Skip to main navigation
Home
  • Library
  • Publishers & Tools
  • CE Credits
  • Financial Apps
  • About
  • Sign in
  • Register
      Filters
      Clean

      Follow

      Market Insights
      Market Outlooks
      Print
      Share
      • Linkedin
      • Twitter
      video by Russell Investments
      This piece is approved to use with clients.

      Market Week in Review: Consumer prices rise unexpectedly in Canada

      BeiChen Lin, Investment Strategy Analyst and Zoe Warganz, Active Ownership Analyst
      May 23, 2023

      Executive summary:

      • Headline inflation increases at 4.4% clip in Canada

      • U.S. retail sales rebound, while manufacturing struggles

      • Signs of progress emerge in U.S. debt-ceiling negotiations


      On the latest edition of Market Week in Review, Investment Strategy Analyst BeiChen Lin and ESG and Active Ownership Analyst Zoe Warganz discussed the latest inflation data from Canada and whether it could impact the Bank of Canada (BoC)’s current pause on interest-rate increases. They also reviewed recent U.S. economic data and provided an update on the latest negotiations over the U.S. debt ceiling.

      Consumer prices rise unexpectedly in Canada

      Warganz and Lin kicked off the segment by unpacking the latest consumer price index (CPI) numbers from Canada. Lin said that contrary to expectations, headline CPI rose at a 4.4% clip in April on a year-over-year basis—a slight acceleration from March’s increase of 4.3%. The uptick was largely due to higher gasoline prices, he noted.

      Lin explained that the three core inflation measures preferred by the BoC—CPI-trim, CPI-median and CPI-common—actually slowed down in April compared to March, on a year-over-year basis. This illustrates how inflation does not necessarily decline linearly, he said. “Slowing inflation may consist of a series of declines, with an occasional spike back up. It’s never going to be a linear process all the way down,” Lin remarked.

      Warganz asked Lin if the uptick in headline inflation could have any impact on the BoC’s conditional rate pause, which officials announced earlier this year. Lin said that while markets are now anticipating that the bank might have to deviate from this pause at some point in the year, one month of data is not sufficient enough to base a decision on.

      “The BoC is going to be looking at a variety of data before making any determination on rates, and whatever decision it ultimately makes will be made very carefully. Now, there are some measures that point to the Canadian economy still being quite resilient—for instance, home prices in April rose by 1.6% on a month-over-month basis. However, there’s still plenty of time this year for economic indicators like this to change,” he explained.

      Ultimately, Lin doesn’t expect the BoC to raise rates at its next meeting in early June. “I anticipate that the bank will stay on hold,” he said, emphasizing that above all else, BoC leaders will continue carefully monitoring the latest data.

      More mixed signals for the U.S. economy

      Turning to the U.S., Lin characterized the latest batch of economic data as a mixed bag. On the one hand, U.S. retail sales rebounded in April after a slowdown in March, he said. On the other hand, recent manufacturing data from the Philadelphia Fed and Empire State surveys showed ongoing weakness in the sector, Lin stated, noting that both surveys indicated contractionary conditions.

      “The bottom line here is that we’re seeing mixed signals pertaining to the U.S. economy. And it’s important to understand that in real life, this is often the case. Understanding what the data is telling you requires really parsing through all of the signals,” he remarked.

      Lin said that overall, he still expects that the U.S. economy will slow down sometime in the next 12-18 months, with a recession potentially developing. However, any recession will likely be mild to moderate in scope, he noted, stressing that investors should stay calm and disciplined.

      Negotiations over U.S. borrowing limit continue

      Lin and Warganz finished the segment with an update on the progress of negotiations to raise the debt ceiling limit in the U.S. Congress. Lin noted that House Speaker Kevin McCarthy expressed optimism on the potential for an agreement to be struck among lawmakers soon—possibly in a matter of days. If this proves to be the case, the House of Representatives may be able to vote on a deal as soon as early in the week of May 22, he said.

      However, Lin cautioned that in politics, things can easily change at the last minute. Until a deal is passed, the situation bears close watching, he remarked. At the end of the day, however, it’s pretty clear that no lawmaker—whether Republican or Democrat—wants the U.S. to default, Lin said.

      “I believe that all politicians recognize the importance of preserving the full faith and credit of the United States, and that ultimately, they will do the right thing,” he concluded.

      View Disclosure

      These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page.

      This material is not an offer, solicitation or recommendation to purchase any security.

      Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.

      Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.

      Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.

      The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.

      Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.

      The Russell logo is a trademark and service mark of Russell Investments.

      This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.

      UNI-12236

      Sign in

      Register to view this content.

      Why should I register?

       You get full access to all content in the expansive library
       

        You can follow topics that interest you and save content for later

      Related Articles
      Market Outlooks

      Weekly Investment Commentary: A home for real estate in multi-asset portfolios

      report by Nuveen
      This piece is approved to use with clients.

      In our view, an allocation to real estate remains essential in a multi-asset portfolio.

      Sep 28, 2023
      Market Outlooks

      Global Weekly Commentary: Yields surge as new regime plays out

      report by BlackRock
      This piece is approved to use with clients.

      Yields on benchmark 10-year U.S. Treasuries last week briefly rose to 16-year highs above 4.50% as major central banks paused rate hikes but left the door open for more.

      Sep 28, 2023
      Market Outlooks

      Global Markets Weekly Update: September 22, 2023

      article by T. Rowe Price
      This piece is approved to use with clients.

      Review the performance of global stock and bond markets over the past week, along with relevant insights from T. Rowe Price economists and investment professionals.

      Sep 28, 2023

      Categories

      • Market Insights
      • Portfolio Construction
      • Financial Planning
      • Practice Management

      Partners & Services

      • About Envestnet Institute
      • Publishers & Tools
      • On Campus
      • Envestnet.com

      Other

      • Privacy
      • Terms & Conditions
      • Email Preferences
      • Contact Us
      This website is for investment professionals only. It is not intended for private investors. Private investors interested in investment services should contact a financial professional.
      © 2008 - 2023 Envestnet. All rights reserved