Your Weekly Guide to Financial Insights and Market Trends
Vikki Zhao & Olena Li
PUBLISHED Mon, March 25, 2024, 11:23 AM EST. 10 min read.
Rate Reductions Remain a Possibility in 2024, Fueling Optimism for Stocks:
The highly anticipated FOMC announcement confirmed the Fed’s decision to keep interest rates unchanged, aligning with expectations and preserving its forecast for three rate reductions by the end of the year. This scenario, where rate cuts are still considered, further bolsters the optimistic outlook for stock markets. The economy continues to show strength, underscored by the Fed’s upgraded GDP growth forecast to 2.1% from the previously estimated 1.4%. Despite waiting for additional signs of decreasing inflation, we are of the opinion that the Fed has concluded its cycle of interest rate increases and anticipates reducing rates in the future, albeit possibly with a slight delay, a move that is favorable for the stock market.
Sustained Bullish Trend:
Since October, the stock market has experienced a consistent upward trajectory and is expected to maintain its bullish stance unless there are significant changes to the current narrative. The market is currently overlooking the recent rise in rates, which had previously played a significant role in determining the direction of stock prices over the last two years, indicating a potential shift in focus towards earnings and economic performance.
The foundation for a favorable stock market environment includes:
- Continued strong price momentum.
- Excitement surrounding AI technology.
- The economy’s resilience despite the potential for delayed effects from higher interest rates.
- The prevailing belief that inflation will keep moderating.
- The Fed’s conclusion of its aggressive interest rate hiking cycle and its likely future rate reductions.
In the short term, the market may need to adjust to recent gains, but the strength of the bullish momentum could drive stocks higher. While economic indicators, particularly regarding inflation, may experience short-term volatility, any resultant market weaknesses are expected to be temporary, within a 5-10% range.
“For long-term investors, waiting for significant market corrections could lead to missed opportunities It given the current bull market’s early stage, having risen almost 50% from its October 2022 lows, compared to the average bull market gain of 152% over 4-5 years. This supports our mid to long-term positive view on markets.”
————Tony Yuan, Head of Products and Strategy on AimStar Capital Group Inc
Recent economic updates have challenged the soft-landing scenario, with the latest Producer Price Index (PPI) report indicating higher than anticipated figures following an unexpectedly high Consumer Price Index (CPI) report. Despite a 0.3% month-over-month increase in core PPI, the year-over-year growth of 2% significantly deviates from its peak, reinforcing our view that inflation will have a diminishing impact going forward.
Moreover, February’s retail sales, increasing by 0.6% month-over-month versus the anticipated 0.7%, might temper some expectations regarding the U.S. consumer. However, we maintain that the economy’s overall resilience, even amid potential delayed effects of higher interest rates, remains intact. While the latest data points merit attention, given their monthly volatility, they are unlikely to alter the prevailing narrative, which continues to support an optimistic market outlook.
😊GOOD NEWS
😊Good News For Reddit Inc.’S IPO Fans: Reddit（RDDT）is set to begin trading on the NYSE, with its IPO priced at the upper end of the target range, aiming to raise $748 million and valued at approximately $6.4 billion. On Reddit’s first day of trading, the stock price soared by 48.35%.
😊Good News for NVIDIA shareholders: NVIDIA Corporation (NVDA) unveils new “super chip” at annual developer conference, promising 30x speed improvement over previous generation, though fails to ignite investor enthusiasm as stock dips 0.4% in pre-market trading.
😊Good News For Samsung Shareholders: Samsung Electronics (SSNLF) surged 5.63% on Wednesday (March 20), reaching a two-and-a-half-month high, as NVIDIA plans to acquire Samsung’s HBM storage chips.
😊Good news for FedEx shareholders: FedEx (FDX.US) announced its Q3 earnings report for the 2024 fiscal year, with profit growth and a stock buyback plan driving the stock price up nearly 13% after hours on Friday.
