For the week, stocks were mixed with the TSX down .2%. The S&P faltered for the third week in a row after hitting a high the week of August 24 as the tech sector continued to slide. The broader S&P 400 MidCap and the Russell 2000 eked out gains during the week but are still in high single-digit negative territory. The pan-European index was up .22%, but major European country indexes lost ground led by Italy’s MIB losing 1.49% and France’s CAC 40 pulling back 1.11%. US Treasury yields ended the week slightly higher over concerns of the Fed failing to clarify the duration of asset purchases.
In economic news, Canadian retail sales showed a modest gain in July of .6%, below the market expectations of 1% after the surge of May’s 21.2% and June’s 22.7%. Still, positive figures indicate the recovery is making progress, however, at a slower rate. Housing starts and existing homes sales continued to rebound during August. National home sales rose 6.2% on a month-over-month basis in August. The MLS price index also rose 1.7%. For the fourth month in a row in the US, industrial production increased in August, however modestly at .4% below market consensus of 1%. Nevertheless, it remains 7.3% below pre-COVID February levels. Core retail sales fell .1% in August, hinting the expiration of benefits could slow the recovery. Initial jobless claims came in at 860,000 versus the previous week at 875,000, and continuing claims fell to 12.6 million. Both numbers were new lows but still elevated versus pre-COVID data. Housing permits and single-family starts remained strong.
The US Fed did little to inspire investors after a two-day policy meeting concluding on Wednesday. They confirmed the low-interest rate policy is staying near 0% through 2023, which market participants priced into the market weeks ago. Disappointing was the lack of changes to the quantitative easing program. On a more positive note, they did revise the US’s economic contraction upward to 3.7% from 6.9%. Generally, it is becoming accepted that the Fed has little more that can be accomplished without accompanying fiscal measures.
On the political front, more details were released on the Biden/Harris tax plan, leading analysts to discuss the wisdom of taking capital gains should Biden win the election. What is becoming increasingly clear is the election results will be contested on the night of the election. The sentiment of the many Democrats, as recently voiced by the former Secretary of State, is Joe Biden should never concede the election. With Justice Ginsberg’s death, the pressure is on the GOP-led Senate to confirm the next Supreme Court justice before the election, stacking the court with a six-to-three conservative majority. It is highly expected the Supreme Court will inevitably be called upon to rule on election processes. One of the US’s hallmarks is the peaceful transition of power from one party to the next. At present, a peaceful transition is not likely to occur, creating more uncertainty for corporations and volatility for investors well after the November 3rd elections.
Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.
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