing interest rates, potentially in June, as employment growth linked to population increases doesn’t inherently drive inflation.

China plans to have local governments buy unsold homes from distressed developers, converting many into affordable housing. This proposal involves state-owned enterprises purchasing homes at steep discounts using state bank loans, and could require up to 2 trillion yuan (CA$377 billion). The move follows pilot programs and recent measures by cities to stimulate housing demand and could ultimately increase local government debt and strain banks already facing bad loans and narrowing margins.

The International Energy Agency (IEA) lowered its global oil demand growth forecast by 140,000 barrels a day to 1.1 million barrels a day due to economic slowdowns and mild weather in Europe. Despite this, annual consumption is expected to reach a record 103.2 million barrels a day. The IEA’s projections are more conservative compared to industry estimates which are forecasting higher growth.

India’s Prime Minister Narendra Modi has focused on infrastructure investments to boost economic growth and connectivity. Despite challenges like high logistics costs and financing hurdles, Modi’s government has committed 11.11 trillion rupees (CA$182 billion) for new projects, including a new highway between New Delhi and Mumbai and India’s first bullet train, aiming to support long-term growth and job creation.

The aging population in North America is expected to drive up wages and inflation, necessitating higher interest rates. This demographic shift is prompting pension funds and asset managers to adjust their strategies, favoring equities and inflation-resistant assets over traditional bonds. Global variations in aging rates make regions like India and Indonesia more favorable due to their growing working-age populations.

On May 2, 2022, a Citigroup Inc. trader in London mistakenly entered a $444 billion (CA$606 billion) trade instead of $58 million (CA$79 million), causing a massive sell-off across European exchanges. This five-minute flash crash wiped €300 billion (CA$444 billion) off European stocks. UK regulators fined Citigroup for risk management failures, noting the bank’s systems generated 711 warnings, many of which were overridden. The error was caught 15 minutes later, resulting in a multi-million dollar loss for the bank.

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) rebounded 12.45% in May. Investors expect upcoming AI-enabled products will boost revenue growth for the tech giant.
  • Manulife Financial (MFC) continued to outperform the industry climbing another 10.50%. Recent success is largely due to their rapidly expanding insurance business in Asian markets. MFC has beaten earnings in each of their last six quarterly reports.
  • Deere & Co. (DE) shares dropped 5.89% despite beating analyst expectations for the quarter. The company spooked investors by reducing annual earnings guidance in their latest report.
  • Abbott Laboratories (ABT) lost 3.99% in May. Challenges from reduced demand for COVID-19 testing and increased operating expenses are hindering growth.
All data sourced from FACTSET and SIACharts. All data is for the reported month and in local currency.

Portfolio Returns

As of May 31st, 2024