Are things slowing down or speeding up? It’s not so clear.

• Canadian CPI decelerates, U.S. retail sales surge.
• Mixed U.S. corporate results: where are we in this economic cycle?
• Powell hints at rate hikes, but no one believes him.

Let's kick off this market update with a nod to "seasonality" in the stock market. As everyone eagerly awaits the winter rally, market experts are quick to highlight historical averages as predictors of what's ahead. But what are the true "seasons" influencing our current market mood? They're less about weather patterns and more about bond yields. Falling yields can put some holiday cheer on your stocks, but a jump to 5%, like the one seen in the 10-year Treasury bond this week, might just be the Grinch that stole your bullishness.

Canadian Consumer Price Index (CPI) figures for September revealed a deceleration in core metrics. The Bank of Canada’s (BoC) year-over-year core measure came in at 2.8%, which was down from 3.3% the previous month, while the month-over-month figure slipped to -0.1% from 0.1%. Statistics Canada attributes this slowdown to reduced prices in several sectors. This figure was reached even after a 7.5% annual increase in gasoline prices. That’s good news, because the gasoline surge has reversed so far this month, pointing to another soft October number. Grocery prices continue to be a concern, increasing by 5.8% annually, but this too has slowed from a previous 6.9% rate. Following this report, both the U.S. and Canadian dollars saw a jump, influenced by both the CPI data and strong U.S. retail sales figures. This suggests the BoC might reconsider its recent assertive stance in its upcoming meeting.

Americans are still spending. The September U.S. retail sales data surpassed expectations, showing a 0.7% month-on-month increase, outpacing the 0.3% forecast. Additionally, figures were revised upwards for prior periods. This recent robust data aligns with other strong reports from the U.S., including job metrics and consumer price indicators.

On the corporate side, the big American banks reported earnings that were a mixed bag. While there were cautionary notes on the broader economy, the reports were not overly pessimistic either. Also reporting earnings, the freight giant J.B. Hunt commented: “We are not at a point yet to say we're out of the freight recession, but we do feel like we're coming out of it.” This once again highlights how different parts of the economy appear to be in different parts of the economic cycle, which is expected to be a major theme over the next few months.

Federal Reserve (the Fed) Chair Jerome Powell once again tiptoed around the Fed’s monetary policy direction, emphasizing that it's neither too tight nor too lax. He killed the possibility of a November hike, but we pretty much knew that already. Even December's odds sit at 24% (down from 28%). He attributes the bond yield surge to term premiums, not to expectations of future central bank action. By this he means that long-term rates are not rising because people expect more hikes, but because of other supply-and-demand-based factors. Still, this yield surge is causing tighter financial conditions and doing the Fed’s job for them. Powell, ever the party pooper, hinted at additional rate hikes contingent on sustained growth and labour market shifts. Attaining the 2% inflation target might require slowing growth. Unfortunately for him, some projections anticipate a 5% GDP increase next quarter, which is anything but slow. Despite a 525-basis-point rise in interest rates, ongoing quantitative tightening and 30-year mortgage rates at a 23-year high, the economy remains resilient.

Listen to this week’s podcast for further insights.