ClearWater Market Commentary as of August 25th, 2023

Here is the ClearWater Market Commentary as of August 25th, 2023:

In this issue:
– Performance of Major Indices
– Market Commentary
– Last Week’s Key Economic  Events and Upcoming Events

Performance of Principle Indexes: 

S&P/TSX Composite Index  
5 Day0.17%
1 Month-2.98%
1 Year-1.53%

As of 2023/08/25- Source:

Index PerformancesLast 5 DaysYTD
S&P 5001.22%15.88%
CAC 400.66%13.19%
Hang Seng Index0.27%-9.27%
FTSE 1000.26%3.02%
S&P/TSX Composite0.17%2.54%
Dow Jones Industrial-0.04%4.10%
Shanghai Composite-0.17%-0.57%
MSCI EAFE-0.20%5.60%
Russell 2000-0.30%6.52%
WTI Crude (Oil)-0.70%-0.20%

As of 2023/08/25- Source:

Last week’s and next week’s key economic events:

US economy (S&P 500 1.22%):

  • Benchmark returns varied for the week as investors seemed to react to mixed signals on the economy and the course of monetary policy. Growth stocks handily outperformed value shares, helped by another substantial earnings and revenue beat by artificial intelligence chipmaker NVIDIA. 
  • Several retailers reported second-quarter results, which arguably offered a generally cautious picture on the health of the U.S. consumer. Shares of department store operator Macy’s fell sharply after the company reported falling earnings and warned of growing consumer caution, along with rising credit card delinquencies. Macy’s competitor Nordstrom, while beating earnings and revenue estimates, also cited rising late payments on its credit cards in issuing a cautious outlook. Nordstrom, discount chain Dollar Tree, and specialty retailer Dick’s Sporting Goods noted that earnings suffered from exceptionally high levels of theft from their stores.
  • The University of Michigan’s final reading of August’s consumer sentiment, released Friday, fell a bit from July’s nearly two-year high, seemingly due to higher inflation expectations following the recent increase in gas prices. However, the study’s chief researcher noted that “consumers remain supported by strong income expectations,” with hopes for higher wages strongest among lower-income consumers. The continued health of the labor market appeared to be confirmed by the weekly jobless claims report, which came in at 320,000, the lowest level in three weeks.
  • Durable goods orders data released Thursday indicated a somewhat higher degree of business caution, at least in certain areas. While durable goods orders, excluding defense and transportation—commonly accepted as a proxy for business investment—rose 0.1% in July; this was more than offset by a downwardly revised 0.4% contraction in June. S&P Global’s index of manufacturing activity also fell more than expected in August, reversing most of July’s strong gain and moving further back into contraction territory.
  • The housing sector appeared more robust, with new home sales reaching their highest level in July since early 2022, despite the highest mortgage rates in years. Freddie Mac reported on Thursday that the 30-year fixed rate mortgage had reached its highest level since 2001. Existing home sales fell back and missed expectations, however.
  • On Friday, Federal Reserve Chair Jerome Powell gave some indication of how he was interpreting these mixed signals at his speech before the central bank’s annual symposium in Jackson Hole, Wyoming. Powell acknowledged that higher rates had slowed growth in industrial production and wages, while tightening bank lending standards were also cooling the economy. On the other hand, he noted that economic growth remained above its longer-term trend and that the housing sector appeared to be “picking back up” after slowing sharply over the past year and a half. “As is often the case,” he concluded, “we are navigating by the stars under cloudy skies.”

Canadian markets (S&P/TSX 0.17%):

  • Canada’s main stock index climbed on Friday, buoyed by strength in the energy sector, while U.S. markets also rose following a speech by U.S. Federal Reserve chair Jerome Powell, who said future decisions on interest rates will be based on what the incoming data says about inflation and the economy.
  • Both the S&P 500 Index and the S&P/TSX Composite Index have retreated approximately 4% so far in August. We attribute much of the volatility to the recent rise in government bond yields. The U.S. 10-Year Treasury yield has risen  approximately 30 bps — nearing a 15-year high — since the beginning of the month. Bond holders are voting with their feet, pushing yields higher in expectation of interest rates staying higher for longer.
  • Markets breathed a sigh of relief after Powell spoke at an annual symposium, sending stocks a little higher Friday after a rocky week. Investors had been anxiously anticipating the speech at Jackson Hole, as Powell’s hawkish comments last year took them by surprise.
  • The Canadian dollar traded for 73.50 cents UScompared with 73.72 cents US on Thursday.
  • The October crude contract was up 78 cents at US$79.83 per barrel and the October natural gas contract was up two cents at US$2.66 per mmBTU.
  • The December gold contract was down US$7.20 at US$1,939.90 an ounceand the September copper contract was down a penny at US$3.76 a pound.

