The Playbook - September 10, 2018

September 07, 2018 • Playbook

 


The Playbook

Weekly Commentary – September 10, 2018

Alfred Lam, MBA, CFA
Senior Vice-President
and Chief Investment Officer
Richard J. Wylie, MA, CFA
Vice-President, Investment Strategy

Richard Wylie’s podcast will return the week of September 17, 2018.

Economic Calendar

Date Release Period Consensus Previous
U.S.        
September 11 JOLTs Job Openings July 18 6.65 M 6.66 M
September 12 PPI August 18 3.2% 3.3%
September 13 Inflation Rate Y/Y August 18 2.8% 2.9%
September 14 Capacity Utilization August 18 78.2% 78.1%
Canada        
September 11 Housing Starts August 18 219.5 k 206.0 k

Key Earnings:
September 10: Applied Genetic Technologies Corp., Limoneira Co., Matrix Service Co.
September 11: Cracker Barrel Old Country Store Inc., Francesca's Holdings Corp.
September 12: Nevada Gold & Casinos Inc., Ocean Power Technologies Inc.
September 13: Adobe Systems Inc., The Kroger Co., LightPath Technologies Inc.
September 14: Dave & Buster's Entertainment Inc., Xcerra Corp.
Source: Trading Economics, Yahoo Finance

Market Focus

North American trade comes back into focus
The U.S. Census Bureau announced that the country's international trade deficit in goods and services widened from a downwardly revised US$45.7 billion in June to US$50.1 billion in July, a five-month high and the biggest jump in three years. July exports were US$211.1 billion, US$2.1 billion less than June exports. July imports were US$261.2 billion, US$2.2 billion more than June imports and a new record high. The politically sensitive goods and trade deficit with China surged 10% to a record US$36.8 billion. Domestically, Statistics Canada announced that Canada's merchandise trade deficit with the world narrowed from C$743 million in June, to C$114 million in July, the smallest deficit since the most recent surplus in December 2016. Canada's trade surplus with the United States widened from C$4.1 billion in June to C$5.3 billion in July, the largest surplus since October 2008. Ongoing uncertainty over international trade is unlikely to diminish as these results run counter to current White House objectives.

Longer View

Following several years of a general expansion in the price-earnings ratio of equities, we believe returns from this asset class will moderate somewhat and become more closely tied to the rate of growth in company earnings. With equity market volatility increasing to at least the normal range, it's important to keep in mind that equities are best suited for long-term investing, and that the allocation in your portfolio should reflect your investment horizon and risk tolerance. Fixed-income investments, while generally providing limited income in today's low interest rate world, are an effective diversifier in a portfolio. When there is extreme pessimism in the equity market, fixed-income tends to outperform. There is no one asset class that looks better than others, in our view, as their current valuations accurately reflect their potential and risk. Talk to your professional advisor to ensure your portfolio is optimized and continues to meet your needs.

Weekly Summary

September 4
The Institute for Supply Management reported that its Purchasing Managers Index jumped to a 61.3 reading in August. This is a 3.2-point gain from June’s 58.1 figure and remains well above the key 50.0 (generally expanding) level for a 24th consecutive month. The reading is above expectations and indicates an acceleration in manufacturing activity.

The U.S. Census Bureau announced that construction spending rose 0.1% in July, following an upwardly revised 0.8% decline in June (originally reported as -1.1%). On a year-over-year basis, construction was up 5.8%. Given the upward revisions, the monthly growth figure is broadly in line with consensus estimates. This result indicates relative stability in the construction sector.

September 5
Statistics Canada announced that Canada's merchandise trade deficit with the world narrowed from C$743 million in June to C$114 million in July, the smallest deficit since the most recent surplus in December 2016. Total exports rose 0.8%, mainly on higher crude oil prices. Total imports declined 0.4%, due to fewer aircraft imports. Since the market was looking for a widening of the deficit in July, these results are considerably stronger than expected. They are a positive sign for overall GDP growth.

The U.S. Census Bureau announced that the country's international trade deficit in goods and services widened to US$50.1 billion in July from a downwardly revised US$45.7 billion in June. July exports were US$211.1 billion, US$2.1 billion less than June exports. July imports were US$261.2 billion, US$2.2 billion more than June imports. The trade deficit was in line with expectations. The weaker trade results will hamper overall GDP growth.

September 7
Statistics Canada announced that employment numbers dropped by 51,600 in August, raising the unemployment rate to 6.0 % from 5.8 % in July. Ontario saw most of the decline with an 80,100 decrease in part-time jobs, the largest in the province since 2009. Nationally, 92,000 part-time jobs were lost versus a 40,400 gain in full-time employment. These losses are greater than anticipated. The employment data reflects the strength of the broader economy and individual sectors.

The U.S. Bureau of Labor Statistics reported that the unemployment rate was unchanged at 3.9% in August with a total of 6.2 million people unemployed. The month saw an increase of 201,000 in total non-farm payroll, which is in line with the average monthly gain of 196,000 over the last year. The average hourly earnings on private non-farm payrolls rose by 10 cents or 0.4%, bringing the annual increase to 2.9%. This is seen as a positive result and fuels speculation that the U.S. Federal Reserve will hike rates later this month.

 

Although the above information has been compiled from sources believed to be reliable, as at the date indicated, we cannot guarantee its accuracy or completeness. The information is provided solely for informational and educational purposes and is not to be construed as advice in respect of securities or as to the investing in or buying or selling of securities, whether express or implied. All data provided is subject to change without notice. The authors of this publication are employed by CI Investments Inc. or its affiliates. ®The Assante symbol and Assante Wealth Management are registered trademarks of CI Investments Inc. Assante Wealth Management and/or Assante Wealth Management and design are trademarks of CI Investments Inc. Neither CI Investments Inc. nor any of its affiliates or their respective officers, directors, employees or advisors is responsible in any way for damages or losses of any kind whatsoever in respect of the use of this information. © 2018 CI Investments Inc.

 

Privacy Policy | Legal

© 2018 CI Investments Inc.

« back to Newsletter page