ClearWater Market Commentary as of May 19th, 2023

Here is the ClearWater Market Commentary as of May 19th, 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 Day-0.21%
1 Month-2.08%
1 Year0.98%

As of 2023/05/19- Source:

Index PerformancesLast 5 DaysYTD
WTI Crude (Oil)2.80%-10.30%
Russell 20001.67%1.31%
S&P 5001.48%9.32%
CAC 400.30%16.54%
MSCI EAFE0.30%9.70%
Dow Jones Industrial0.04%0.60%
S&P/TSX Composite-0.21%5.07%
FTSE 100-0.30%6.94%
Shanghai Composite-0.40%5.77%
Hang Seng Index-0.90%-2.03%

As of 2023/05/19- Source:

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

US economy (S&P 500 1.48%):

  • Stocks recorded solid gains for the week, with the S&P 500 Index breaching the 4,200 level in intraday trading for the first time since late August. The index has remained notably range-bound over the past few months, and the previous week marked the sixth consecutive one in which it failed to move by more than 1%—the longest such stretch since November 2019. 
  • The disparity was reflected in the outperformance of several mega-cap technology-related stocks, particularly a strong gain in the shares of Google parent Alphabet and Facebook parent Meta Platforms. NVIDIA, Advanced Micro Devices (AMD), and several other chipmakers also recorded solid gains. 
  • The catalyst for the week’s gains appeared to be a notable shift in tone around debt ceiling negotiations. Following a Wednesday meeting at the White House, President Joe Biden stated he was confident there will be no default, while Republican House Speaker Kevin McCarthy called a deal “doable” and Democratic Senate Leader Chuck Schumer stated that the only path forward was via a bipartisan deal. President Biden traveled to Japan for a meeting of G-7 leaders, but the White House announced that he would cut his trip short and return on Sunday to continue negotiations. 
  • Stocks seemed to waver a bit on Friday, however, after Republican negotiators announced that they had decided to “press pause” in discussions.
  • Much of the week’s economic data were generally in line with consensus expectations, but investors appeared to react to some prominent surprises. Retail sales rose 0.4% in April, below consensus expectations and at the slowest year-over-year pace (1.6%) since early in the pandemic. Given that the data are reported on a nominal basis and that the consumer price index rose 5.5% over the same period, inflation-adjusted spending fell sharply. Industrial production rose 0.5% in April, well above expectations for a flat reading, driven in part by increased auto manufacturing.
  • The week also brought signs of surprising resilience in the labor market. Weekly jobless claims came in at 242,000, below expectations and below the previous week’s reading of 264,000, the highest level since late 2021. Continuing claims hit their lowest level in nine weeks.
  • Given the Federal Reserve’s stated intention of cooling the labor market to bring down inflation, investors were perhaps primed to react negatively to some hawkish commentary from Fed Chair Jerome Powell on Friday. An early rally evaporated after Powell stressed before a Fed conference that inflation remained far too high and that officials were resolute about bringing it back to their target of 2%. 
  • Nevertheless, Powell also stated that tightening credit conditions following recent banking turmoil meant that the “policy rate may not need to rise as much as it would have otherwise to achieve our goals.”

Canadian markets (S&P/TSX -0.21%):

  • Canada outperformed the U.S. markets Friday after lagging for most of the week as strength in the energy sector helped Canada’s main stock index post a small gain, while U.S. stock markets were down as debt ceiling talks fizzled ahead of the weekend.
  • Canadian existing home sales for April jumped 11.3% m/m seasonally adjusted. Housing starts rose to 261,600 (versus 220,000 expected), up from 213,800.
  • Canadian CPI inflation unexpectedly rose to 4.4% (versus 4.1% expected), up from 4.3%. The average of the Bank of Canada’s core measures slowed to 4.2% (versus 4.1% expected), down from 4.45%.
  • Canadian retail sales fell -1.4% (in line with expectations), following the prior month’s -0.2% decline. StatCan’s preliminary estimate for September calls for a 0.2% rebound.
  • The Bank of Canada Financial System Review (FSR) noted that the “spillover effects in Canada from the recent stresses in the global banking sector have been limited”. However, the tightening cycle is having a negative impact on funding costs and market liquidity. 
  • The Canadian dollar traded for 74.06 cents US compared with 74.07 cents US on Thursday.
  • The July crude contract was down 25 cents at US$71.69 per barreland the June natural gas contract was down less than a penny cents at US$2.59 per mmBTU.
  • The June gold contract was up US$21.80 at US$1,981.60 an ounce and the July copper contract was up four cents at US$3.73 a pound.