😒BAD NEWS
😒Bad News for Nike Shareholders: Nike (NYSE: NKE) expects a revenue decline in the first half of 2025 as the company cuts franchise operation costs. Before the market opens on the 22nd, Nike’s stock price has already fallen by 6.1%.
😒Bad News for Apple Shareholders: The U.S. Department of Justice is suing Apple Inc. (NASDAQ: AAPL) for antitrust practices, alleging restrictions on software and hardware in iPhones and iPads to hinder competition.
😒Bad news for Lululemon shareholders: Lululemon Athletica (NASDAQ:LULU) shares dropped by 13% as the company reported annual revenue and profits below expectations, primarily due to reduced demand for high-end products in the North American market.
😒Bad news for Tesla shareholders: Tesla (NASDAQ:TSLA) has reduced production at its Shanghai factory due to slowing growth in electric vehicle sales and increased competition. Pre-market on Friday (March 22), Tesla’s stock price dropped by 4.1%.
Canadian Inflation Slows, Raises Possibility of Rate Cut
Canada’s inflation rate decelerated in February, reaching 2.8 percent year-over-year, down from 2.9 percent in January. This unexpected slowdown, lower than economists’ forecast of 3.1 percent, has heightened speculation about a potential interest rate cut by the Bank of Canada in the summer. The softening in price pressures, particularly notable in grocery store prices, marks the first time they rose at a slower pace than overall inflation since October 2021. Despite some upward pressure from gasoline prices, the easing inflationary trend is prompting discussions of monetary policy adjustments to stimulate economic activity.
Newcomers Struggle with High Costs in Canada
A recent survey reveals that over 80% of newcomers arriving in the past decade find Canada too expensive. Despite financial challenges, most feel welcomed. Analysts suggest a shift in attitude towards financial self-sufficiency. It takes about 20 months for newcomers to cover living expenses independently. While many seek tailored financial services, job hunting remains challenging due to a lack of Canadian experience. Overall, newcomers strive to establish themselves despite hurdles.
RBC Report Reveals Growing Disparity Between Canadian Renters and Homeowners
A recent study by the Royal Bank of Canada sheds light on the widening gap between Canadian renters and homeowners amidst the ongoing housing crisis. The report indicates that while residential real estate has been a significant driver of wealth accumulation over the past three decades, renters are facing a tougher squeeze compared to homeowners. Despite a brief period of saving during the pandemic, renters are struggling to keep up with rising housing costs, making it increasingly difficult to save for a down payment. This growing inequality underscores the urgent need for measures to address the housing affordability crisis in Canada.
Foreign Investment Surge in Canadian Debt Securities
Statistics Canada reports a substantial increase in foreign investment in Canadian debt securities, with inflows reaching $21.3 billion in January, marking the highest level since November 2021. The bulk of these investments, amounting to $14.1 billion, flowed into federal government debt, while $6.6 billion was directed towards debt securities of government business enterprises. Concurrently, foreign investors significantly reduced their holdings of private-sector corporate paper by a record $15.5 billion, largely driven by the retirement of banking sector instruments. Meanwhile, Canadian investors divested $14.8 billion in foreign equity securities, with the majority directed towards both U.S. and non-U.S. shares, marking the largest divestment in a year. Despite this, Canadians increased their holdings of foreign bonds by $8.1 billion, partially offsetting the divestment in foreign equities.
Insider Reveals Misconduct in Canada’s Big Five Banks
Marketplace’s investigation unveils unethical practices within Canada’s major banks, where employees face intense sales pressure, compromising customer interests for sales targets. Despite legal and ethical violations, banks remain silent, with regulators failing to adequately address consumer concerns.
Canada Joins Efforts with Germany to Boost Hydrogen Trade
Canada is teaming up with Germany and the Netherlands to stimulate the hydrogen market, a move aimed at promoting cleaner energy alternatives. Both Canada and Germany will contribute €200 million towards bilateral hydrogen auctions under the H2Global platform. This initiative seeks to address the challenges of hydrogen production costs and infrastructure investments, making it more appealing to European buyers. With plans already in motion for Canada to supply hydrogen to Germany by next year, this collaboration aims to establish a global market for hydrogen, paving the way for a cleaner energy future.
