ClearWater Market Commentary as of September 20th, 2021

Here is the ClearWater Market Commentary as of September 20th, 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	-0.85%
1 Month	0.74%
YTD	17.57%
1 Year	266.49%

^{As of 2021/09/17- Source: www.marketwatch.com}

Index Performances	Last 5 Days	YTD
Oil ($/bbl)	3.30%	48.40%
Nikkei 225	0.17%	11.13%
Russell 2000	-0.31%	13.12%
Nasdaq	-0.41%	16.73%
S&P 500	-0.80%	18.02%
Dow Jones Industrial	-0.82%	13.00%
S&P/TSX Composite	-0.85%	17.54%
Shanghai Composite	-2.73%	4.06%
FTSE 100	-3.24%	5.87%
CAC 40	-4.06%	15.40%
DAX	-4.14%	9.717%
Hang Seng Index	-6.64%	-11.50%

^{As of 2021/09/17- Source: www.marketwatch.com}

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

US economy (S&P 500 -0.80%):

• The small-cap Russell 2000 Index managed a small gain, but most of the major equity indexes ended the week modestly lower, as investors weighed some encouraging economic data against worries about supply chain challenges, elevated valuations, and concerns over how stocks would respond to an eventual tightening in monetary policy.
• Energy shares within the S&P 500 Index recorded solid gains on the back of rising oil prices.
• On Sunday, Democratic Senator Joe Manchin said he would support an infrastructure spending package of around USD 1.5 trillion, far less than USD 3.5 trillion that the more progressive members of Congress have proposed. Manchin, whose vote will be crucial for the bill’s passage, also stated that he believes congressional leaders should take their time as opposed to forcing the issue.
• To help fund the new package, Democrats are seeking to raise the corporate tax rate to 26.5%, up from the current 21%, while also raising the top capital gains tax rate from 20% to 25%—smaller increases than previously sought.
• Inflation moderates even as retail sales rebound, however equity investors seemed to believe that the benign inflation report was not likely to have implications for Federal Reserve policy given the outsized importance of the labor market recovery.

Canadian markets (S&P/TSX -0.85%):

• Canada’s main stock index closed at its lowest level in nearly four weeks as its largest sectors came under pressure ahead of Monday’s federal election.
• Markets also slid last week as investors continue to be concerned a fallout from regulatory crackdowns in China and signs of slowing global economic growth.
• All eyes are on the election front this week as the polls show a very close race between Trudeau and O’Toole. Trudeau does look to lose his bid for a parliamentary majority.
• Aside from the uncertainty around what another minority government in Canada will look like, markets are waiting to see the roll-out of Liberal and Conservative tax plans. Typically election results in Canada do not really have much of an effect on the broad market, however there is more uneasiness this time around.
• On the economic data front, Canadian inflation surged in August by 4.1% – quickest pace since 2003, fuelled by the summer reopening and other pandemic factors. For five consecutive months, the annual rate of inflation has exceeded the Bank of Canada’s target range.
• Canada’s housing starts were down 3.9% in August compared to July, as were building materials and supplies sales.
• Overall, investors should expect the TSX to remain range bound as the TSX lost steam this September after it touched record highs for seven consecutive months prior to last week.

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

European and Asian economies:

• Stock markets in Europe weakened as concerns about the impact of the coronavirus’s delta variant on the global economy outweighed expectations of continuing central bank support.
• The European Central Bank (ECB) expects to meet its 2% inflation target by 2025 and is on course to raise interest rates in about two years – well ahead of expectations. The Bank of England (BoE) is expected to increase interest rates even soon.
• There was a record jump in inflation in the UK as it reported a 3.2% gain in August, its highest level in more than 9 years. This spike however was due to a substantial drop in restaurant and café’ prices last year followed by meaningful increases this year.
• UK unemployment rate fell to 4.6% as well as the job market continues to improve.
• The UK Prime Minister Boris Johnson also unveiled a plan to prevent the National Health Service (NHS) from being overwhelmed by COVID this winter, starting with vaccines for children 12 to 15 years old and booster shots for those 50 years and older by Christmas. ‘Vaccine passports’ remain a possibility.
• Japan’s stock market rose over the week and campaigning has begun for the next president of the ruling Liberal Democratic Party (LDP).
• On the pandemic front, the country’s top coronavirus advisor has said that the peak of the fifth wave has largely passed and the government is aiming to ease the scope of the restrictions come November.
• Chinese stocks fell sharply on the back drop of weak August economic data, a fresh coronavirus outbreak in the Fujian province, and the growth debt crisis at embattled property developer China Evergrande Group, and the threat of tighter gaming regulations in Macau all dampened investor sentiment.
• Worsening dept problems at Evergrande, China’s third-largest developer, dominated headlines a concerns grew about a potential debt restructuring of the company. The issue is the potential inability for them to repay bank interest due on September 20 th , a sign of a liquidity issue, which is emerging as a key test of the Chinese government’s willingness to bail out systemically important, highly indebted companies.

What to watch this week:

• Canadian federal election
• Canadian retail sales data
• US and UK monetary policy announcements
• US housing and trade data
• Eurozone and UK consumer confidence data
• Japanese inflation
• Global Purchasing Manager Indices

• 

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

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