Performance 2023: S&P 500 Sectors   

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

European and Asian economies:

  • Shares in Europe advanced amid optimism that interest rates could be close to peaking and that the U.S. would avoid a debt default. 
  • Official data provided further signals that Europe might be sliding into an industrial recession. Eurozone industrial production sank 4.1% sequentially in March, after rising 1.5% in February. On a year-over-year basis, industrial output declined 1.4%, after increasing 2.0% in the preceding month. While Irish production led the drop—mainly due the transfer pricing practices of multinationals—German, French, and Italian output also weakened.
  • In Germany, the ZEW economic research institute said investor morale fell for a third consecutive month in May. Its sentiment index entered negative territory for the first time since the end of 2022 amid concerns about rising interest rates. ZEW President Achim Wambach said Germany could slip into a mild recession.
  • The European Commission raised its forecasts for eurozone economic growth this year and next and predicted inflation would remain stubbornly high. Wage increases are expected to drive inflation higher to 5.8% in 2023 and 2.8% in 2024, up from the previous estimates of 5.6% and 2.5%, respectively.
  • Bank of England (BoE) Governor Andrew Bailey reiterated in a speech that monetary policy would have to tighten further if there was evidence of more persistent inflationary pressures. He predicted that inflation could start to slow significantly in April as energy increases drop out of the annual calculations. But policymakers “still judged the risks to inflation to be skewed significantly to the upside,” he said, noting that second-round effects would take longer to unwind than they did to emerge.
  • The UK’s unemployment rate crept up to 3.9% in the three months through March, from 3.8% in the three months through February, the national statistics office said. However, wage growth showed little signs of easing over the period. Average weekly pay excluding bonuses rose to 6.7% compared with a year earlier, from 6.6%.
  • Japan’s stock markets registered their sixth consecutive weekly gain. Both indexes reached near 33-year highs during the week, boosted by solid domestic earnings, yen weakness, and strong overseas buying of Japanese equities. Sentiment was also supported by data showing that the Japanese economy grew by more than expected over the first quarter of the year, boosted by a post-COVID revival in consumption. Hopes that the U.S. government would reach a deal on raising the debt ceiling further added to investor optimism.
  • Japan’s gross domestic product expanded at an annualized rate of 1.6% in the first quarter of the year, ahead of expectations. Economic expansion was attributable primarily to resurgent consumption—with consumers and businesses spending more than had been anticipated—as COVID restrictions were eased. Conversely, net trade was a drag on growth given weakness in exports.
  • Japan’s April core consumer price index rose 3.4% year on year, largely driven by food price hikes. While in line with expectations, the reading marked a reacceleration in inflation and is well above the BoJ’s 2% inflation target. It led to some speculation that the BoJ would have to raise its inflation forecasts further and potentially tweak its massive stimulus program.
  • However, BoJ Governor Kazuo Ueda reasserted that the central bank is committed to patiently maintaining its ultra-loose monetary policy stance and cited risks from a slowing global economy and uncertainty about whether wage growth will be sustained. 
  • Chinese equities were mixed amid concerns that the country’s post-COVID recovery is losing steam. 
  • Official data showed industrial output, retail sales, and fixed asset investment grew at a weaker-than-expected pace in April from a year earlier. Unemployment fell to 5.2% in April from March’s 5.3%, but youth unemployment jumped to a record 20.4%, raising concerns that the post-pandemic recovery is not strong enough to attract new talent. Investors found the latest figures disappointing, although the data were helped by the comparison over the prior-year period, when China was still under lockdown.
  • The People’s Bank of China (PBOC) injected RMB 125 billion into the banking system via its one-year medium-term lending facility compared with RMB 100 billion in maturing loans. The medium-term lending rate was left unchanged, as expected. In its quarterly monetary policy report released on Monday, the PBOC pledged to maintain sufficient credit growth and liquidity in the economy, raising expectations that the central bank would step up easing measures in coming months.
  • Signs of slowing growth in China and a surge in the U.S. dollar driven by hopes that the U.S. government would raise its debt ceiling in time to avoid a default have pressured the local currency.
  • New home prices in 70 of China’s largest cities rose 0.4% in April in the fourth consecutive monthly gain but slowed from March’s 0.5% growth, Reuters reported, citing official data. The month-on-month slowdown in home price gains came after data earlier in the week showed property investment and sales fell sharply in April, adding to worries about a key sector for China’s economic health.

What to watch this week:

  • FOMC Minutes from May 2-3 meeting
  • US personal spending and income and durable goods orders data
  • UK inflation and retail sales data
  • Global Purchasing Manager Indices
  • New Zealand monetary policy announcement
  • Canadian Big Banks report earnings

Sources:,, Barron’, and

Thank you for checking out our ClearWater Market Commentary for May 19th, 2023. If you would like to receive the ClearWater Commentary at the start of every week, sign-up for our Newsletter.