Market Commentary Match 29, 2019
The month of March was fairly flat for most North American Indexes in 2019, at time of writing the TSX was up just 0.35% for the month, creating 12.7% of gain in 2019. The S&P 500 was up just 0.9% for March as well, but 14% since Jan 1. The NASDAQ was up 1.6% for the month and 17.6% to start 2019. While all three indexes are on strong recovery paces (over 50% annualized rates of return), it won’t continue at the current rate.
Economic data continues to be in line with economist expectations for the most part. There has been some weakening in certain numbers, and there are lots of warning of slowing growth in the corporate world. Data like consumer confidence in the US, which means people will slow down their spending will impact the economy over time.
The biggest news this month was the inverted yield curve. What does this mean? The yield curve is explained simply as the difference in interest rates that banks are able to borrow money at and what they are able to lend it at. They tend to borrow at short term rates and lend out at the long term rates. If they have to pay a higher rate than what they can charge for the loan, they reduce the loans they offer. If this happens, credit dries up and the economy begins to shrink as businesses can’t expand and consumers can leverage debt for home purchases and things.
The other large item in the news, is the unsuccessful vote in Britain over the Brexit negotiation. Prime minister Theresa May’s government can not get the negotiated exit agreement passed by her government. The bill was rejected for a third time today, and is looking to delay the British exit from the EU until at least May. With this hanging over the EU market, equities will continue to linger in an uncertain environment.
At home in Canada, the impact of China stopping all consumption of Canadian canola oil, will begin to impact the economy and the global market supply. Canada exports billions of dollars to China in canola oil each year. If the Canadian suppliers can’t find other nations to sell to, this will cause some pain in the sector soon and its trickle effects will be similar to the oil industry.
Thank you for reading,
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