Click here for the PDF: The Weekly Beacon – June 30 2023
We will be giving some macro economic market updates on a weekly basis. No equity recommendations will be given in this commentary, and we encourage you to contact us if you have questions regarding any observations.
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This weeks issue: Inflation, CPI, Bank of Canada, Core inflation, Interest rates, Market consolidation, Nasdaq 100, Tech giants, Tech stocks versus the rest, M2 Money Supply, Covid-19 liquidity, FED, Lordstown Motors stock, Lordstown Motors Tesla competitor, Lordstown Motors files for bankruptcy, Electric vehicles, Pickle-ball, Pickle-ball injuries, UBS report on healthcare, Copper supply, Latin America and copper, Socialism in South America, Chile copper, Export restrictions China vs U.S., AI chips, Nvidia, AMD, Biden vs. Xi.
Canadian CPI
Statistics Canada released May’s Consumer Price Index (CPI) this past Tuesday signaling an inflation rate of 3.4% over the last year. This is the lowest reading since June 2021. The CPI continuing to slow gives the Bank of Canada (BOC) more breathing room before their next policy decision. Although, many believe one last interest rate hike is likely. Inflation slowing down and the Bank of Canada being successful in its path to slowing price increases could be the first step for Canadians in getting relief. We do not think the BOC will cut rates immediately but think, that rate cuts could be in the cards next year, especially as economic data turns negative and we slip into a recession.
Although the CPI has decreased in recent months, relief has not come at the grocery stores for Canadians. Food from grocery stores has risen 9% over the last year.
However, it is important to remember that 3.4% is no where near the Bank of Canada’s target inflation rate of 2%.
A BMO Market Strategist wrote that he believes the BOC will not breathe a sigh of relief after Tuesday’s numbers, as core inflation remains quite sticky, and an economic slowdown has yet to occur.
Tuesday’s CPI reading came in line with economist expectations.
Money markets are now forecasting a 56% probability of a 25-basis point hike on July 12th, down from a 64% probability before the release of Tuesday’s inflation data.
It is important to remember that today’s inflation rate sits well above historical averages for inflation:
