Market Insights: Market Commentary - The Resurgence of the U.S. Consumer
Milestone Wealth Management Ltd. - Aug 14, 2020
Macroeconomic and market developments Equity markets were mixed this week, with Canada down slightly and the US markets up slightly. After gold’s remarkable runup in the last few months to around $2,030, this week saw the metal sell off, trading arou
Macroeconomic and market developments
- Equity markets were mixed this week, with Canada down slightly and the US markets up slightly.
- After gold’s remarkable runup in the last few months to around $2,030, this week saw the metal sell off, trading around $1,940 on Friday. This decline snaps a nine week uptrend.
- On the flipside, the price of US oil was up this week, with West Texas Intermediate crude trading around $42 (up about a dollar from last week). Western Canadian Select was also up about a dollar, trading at $29 on Friday.
- The Canadian dollar continued to strengthen this week, trading around $0.756 on Friday, up from $0.736 on June 30th, totaling a 2.7% rise so far this quarter. Starting 2020 at $0.77, that puts the Canadian dollar down 1.8% this year.
- Government bond interest rates were in focus this week. Rates have been incredibly low for the last several months due to the COVID induced recession, however this week saw longer term bond yields push higher. In Canada, the 10 year yield increased from 0.46% last week to 0.66% this week, whereas 30 year bonds went from 0.92% to 1.13%. Similarly in the US, 10 year rates increased from 0.53% to 0.70% and 30 year rates went from 1.19% to 1.42%. Of course, in the big picture these are still very low rates, but those are substantial moves higher in a very short amount of time.
- In the US, there are currently no plans for another round of stimulus talks over the near term with White House and Democrats still far apart over the size and scope of the package. Bloomberg discussed how additional state and local government funding may now be the biggest stumbling block. Fiscal cliff concerns have been flagged again this week in the press, with concerns over what would happen to the economy once the current stimulus program expires.
- In terms of the Canadian economy, June manufacturing sales rose a record 20.7% to $48.7B in June, topping consensus for +16.4. This follows an 11.6% increase in May with Stats Canada noting factories operated at a much higher capacity
- The number of confirmed COVID-19 cases globally in now just below 21 million, up approximately 2 million this week, with total deaths just over 750,000. The US continues to lead in total cases at just over 5.2 million (up approximately 400,000 from last week) and just over 167,000 deaths, with Brazil over 3.2 million cases and 105,000 deaths.
Chart of the day
The following two charts show the remarkable resurgence of the U.S. consumer. Retail sales in the U.S. for July are back to a record seasonally adjusted annualized rate, above the last peak in January. So it took just five months to recover, compared with 40 months during the 08/09 Financial Crisis.