Market Commentary
May 5, 2023
Making Cents of the Markets
Listen to this week’s episode of Ready.Set.Retire! For many business owners, it takes a lot of planning and hard work to turn your business dream into a reality and the same goes for retirement planning!
Lori and Jon discuss the things you need to consider when thinking about retirement as a business owner, the challenges that can arise, and who are the professionals that you need in order to successfully transition into the next exciting stage of life!
Listen here or subscribe on Spotify, Apple Podcasts, and Acast.
Listen now to the most recent Making Cents of the Markets. Lori gave a market update ahead of the Fed’s expected 25 basis point interest rate increase and a breakdown of the final stronger-than-expected earnings results from many reporting companies.
She also talked through the top 5 common investment mistakes that retirees make and how to plan to prevent them!
Click here to listen.
Lori is honoured to be recognized as one of Canada’s Top Women Wealth Advisors by The Globe and Mail and Shook Research.
This achievement would not be possible without the collaborative effort of our powerhouse team! ” I am so grateful for the work they do every day to ensure our clients receive the superior service they deserve” – Lori
Click here to read more!
Beyond the Markets
Breast Cancer Canada’s Walk-a-Thon to Mother’s Day
The Breast Cancer Society of Canada is encouraging everyone across the country to take part in their virtual walk-a-thon, ending on May 14th. It doesn’t matter if you run 20km or walk for 30 minutes every day – gather pledges and raise vital funds for cancer research.
Put your sneakers on and get involved as every step and every dollar helps!
Click here to find out more.
Be in the Know
“Nothing is a waste of time if you use the experience wisely.” – Auguste Rodin
Oddsmakers cite a 13.3% chance of Edmonton winning the Stanley Cup. The Edmonton-based study calculates a 94.3% probability.
Beware the illusion of precision. That’s when more precision is implied than is justified.
For example, “90% of the difficulty in writing a weekly newsletter is getting started”, a claim that can’t be measured so shouldn’t be believed. Or an estimate that a dinosaur skeleton is 100 million years old, which gives a decent idea of its age but is probably off by a few million years.
When Statistics Canada said today that the nation added 41,400 net new jobs in April (double the forecast) while the U.S. Labor Department reported jobs adds of 253,000, it’s important to remember these are only rough estimates. Fairly crude ones, at that.
Despite beating estimates, the trend of net new jobs has been generally slowing but still remains positive. Specifics aside, it’s safe to say the numbers are not yet indicative of a recession.
Wall Street hopes that the U.S. Federal Reserve has stopped hiking rates after doing so this week for the 10th time in a row, taking the key rate to 5.25%.
The Fed listed a bunch of factors it will consider when makings its next decision, but the most important one they cited was ‘lag effects’. That is, the acknowledgment that a hike today takes an estimated 6-9 months to take effect.
Too Big to Fail gets a fresh dose of steroids
While the Fed said just this week that it prefers to see the banking sector inclusive of small, medium, and large banks, the biggest is now about 17% of the entire American banking sector. The largest in modern times.
There is a wide consensus that JPMorgan got a wonderful deal in buying First Republic, sharing half the risk with the FDIC.
It’s also a positive gesture that shows banking confidence.
And the banking industry needs as much confidence as it can muster. Treasury Secretary Janet Yellen warned that the debt ceiling could be hit as early as June 1st. A meeting between Republican speaker McCarthy and President Biden is set for Tuesday.
In the past, the two sides have always come to an agreement but sometimes it’s gotten messy. Really messy. Like in 2013, when Texas Senator Ted Cruz read “Green Eggs and Ham” during a mammoth filibuster, intended on defunding Obamacare, and led to a 17-day shutdown (the bill managed to pass).
But how this fight goes is anyone’s guess. A deal will eventually be made, one that may or may not include Democrats agreeing to some spending cuts. And while it may or may not get messy, long-term investors will see past this issue just as they did in 2013.
Change is inevitable. Change is constant.
Google’s top AI engineer left after 50 years to warn of the dangers of AI. Part of his message is to pause development.
Most experts believe a pause would be impossible to implement.
What is realistic and needed is getting policymakers to start implementing guardrails to reduce abusive usage.
IBM’s CEO said it expects to stop hiring back-office positions that it sees being replaced by AI over the next five years. For example, HR and other non-customer-facing roles. Of these roughly 26,000 workers at IBM, the CEO said he could “easily see 30% of that getting replaced by AI and automation over a five-year period.”
Change is coming, and investors will have to embrace it and act accordingly. Should we be afraid of AI? An expert offered this answer:
There is no one-size-fits-all answer to this question, as it ultimately depends on how AI is developed, deployed, and regulated. AI has the potential to bring many benefits, such as improved efficiency, productivity, and innovation in various fields, including healthcare, transportation, finance, and entertainment. However, there are also concerns about the potential risks and challenges associated with AI, such as job displacement, bias, privacy violations, and security threats.
To address these concerns, it is important to ensure that AI is developed and deployed in an ethical and responsible manner. This includes incorporating principles of fairness, transparency, and accountability into AI systems, as well as establishing regulations and standards for AI development and deployment.
In summary, while it is important to be aware of the potential risks and challenges associated with AI, we should not necessarily be afraid of it. Instead, we should work towards developing and using AI in a way that maximizes its benefits while minimizing its potential harms.
The name of the expert? ChatGPT.
Our Strategy
The Apple of our eye
Our long-standing Legacy holding Apple reported Q1 earnings that beat estimates on both the top line (revenues) and bottom line (earnings). The stock enjoyed an initial 2% bump in after-hours trading, but gains leveled once investors looked under the hood and saw that overall sales fell for a second quarter in a row. Overall growth has been slowing.
Having said this, Apple remains a tech darling and incredibly well-run with fat net profit margins (usually in the 25% range). We also tend to see a slowdown in iPhone demand which picks up after the new models are released in September.
But we are mindful that shares are a few percent away from it’s all-time high and will be monitoring this closely.
Further to our banking comment above, it is worth mentioning that we added to our recent purchase of TD Bank. We were delighted with TD’s announcement that they are dropping their bid for regional bank First Horizon. The deal was already trading underwater by 25-30% and with all the turmoil around regional banks, the timing of this deal was just not great.
We look forward to earnings season slowing down next week and the U.S. inflation data being released on Wednesday. Interest rate hikes may be a thing of the past and we look forward to inflation declining further over the coming months!
Visual of the Week
Although we are stuck in Raincouver, you can find our team member Megan relaxing by Shuswap Lake after a busy week in markets.
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