Forward P/E Ratios: S&P 400/500/600 Sectors

Performance 2023: S&P 500

European and Asian economies:

  • Major stock indexes advanced as European natural gas prices dropped and expectations grew that interest rates may soon peak.
  • Initial results from a survey of purchasing managers compiled by S&P Global indicated that business activity in the eurozone likely shrank for a third consecutive month. The Purchasing Managers’ Index (PMI) for manufacturing came in at 43.7—a slight improvement from July but still well below 50, the level that indicates a contraction in activity. Meanwhile, the PMI reading for the services sector dipped below 50. The HCOB Flash Eurozone Composite PMI Output Index, which combines data from both sectors, fell to a 33-month low of 47.0 from 48.6 in July.
  • The Bundesbank said in its monthly report that it expects German economic output to remain “largely unchanged” in the three months ending September 30. If this scenario were to transpire, the economy would have posted zero growth for two consecutive quarters. A recovery in private consumption should continue, according to the central bank, but it also asserted that weak foreign demand could translate into anemic industrial production.
  • UK business activity recorded its weakest month in August since January 2021, according to S&P Global/CIPS. The Flash UK PMI Composite Output Index fell to 47.9 from 50.8 in July, the first contraction since January. New orders shrank for a second consecutive month.
  • Japanese equities rallied following the previous week’s declines, posting four consecutive positive sessions, before giving up much of the gains in a disappointing Friday close.
  • Japanese investors appeared undeterred by a softer-than-hoped-for policy response from China in the face of slowing growth and a building property crunch. Markets were further buoyed by encouraging domestic data announcements. 
  • Various inflation readings during the week provided mixed messages. However, a 3.1% rise in Japan core consumer prices in July was generally well received.
  • On the global front, Japan markets also seemed to respond positively to weaker August U.S. PMI numbers during the week, notably manufacturing data—seen as potentially undermining the Fed’s case for holding rates higher for longer. On Friday, however, Japanese stocks tumbled on renewed concerns about China’s slowdown, while trade relations also took a turn for the worse following Japan’s decision to dump contaminated water from the Fukushima nuclear plant into the Pacific Ocean.
  • The yen continued its weaker trend of recent months, finishing the period in the low JPY 146 range against the U.S. dollar. The value of the yen has tumbled to levels approaching those reached in September/October 2022—lows that prompted the Bank of Japan to step in to support the flagging currency.
  • Chinese stocks fell as investors grew more pessimistic about the country’s economic outlook. In Hong Kong, the Hang Seng Index, which entered a bear market the previous Friday, rose slightly for the week, though it too is at its lowest level since November.
  • Disappointing data, signs of deflation, record youth unemployment, and continued liquidity problems in the debt-laden property sector have contributed to an erosion of confidence in China’s economy. Signs of deteriorating growth—and a sense that China’s government has relatively few good options to arrest the downturn—have raised the prospect of accelerated capital outflows.
  • On Friday, state media reported that China has proposed that local governments can scrap a rule that disqualifies people who have ever had a mortgage—even those who have fully repaid them—from being considered a first-time homebuyer in major cities. The proposal was Beijing’s latest effort to shore up the property sector, which is under pressure from falling home prices and a rising number of developers defaulting on their debt.
  • Many analysts believe that downside risks are growing in China’s economy. Moreover, the recent spate of negative news coming from China’s property and trust sectors threaten to create a negative feedback loop about the economy, which could result in further weakness ahead.
  • However, the risks of a systemic crisis emanating from China’s property sector appear low. Moreover, the riskier “shadow” banking system, which includes trusts, is smaller today than it has been in recent years thanks to increased regulation. As a result, our analysts believe that the key risks are at the periphery of its financial system and potentially resolvable through regulatory intervention. Nevertheless, they are carefully monitoring property sector developments and possible spillovers to other sectors.

What to watch this week:

  • S&P Case-Shiller National Home Price Index (Jun)
  • FHFA House Price Index (Jun)
  • Job Openings and Labor Turnover Survey (JOLTS) (Jul)
  • Conference Board Consumer Confidence Index (Aug)
  • Real Consumer Spending (Q2 2023)
  • Corporate Profits (Q2 2023)
  • U.S. Goods Trade Balance (Jul)
  • Personal Consumption Expenditures (PCE) Price Index (Jul)
  • Chicago Purchasing Managers’ Index (PMI) (Aug)
  • Nonfarm Payrolls (Aug)
  • S&P Global Manufacturing PMI – Final Reading (Aug)
  • ISM Manufacturing PMI (Aug)

Sources:,, Barron’, and

Thank you for checking out our ClearWater Market Commentary for August 25th, 2023. If you would like to receive the ClearWater Commentary at the start of every week, sign-up for our Newsletter.

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