Canadian Housing Market Shows Signs of Recovery
Data released on Monday (March 18) suggests that the Canadian housing market may have bottomed out, but economists warn of a challenging road to recovery. According to the Canadian Real Estate Association, the national MLS Home Price Index remained flat in February, ending a five-month downward trend since last fall. Despite the uptick in prices, housing market activity has yet to fully rebound, especially in some regions where it remains sluggish. Economists anticipate fluctuations in the housing market in the coming months, with a potential standoff between buyers and sellers persisting.
Canada to Cap Temporary Residents Amid Housing Crisis
Canada’s government, led by Prime Minister Justin Trudeau, will impose caps on the number of temporary residents entering the country for the first time this fall in response to the ongoing housing crisis and inflation concerns. Immigration Minister Marc Miller aims to reduce the current 6.2 percent of temporary residents to around five percent over the next three years through annual targets, similar to the approach used for permanent residents. The move reflects the need for strategic policy adjustments to align with evolving labor market demands and international conditions, emphasizing a shift towards a more sustainable immigration system.
Ontario Cities Witness Largest Weekly Surge in Gas Prices of 2024
Gasoline prices in Ontario cities experienced the most significant weekly increase of the year, with prices jumping by an average of 5.9 cents per litre of regular fuel from March 14 to March 21, according to Statistics Canada.
Fed Expected to Cut Rates in June, September, and December, but Final Rates to Be Higher Than Previous Cycle
Goldman Sachs economists suggest that the Federal Reserve is likely to implement rate cuts in the upcoming months, starting as soon as the June meeting. While the Fed’s move is anticipated to combat inflation, it’s projected that the final rates will surpass those of the previous cycle, signaling a shift in monetary policy.
The Bank Of Japan Finally Raises Interest Rates, Marking The End Of An Era
On March 19th, the Bank of Japan announced its first interest rate hike in 17 years, signaling the end of nearly a decade of ultra-loose monetary policy. The bank raised short-term rates by 10 basis points to 0%, and stated that it will continue to purchase Japanese government bonds at a “steady” pace while halting purchases of higher-risk exchange-traded funds and real estate investment trusts.
The Swiss National Bank Announces Interest Rate Cut
The Swiss National Bank announced today its first interest rate cut since June 2022, lowering the key rate to 1.5% as part of its easing monetary policy amid effective inflation control efforts over the past two and a half years.
Inflation Dip in UK Slightly Higher Than Expected
Data released on Wednesday (March 20) showed that the cooling of inflation in the UK in February was slightly higher than expected, providing more impetus for the Bank of England to cut interest rates later this year. The UK Consumer Price Index (CPI) rose by 3.4% year-on-year in February, significantly slower than January’s 4.0%, and lower than the expected 3.5%. At the same time, the latest CPI is also the lowest since September 2021, strengthening confidence that UK inflation will eventually fall back to the Bank of England’s 2% target in the coming months.
Bitcoin Plunged Over 7%, Marking Its Largest Single-Day Drop in Two Weeks
On March 19, Bitcoin’s price had fallen 6.54% in the past 24 hours, hitting $63,939.6. Other cryptocurrencies also saw declines, with Ripple dropping 3.86%, Ethereum falling 8.74%, Dogecoin declining 11.66%, and Binance Coin down 9.59%. Despite this drop, Bitcoin still maintains a 50% gain for the year, driven by increased investor interest in Bitcoin spot ETFs.
U.S. Existing Home Sales in February Reached Their Highest Growth Rate In A Year.
