Market Commentary

Making Cents of the Markets

Listen now to the most recent Making Cents of the Markets on CKNW. We discussed the market’s strong start this year, inflation cooling off, and Canada’s housing market. What should you do if you want to sell your home now?

Lori also provides advice on how to set yourself up for investment success and what questions you need to ask yourself first!

Click here to listen

Beyond the Markets

Dine Out Vancouver Festival

Dine Out Vancouver is back from January 20th until February 5th. With hundreds of restaurants participating, there is something for everyone! Menu prices range from $20-$65. It is the best way to enjoy great deals in some of Vancouver’s top restaurants.

Click here to see each participating restaurant’s menu.

 

Be in the Know

“We do not remember days, we remember moments.” – Cesare Pavese

May the Disinflation Be With You

Inflation was once described as “when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.”

Global inflation is the one getting the haircut, as confirmed by the latest numbers. Canada’s official rate is down to 6.3%, its lowest in ten months. Gasoline’s 13% drop in December was the biggest factor, falling almost to pre-Russia invasion levels. But consumers are still tightening their belts when it comes to grocery spending, which is up 11% from a year ago.

America’s inflation peaked in June last year and has been slowing ever since. According to the Wall Street Journal’s analysis of U.S. Labor Department data, “annual growth of inflation has eased to levels that existed before the pandemic” and they estimate that inflation is on pace for a 1.9% increase looking a year out (this compares to 1.7% inflation averaged between 2010 and 2020).

By the way, ‘disinflation’ is falling inflation. Think of a runner who keeps running, but at a slower pace. ‘Deflation’ would be a runner running backwards.

The World’s Second-Largest Economy is Waking Up From Its Slumber

China’s demographics shrunk for the first time since the Mao-induced famine of 1961, when tens of millions died due to inefficient farming, warehousing, and other logistics changes forced by the Communist central planners in Beijing.

Last year, China’s population fell by 850,000 to 1.411 billion due to a combination of an aging population, the now abandoned but still consequential one-child policy, and a change in societal attitudes toward marriage and family formation.

Covid cases have rocketed higher these past few weeks. Officially, the daily count was put at 14,000. But independent analysts adding up local-level figures put the real number of new daily counts into the millions. The official death toll in the first five weeks of reopening is pegged at 60,000, a figure that experts say is understated by a factor of three or four times.

As bad as that is, infection spreading through the populace is a process China needs to go through like most of the rest of the world did. Some 90% of citizens have at least two vaccinations but a minority of them have a third. Regardless, China is finally facing reality and working its way through this process.

The economic benefits should provide a real shot in the arm to global growth. Revenge travel is already underway, with Thailand alone expecting 7-10 million Chinese tourists this year. More travel also means more cars sold, including EV. That means more demand for commodities, especially lithium, copper, and oil.

China’s economy grew 3% last year but some economists figure it will touch a 5% expansion this year. Just how much Covid case counts hold their growth potential hostage remains to be seen, but an uptick in growth is a reasonable expectation. It’s another reason why 2023 should prove to be a better year for investors than 2022.

Our Strategy

Flat as a Pancake

Markets had a more volatile week and some indices closed slightly lower, after a couple of strong consecutive weeks that started the year. After all, it is normal for markets to take a breather during an uptrend and not shoot up in a straight line (although we would be happy with that!).

Nevertheless, our Legacy portfolios closed the week flat as our exposure to various asset classes, along with proper sector weightings helped us outperform the average North American markets’ performance.

Our position in markets remains steady. We continue to sit somewhat defensively right now and will wait and see what the Fed will do at their next couple of meetings. We have not been shy to take profits as some of our holdings have had exceptional gains.

Slowing price pressures (deflation as we talked about) usually means a slowdown in consumer spending. The first areas that consumers start cutting are those that are more discretionary to them. These would be the “wants” rather than the “needs”. For example, we took the rest of our profit on Aritzia – it was up 150% since we initiated the buy over a year ago.

Next week, we look forward to the Bank of Canada’s key interest rate decision. Consensus currently stands at a quarter-point rate hike to 4.50%. If true, this will be the smallest rate hike Canadians have seen since March of last year and it will stand as another sign that central banks could be closer to a pause, with the Fed now expected to follow suit as well.

 

 

Visual of the Week

Happy Lunar New Year!

 

 

The comments and opinions expressed in this newsletter are solely the work of Pinkowski Wealth Management, not an official publication of Canaccord Genuity Corp., and may differ from the opinion of Canaccord Genuity Corp’s. Research Department. Accordingly, they should not be considered as representative of Canaccord Genuity Corp’s. beliefs, opinions or recommendations. All information is given as of the date appearing in this newsletter, is for general information only, does not constitute legal or tax advice, and the author Pinkowski Wealth Management does not assume any obligation to update it or to advise on further developments related. Investing in equities is not guaranteed, values change frequently, and past performance is not necessarily an indicator of future performance. Investors cannot invest directly in an index. Index returns do not reflect any fees, expenses, or sales charges. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability.

CANACCORD GENUITY WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA