AIMSTAR FINANCIAL INSIGHTS – October 15, 2024

Mortgage Rates See Biggest Jump Since April, 30-Year Fixed Hits 6.32%

US mortgage rates surged for a second consecutive week, with the 30-year fixed-rate mortgage reaching 6.32%, the highest since early September, according to Freddie Mac. This marks the largest one-week increase since April. The rise in rates follows a climb in 10-year Treasury yields and strong September jobs data, which led traders to reduce expectations for aggressive Federal Reserve rate cuts. While higher mortgage rates may hinder affordability, Freddie Mac’s chief economist Sam Khater noted that it also reflects the underlying strength of the economy, which is supporting a housing market recovery.

 

 

JPMorgan Posts Surprise NII Gain, Raises Revenue Forecast

JPMorgan Chase & Co. surprised analysts by reporting a 3% increase in net interest income (NII) for the third quarter, reaching $23.4 billion, and raising its forecast for 2024 NII to approximately $92.5 billion. Investment-banking fees surged 31%, outperforming expectations of a 16% rise, with equity trading revenue also growing by 27%. Despite these strong financial results, CEO Jamie Dimon expressed concerns about economic and geopolitical risks, citing fiscal deficits and global instability. JPMorgan’s shares rose 1.7% in early trading, and the bank’s adjusted expenses for 2023 were revised down to $91.5 billion.

 

TD to Pay $3.1 Billion in Money Laundering Case, Faces Asset Cap

Toronto-Dominion Bank (TD) will pay $3.1 billion in fines and penalties after pleading guilty to failing to prevent money laundering by drug cartels and criminals. Two of its US units admitted to the charges, and TD became the largest bank in US history to plead guilty to conspiracy to commit money laundering. The bank will also face a cap on its US retail banking assets, limiting its future growth. Despite setting aside funds for the settlement, this penalty impacts TD’s growth strategy in the US. CEO Bharat Masrani expressed confidence in rectifying the issues.

 

Canada Jobless Rate Dips, Strengthening Case for Gradual Rate Cuts

Canada’s unemployment rate unexpectedly dropped to 6.5% in September, with the addition of 46,700 jobs, surpassing economists’ predictions of a 6.7% rate and 27,000 new jobs. The job growth was driven by full-time positions, and the private sector added 61,200 jobs. This strong labor data supports the Bank of Canada’s case for gradual interest rate cuts, as the economy shows resilience without major layoffs. The report eases concerns about the labor market, bolstering hopes of a soft landing and reducing inflation. A 25 basis-point rate cut is expected at the next Bank of Canada meeting.

Three Fed Officials Downplay CPI Data, Bostic Hints at Potential Pause in Rate Cuts

Three Federal Reserve officials were unfazed by a higher-than-expected inflation report for September, suggesting the central bank will continue cutting interest rates. New York Fed President John Williams, Chicago Fed President Austan Goolsbee, and Richmond Fed President Thomas Barkin all remained confident inflation is on a downward trend. However, Atlanta Fed President Raphael Bostic indicated openness to pausing rate cuts if future data supports it. Despite a recent rise in core inflation, Fed officials generally expect inflation to continue moderating, although they acknowledged that the fight to reach the 2% target isn’t over.

 

UK Economy Returns to Growth Before Budget Concerns Hit Confidence

The UK economy grew by 0.2% in August, after two months of stagnation, with gains in services, production, and construction. This growth sets the stage for modest economic expansion in the third quarter of the year. However, sentiment turned negative in September due to concerns over the upcoming budget, with consumer confidence falling at the fastest rate since the start of the Ukraine war. Prime Minister Keir Starmer’s government is banking on sustained growth to fund public service improvements, but rising economic uncertainty poses challenges.

 

ECB Expected to Accelerate Rate Cuts to Stimulate Economy Next Year

The European Central Bank (ECB) is forecasted to cut interest rates at an accelerated pace, with analysts predicting a quarter-point cut at every meeting through March 2024. By 2025, borrowing costs are expected to drop to a neutral or stimulative level, with rates reaching 2%. This shift comes as inflation hovers below the ECB’s 2% target, though concerns remain about lingering wage pressures and the labor market. Analysts are also wary of geopolitical risks and economic uncertainties, particularly with the potential return of Donald Trump to the US presidency.

India’s Industrial Output Declines for the First Time in Two Years

India’s industrial production fell by 0.1% in August 2024, marking its first contraction in nearly two years. This decline follows a 4.7% growth in July, indicating a slowdown in the country’s rapid economic expansion. The drop in the index of industrial production aligns with other indicators, such as lower growth in the services and manufacturing sectors and an output contraction in core industries like steel and cement. Economists are lowering their GDP growth forecasts for 2024, with predictions ranging from 6.5% to 6.9%, while the Reserve Bank of India maintains its forecast at 7.2%.

 

Chinese Stocks Suffer Worst Week Since July Ahead of MOF Stimulus Briefing

Chinese stocks experienced their worst week since July, with the benchmark CSI 300 Index dropping 2.8% on Friday, bringing weekly losses to 3.3%. Investors were cautious ahead of a Ministry of Finance (MOF) policy briefing on Saturday, where it is expected that up to 2 trillion yuan ($283 billion) in fiscal stimulus may be announced. Market expectations for significant stimulus are high, and concerns loom that if the measures fall short, the recent rally could unwind. Corporate bond yields dropped as some investors shifted to the bond market in search of better returns.

