Weekly Market Commentary April 27 2023

The Markets

Earnings season is here – the time when publicly traded companies report on how profitable they were during the first quarter of 2023. So far, reports coming out of the United States suggest that many companies did better than anticipated. Almost 20 percent of companies in the S&P 500 index have reported and three-out-of-four have exceeded earnings expectations, reported John Butters of FactSet.

“At any given moment, earnings expectations reflect everything that’s happening in the world, from the economy and the [central bank] to interest rates and geopolitics. Right now, most of the fear stems from expectations about the economy. The [central bank] has lifted interest rates to tamp down inflation by reducing economic demand, and so far, that seems to be working. The rate of inflation has been cut almost in half from its [..] peak but growth is slowing with it...And since higher rates operate with a lag, the full effects of the rate hikes probably haven’t been felt yet, raising the possibility of a recession,” reported Jacob Sonenshine of Barron’s.

Banks were among the first companies to report on earnings, and the news reassured investors who were concerned about financial stability after the collapse of three regional banks. Despite contributing $30 billion to bailout a regional bank, big U.S. banks generally reported healthy results and higher interest income in the first quarter, reported Max Reyes of Bloomberg.

That said, the banks still face significant challenges. Loan delinquencies have been rising from historic lows as policies instituted to protect borrowers during the pandemic have come to an end. The four largest American lenders saw a 73 percent increase in consumer loan defaults and have significantly increased the assets set aside to cover loan losses.

Last week, most major North American stock indices finished the week close to where they started it. Yields on Canadian Treasuries increased last week, while yields on Government of Canada bonds fell.

Source: FactSet

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Group Bike Ride - July 8th, 2023
Mud Bay Gravel Ride starting from Barnside Brewing

Fundraiser: We've raised over $800!

This year, I am participating in the Tour de Cure to raise funds for cancer research  in honor of my sister-in-law who has been impacted by this disease.

This 100km bike ride will support the BC Cancer Foundation.

Ruben Jimenez, Associate Financial Advisor.

Power outage? There's a hybrid for that.

In recent years, storms have led to lengthy power outages in many parts of North America. When ice storms knocked out the Texas power grid in the winter of 2021, some people relied on generators to supply their energy needs. Others turned to hybrid trucks, reported Paul Eisenstein of NBC News.

One hybrid truck owner in Texas purchased the optional generator feature, thinking he would use it when camping or to fire up power tools in remote areas. Instead, after the storm hit, he hooked the vehicle up to his house. For three days, it “provided enough energy to handle a refrigerator, a freezer, lights, the cable and internet box and a television.”

When the supply of generators ran low, one U.S. truck manufacturer asked its Texas dealerships to lend any hybrid trucks they had in stock to people who needed power.

Hybrid trucks that double as generators are just one example of innovation in the auto industry.

“The $4 trillion automotive industry is going through three big transformational changes at once. Two of those – the rise of electric vehicles and the gradual emergence of autonomous driving – have attracted most of the attention. But the third one could be more powerful still: Cars are becoming computers on wheels,” explained Eric Savitz of Barron’s.

There are more lines of code in automobiles than there are in jumbo jets, according to a C-suite executive at a semiconductor firm who was cited by Barron’s. In fact, automakers have been scooping up workers laid off by technology companies to help develop branded software.

Not too far in the future, it’s possible that drivers will be loyal to vehicle brands in the way they are to mobile phone brands. When drivers change brands, they’ll have to learn a new system – and that could give industry leaders a competitive advantage.

Weekly Focus – Think About It

“There are not more than five musical notes, yet the combinations of these five give rise to more melodies than can ever be heard. There are not more than five primary colors, yet in combination they produce more hues than can ever been seen. There are not more than five cardinal tastes, yet combinations of them yield more flavors than can ever be tasted.”

—Sun Tzu, philosopher

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