U.S. existing home sales surged in February, with the growth rate reaching its fastest pace in a year, marking another encouraging sign of the tumultuous recovery in the real estate market. Data released by the National Association of Realtors (NAR) on Thursday showed that existing home sales in February rose by 9.5% on a seasonally adjusted annual basis to 4.38 million units, exceeding market expectations, indicating that the resale housing market is emerging from a long period of stagnation. Lawrence Yun, Chief Economist at NAR, suggested that homeowners may have accepted the fact that mortgage rates are entering a new normal and can no longer delay relocation. This led to more listings last month, boosting the inventory of existing homes to its highest level since February 2020. Yun stated, “With population and employment growth, housing demand has been steadily increasing.” Despite the increase in inventory, strong demand has exerted upward pressure on prices, with the median home selling price rising by 5.7% year-over-year to $384,500, the highest level for February since 1999.
Bank of Canada
Bank of Canada senior deputy governor Carolyn Rogers will give a speech in Halifax on Tuesday. Her talk on the urgent need to improve Canadian productivity comes after Statistics Canada reported the annual inflation rate in February was 2.8 per cent, down from 2.9 per cent in January.
Montreal Banking conference
National Bank Financial Markets will hold its annual financial services conference in Montreal on Tuesday and Wednesday. Top executives from the country’s big financial institutions gather to offer their perspectives for the year.
Canada’s CIX Summit
Canada’s tech community will gather at the CIX Summit in Toronto on Tuesday and Wednesday to hear leaders in the sector speak about their businesses. Among those on the agenda is Dax Dasilva, the founder of Lightspeed Commerce (TSX:LSPD), who returned to the helm of the Montreal-based company in February on a mission to boost its stock price.
Canada’s GDP
Statistics Canada will release its January figures for gross domestic product on Thursday following essentially no change in the month of December. The preliminary estimate for January released last month pointed to an increase of 0.4 per cent for the first month of 2024.
BRP results
BRP Inc. (TSX:DOO) will release its fourth-quarter results and hold a conference call with investors and financial analysts on Thursday. Shares in the company fell when it reported its third-quarter profit fell as the recreational vehicle maker felt the squeeze of sluggish consumer spending.
Powell Takes Balanced Approach Amid Diverging Views
Fed Chair Powell, along with Atlanta Fed President Bostic and other officials, is set to speak this week. While the Fed’s latest outlook suggests stronger growth and higher inflation, Powell’s tone is less dovish than other policymakers. Notably, Bostic’s recent hawkish stance contrasts with Powell’s, as he now anticipates only one rate cut this year, down from his earlier forecast of two.
Stocks Surge
Last week saw significant gains across major indices: the S&P 500 surged 2.3%, the Dow rose 2%, and the Nasdaq climbed 2.9%. Analysts anticipate a possible correction following the S&P 500’s 27% rise since October.
Global Oil Dynamics
Oil prices ended the week mostly flat, with slight dips attributed to rumors of a Gaza ceasefire. However, geopolitical tensions in Europe and reduced US drilling tempered downward pressure. A stronger dollar weighed on commodity prices, but the Swiss National Bank’s unexpected rate cut provided a boost to global sentiment.
China’s Development Forum
The 2024 China Development Forum began last Sunday, hosting over 110 international guests, including top executives like Apple’s Tim Cook and Pfizer’s Albert Bourla. Chinese Premier Li Keqiang reiterated signals of openness, reflecting improving US-China relations.
Wednesday will see the release of industrial enterprise profit data, while official PMI figures for manufacturing and non-manufacturing sectors are due on Sunday. Additionally, BYD, once a leader in global electric vehicle sales, will announce its financial results on Tuesday, and Xiaomi will unveil its first electric vehicle, the SU7, on Thursday.
The most anticipated earnings releases for the week of March 11, 2024, are GameStop #GME, Carnival #CCL, Direct Digital #DRCT, Rumble #RUM, Altimmune #ALT, urban-gro #UGRO, Walgreens Boots Alliance #WBA, Ouster #OUST, Braze #BRZE, and Cintas #CTAS.
This report by The EarningsWhisper was first published on March. 21, 2024.