Media Room
The week in the markets -
March 31, 2023
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Consumerism and the road ahead
The Canadian Government released its detailed budget for 2023, which contains several interesting measures. Click on this link to read the budget highlights.
The Bank of Canada appears to have peaked with its interest rate policy. Data from the six-month annualized trend of the Consumer Price Index (CPI) shows a current pace of 2.5%. We believe inflation will continue to trend lower on a year-over-year basis during the rest of 2023. This suggests there is no immediate need to continue rate hikes; a pause in interest rate hikes will be welcome news to Canadian consumers.
This week, the U.S. Federal Reserve got a look at the Personal Consumption Expenditures Index (the PCE, its preferred measure of inflation). The PCE Index was up 5% from a year ago, a deceleration from January, when it was at 5.3% year-over-year. Excluding food and energy, the core PCE price index gained 4.6% year-over-year, lower than last month’s 4.7%, and matching the smallest increase since October 2021. Inflation in the U.S. continues to trend lower on a year-over-year basis, supporting the view that the Federal Reserve is in a position to pause on its rate-hiking policy.
We believe that the trend for inflation is likely to continue lower through the remainder of the year, given the inflation data mentioned above, as well as last week’s U.S. Federal Open Market Committee statement that the Federal Reserve has reached a pause with regards to any further interest rate increases. And while we may be into 2024 before U.S. inflation is back to the Fed’s 2% target, our expectation is that the Fed will be satisfied with the trend and pause, rather than risk putting undue pressure on the U.S. economy and banking system.
The Canadian dollar gained against the U.S. dollar during the week, as yields between the countries’ 2-year government bonds narrowed to within 40 basis points of each other. Market participants have started to price in the likelihood of the U.S. Federal Reserve being at the end of its rate-tightening cycle. This has narrowed the spread between market rates between Canada and the U.S. and has pushed the Canadian dollar higher as a result. We believe we may see the loonie climb further over the next few months.
This week's market closing value - week ending March 31, 2023
(As of 4:00 PM ET.*)
| EQUITY INDICES | Level | Change | 1-week | YTD | 1-year | 5-year |
| CAD | CAD | CAD | CAD | |||
| S&P/TSX | 20,066.14 | 579.23 | 2.97% | 3.59% | -8.33% | 5.48% |
| S&P 500 | 4,095.54 | 131.79 | 1.68% | 6.86% | -2.29% | 10.20% |
| DJIA | 33,274.15 | 1,036.62 | 1.57% | 0.21% | 3.71% | 7.66% |
| FTSE 100 | 7,631.74 | 226.29 | 2.31% | 4.31% | 2.96% | -0.06% |
| CAC 40 | 7,322.39 | 307.29 | 3.51% | 14.36% | 16.46% | 5.49% |
| DAX | 15,628.84 | 671.61 | 3.62% | 13.49% | 14.85% | 3.56% |
| Nikkei | 28,041.48 | 656.23 | -0.76% | 6.07% | -0.17% | 1.86% |
| Hang Seng | 20,400.11 | 484.43 | 0.79% | 2.36% | -0.02% | -6.61% |
| CURRENCY RETURNS | CAD | Change | 1-week | YTD | 1-year | 5-year |
|---|---|---|---|---|---|---|
| USD | 1.3516 | -0.0219 | -1.59% | -0.17% | 8.08% | 0.94% |
| Euro | 1.4656 | -0.0123 | -0.83% | 1.10% | 5.93% | -1.61% |
| Yen | 0.0102 | -0.0003 | -3.08% | -1.30% | -0.95% | -3.45% |
| CANADIAN TREASURIES | Yield | Change | COMMODITIES | USD | Change |
|---|---|---|---|---|---|
| 3-month | 4.33 | 0.01 | Oil | $75.52 | $6.34 |
| 5-year | 3.02 | 0.24 | Gold | $1,970.19 | -$6.37 |
| 10-year | 2.90 | 0.16 | Natural Gas | $2.20 | $0.02 |
| CANADIAN PRIME RATE |
|---|
| 6.70% |
*The data contained in the charts above is provided by Bloomberg as of 4:00 PM ET. Please note that the final closing market values may vary due to data delays and market settlement.
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