ClearWater Market Commentary as of August 30, 2021

Here is the ClearWater Market Commentary as of August 30, 2021:

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 Day	0.82%
1 Month	1.76%
YTD	18.42%
1 Year	23.58%

^{As of 2021/08/27- Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
Oil ($/bbl)	10.60%	41.70%
Russell 2000	3.14%	15.33%
Hang Seng Index	1.71%	-6.21%
Shanghai Composite	1.47%	1.59%
Nasdaq	1.25%	17.39%
Nikkei 225	1.07%	1.26%
S&P/TSX Composite	0.82%	18.42%
S&P 500	0.67%	20.06%
FTSE 100	0.55%	10.64%
Dow Jones Industrial	0.34%	15.84%
CAC 40	0.14%	20.55%
DAX	0.01%	15.57%

^{As of 2021/08/27- Source: www.marketwatch.com}

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

US economy (S&P 500 0.67%):

• Stocks gained last week as the Food and Drug Administration (FDA) gave full approval for the Pfizer-BioNTech vaccine, which supported sentiment towards an ongoing economic recovery. This could convince more employers to mandate use of the vaccine which boosted stocks.
• However, stocks did fall on Thursday as an attack at the Kabul airport in Afghanistan amid the U.S. military’s withdrawal from the country resulted in casualties.
• The Tech-heavy NASDAQ outperformed the broad market S&P500 and Dow Jones Industrial average.
• The Russell 2000 Index of small-cap stocks saw particularly impressive gains.
• Stocks in the energy sector jumped higher as crude oil prices gained about 10% for the week.
• Friday’s speech in Jackson Hole by Fed Chair Jerome Powell turned out to be a non-event as Powell did not signal any deviation from the central bank’s recent assessment of economic conditions or outlook for removing policy accommodation.
• The week’s economic data releases were generally positive with July’s home sales rising 2%. Weekly jobless claims did tick up but remained near their lowest levels of the pandemic, indicating that the labor market is still strengthening even as the delta variant spreads in the U.S.

Canadian markets (S&P/TSX 0.82%):

• The S&P/TSX was able to post a fresh all-time high, despite the salvo fired by the Liberals at the financial services sector.
• Energy and resource stocks propelled the index higher.
• The release of loan loss provisions once again drove the Canadian banks to post solid earnings. Share prices had made solid gains in advance of earnings, but shares took a dip (between 1%-3%) on the election campaign announcement by the Liberals.
• The Liberal proposal is to increase the corporate tax rate to 18% from 15% on bank and insurance company earnings over $1 billion (note that the effective tax rate that the banks have paid over the past decade has ranged from ~22%-25%).
• Additionally, the Liberals are proposing that the banks and insurers pay a “Canada Recovery Dividend” (CRD) to their customers in recognition of the significant government support provided during the pandemic. Estimates suggest the additional tax and CRD would amount to a hit of 3% – 4% of estimated 2022 after-tax earnings.
• Polls suggest the election race is tightening up, and like all election rhetoric, there is likely room for these plans to be adjusted.

Performance 2021: S&P 500/400/600 Sectors

European and Asian economies:

• Shares in Europe gained ground as the central banks’ accommodative policies showed signs that economic growth remained strong in August and hopes that higher vaccination rates might help to prevent hospitalizations.
• The eurozone economy appeared to remain in expansion mode in August with the early headline number for the Purchasing Managers’ Index (PMI) coming in strong. The pace of growth in the both the manufacturing and services sectors moderated slightly from July but remained robust to relative to historical levels.
• The European Central Bank (ECB) reiterated their view that inflation should prove temporary.
• Japan’s stock markets rose over the week despite more negative developments on the coronavirus front. The Japanese government extended its COVID-19 state of emergency to eight more prefectures, which is expected to last until September 18 th . On a positive note, Japan has sped up its vaccination drive and expect 60% of the country’s population to be fully vaccinated by end of September.
• Chinese stocks continued to recover from their late-July lows.
• Early in the week, the People’s Bank of China met with leading financial institutions to urge them to strengthen credit support to the economy. This meeting was significant because credit growth accelerated after the central bank held similar meetings in 2018 and 2019 and suggests that policy is shifting toward further easing amid and uneven economic recovery.
• In regulatory news, the China Securities Regulatory Commission pledged to cooperate with their U.S. counterparts regarding the audit of Chinese companies trading in the U.S. The years long dispute with the U.S. stems from China’s refusal to provide full access to the financial data of Chinese Companies that trade in the U.S. on national security ground.
• On the coronavirus front, China’s daily cases dropped to single-digit levels following tough measures in recent weeks.

What to watch this week:

• Canadian GDP, trade and labour productivity data
• US trade and employment data
• Europe and Japan retail sales data
• Eurozone inflation and consumer confidence data
• Purchasing Manager Indices globally, including both US ISM readings

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Sources: Bloomberg.com,Yardeni.com, Barron’s.com, Factset.com and Newyorkfed.org

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