 

Florida Begins Assessing Damage from Hurricane Milton

Florida is evaluating the aftermath of Hurricane Milton, which caused significant damage primarily from strong winds rather than flooding. At least 10 people were killed, and tornadoes caused extensive damage in areas like Palm Beach. Milton made landfall in Sarasota County, leading to power outages for 2.4 million homes and businesses, with damages estimated between $60 billion and $180 billion. President Joe Biden promised swift federal aid, and some businesses, like Disney World, are set to reopen soon. However, agricultural losses, power outages, and sewage flooding continue to be major concerns.

*The viewpoints are attributed by Wallis Zeng.

Tesla Falls Further as Reported Robotaxi Delay Weighs on EV Maker

 

Reported on July 12 by AIMSTAR.CA – Tesla (TSLA) shares are slipping more than 1% in premarket trading after suffering the steepest losses of any S&P 500 constituent Thursday with an 8.4% plunge on a report the EV maker is postponing its robotaxi unveiling by two months. The company previously indicated it would hold an event to introduce the autonomous vehicles on Aug. 8, but Bloomberg reported the presentation has been pushed back to October. Tesla shares entered Thursday on an 11-session winning streak to move into the green for the year, fueled by its better-than-expected second quarter deliveries report, but returned into negative territory for 2024 on yesterday’s plunge.

U.S. Inflation Cools, Possible Fed Rate Cut in September

 

Reported on July 11 by AIMSTAR.CA – U.S. inflation slowed in June, mainly due to reduced housing costs, raising the possibility of a Federal Reserve rate cut in September. Core CPI, excluding food and energy, increased by just 0.1% from May and 3.3% year-over-year, marking the slowest rise in over three years. Overall CPI fell 0.1% from the previous month. The labor market showed mixed signals, with high jobless benefit applications but a drop in first-time filings. Traders anticipate a rate cut in September, and Fed Chair Jerome Powell emphasized that decisions will be data-driven.

Market Momentum Slows, But Long-Term Outlook Remains Positive: AimStar’s Take on Diversification Opportunities

Uptrend Still in Place, but Some Short-Term Caution Needed:

AimStar remain positive on the stock market over the next 12 months, supported by the Federal Reserve’s easing cycle. However, momentum is starting to slow down. We’re seeing signs such as fewer stocks making new highs and defensive sectors (like utilities and healthcare) showing strong performance, which usually signals potential market weakness. The current sentiment suggests that the market could experience a short-term pullback. Despite this, we recommend using any dips as a chance to accumulate stocks as the broader uptrend is still intact.

 

Rising Concerns on the Horizon:

There are a few growing concerns impacting the market. Recently, East Coast port closures and escalating tensions in the Middle East have spooked investors. These events could disrupt supply chains, particularly in the retail industry, which depends heavily on these ports. On the flip side, geopolitical risks have boosted defense stocks, as we’ve seen a breakout in the Aerospace & Defense sector.

 

Strong September Performance Defies Expectations, but Election Year Could Add Volatility:

September is usually a weak month for stocks, but this year, the S&P 500 posted a 2.02% gain, defying its usual negative trend. However, with the upcoming election, October might see some volatility or consolidation. Still, any market dips should be viewed as buying opportunities, as the long-term outlook for stocks remains strong.

 

Market Signals Remain Positive: 

In the medium to long term, things are looking good for equities. Around 76% of stocks in the S&P 500 are trading above their 50-day and 200-day moving averages, which is a positive sign. Additionally, riskier sectors like consumer discretionary are outperforming defensive sectors, indicating that the market is positioning itself for more upside over the next 12-18 months.

 

Focus on Diversification: 

For the past year and a half, concentrated bets on a few large stocks have worked well. However, the market is now broadening out, and we believe a diversified approach will be more effective. Historically, when markets become highly concentrated, it often sets the stage for more average stocks to catch up, which is good news for diversified portfolios.

*The viewpoints are attributed by Tony Yuan

July 15 – July 19 COMING UP

  • Federal Reserve Chairman Jerome Powell speaks on Monday, with other Fed officials making remarks throughout the week.
  • Goldman Sachs, Bank of America, and Morgan Stanley are among the major bank earnings coming this week.
  • Netflix and Johnson & Johnson also report earnings this week, while Amazon hosts its annual Prime Day sales event.
  • The Republican National Convention will feature remarks from presidential candidate Donald Trump.

 

The earnings releases for the week of October 14, 2024, will span multiple industries:

  • Monday: Netflix (#NFLX) will report earnings, focusing on the streaming entertainment market.

  • Tuesday: TSMC (#TSM) and Walgreens Boots Alliance (#WBA) will release earnings, covering semiconductors and pharmaceutical retail.

  • Wednesday: UnitedHealth (#UNH) and ASML (#ASML) will provide updates on health insurance and semiconductor equipment.

  • Thursday: Citigroup (#C), Bank of America (#BAC), and Comerica (#CMA) will report earnings, offering insights into the banking sector.

  • Friday: Johnson & Johnson (#JNJ) and Progressive (#PGR) will release earnings, covering healthcare and insurance sectors.

Published by  Vikki Zhao 

October 15, 2024, 10:00 AM EST. 6 min read

 

AimStar Capital Group Inc. is a Canadian full-service Investment Dealer, regulated by Canadian Investment Regulatory Organization (CIRO) and a member of Canadian Investor Protection Fund (CIPF). As an independent firm, AimStar is built on a foundation of innovation, integrity, and client-centricity. They are committed to providing unbiased advice and dedicated to the client’s needs, helping them achieve their financial goals.

AimStar is recognized as a Wealth Professionals 5-star Wealth Management Firm for 2024, this award recognized AimStar has offered exceptional client experience, a proven investment track record, continuous innovation, and stringent regulatory compliance.

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