Weekly Market Commentary June 30th, 2022
The Markets
Last week, bad news was good news.
Consumers were feeling blue in June, according to the University of Michigan Consumer Sentiment Survey. The survey scored sentiment at 50, which was the lowest level on record. Surveys of Consumers Director Joanne Hsu reported that 79 percent of consumers anticipate business conditions will decline during the next 12 months, and almost half indicated they are spending less because of inflation.
Consumer pessimism was reflected in the S&P Global Flash US Composite PMI™. The Index measured that manufacturing growth was at the lowest level in almost two years. “Declines in production and new sales were driven by weak client demand, as inflation, material shortages and delivery delays led some customers to pause or lower their purchases of goods,” reported S&P Global. The Index was at 52.4. Any reading above 50 indicates growth.
Unhappy consumers and slower growth in manufacturing made investors very happy. Consumer spending drives the economy. So, if consumers begin to spend less and economic growth slows, then the central bank may slow its rate hikes or raise rates by less. Last week Fed Chair Jerome Powell told U.S. Congress:
“The tightening in financial conditions that we have seen in recent months should continue to temper growth and help bring demand into better balance with supply…Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”
Despite their pessimism, consumers’ expectations for inflation moved lower in June. They anticipate inflation will be about 5.3 percent in the year ahead, and in the range of 2.9 percent to 3.1 percent over the longer term.
Last week, major U.S. stock indices rallied, while the S&P/TSX Composite index finished the week flat. Similarly, yields on shorter maturity U.S. Treasuries moved higher as yields on longer maturities moved lower, but Government of Canada bonds finished the week more-or-less where they were at the beginning of the week.
If you have any questions or concerns about your investment portfolio or recent market events, please don’t hesitate to give us a call.
What do you like about where you live?
People choose where to live for a variety of reasons. They may live where they grew up or where their company is located. They may choose a city or town because they like the culture and environment, need accessible healthcare or prefer a certain school district.
Every year, the Economist Intelligence Unit (EIU)’s Global Liveability Index considers 30 factors in five categories – stability, health care, culture and environment, education and infrastructure – to assess living conditions in more than 170 cities around the world. Its goal is to determine which are the most “livable”. Clearly cost of living was not a factor!
In 2022, the top five “most livable” cities were:
- Vienna, Austria
- Copenhagen, Denmark
- Zurich, Switzerland
- Calgary, Canada
- Vancouver, Canada
The five “least livable” cities were:
- Karachi, Pakistan
- Algiers, Algeria
- Tripoli, Libya
- Lagos, Nigeria
- Damascus, Syria
Weekly Focus – Think About It
“When you take a flower in your hand and really look at it, it's your world for the moment. I want to give that world to someone else. Most people in the city rush around so, they have no time to look at a flower. I want them to see it whether they want to or not.”
—Georgia O'Keeffe, artist
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