Market Commentary May, 2019
May has been a month of reality setting into the market. The strong rebound from Q1 has leveled off as trade fears have resurfaced again. The optimism over a quick resolution to the US-China trade wars has subsided as both sides have implemented another round of tariffs and fees on imports and exported goods that has been delayed since March 1st.
The TSX is down over 3% for the month of May and the S&P 500 is down over 8% at time of writing. The NASDAQ is leading the decline for the month being down over 8%. The trend of volatility in the technology sector both up and down continues or the month.
Economic data being released has been fairly positive, however the theme of searching for negatives within the positives has dominated the markets this month. The US Federal Reserve has indicated it will continue to hold still on rate hikes, as has the Canadian Central bank, which should be good news for equity markets as they are free to operate without outside influence. However investors seam to be seeing this as a sign that trouble is looming. Canadian jobs data hit all time highs as over 100,000 jobs were created in the month of April, and many of them were full-time work, this pace is unsustainable. The US continues to pump out 200,000 jobs each month. To give you an idea of how much of an anomaly the month April production was for Canada, it would be similar to the US creating over 1 Million jobs for the month.
The big banks in Canada have continued to release strong earnings each quarter, bringing in billions of dollars in revenue and continuing to pay strong dividends on their stocks. The numbers do point to trouble with their lending practices as defaults are increasing, and more cash is being put aside to cover those losses. The banks have foreseen this trouble and almost all of Canada’s banks have diversified their businesses into other markets around the world.
The news to keep an eye on will continue to be progress in the US- China trade talks, as well as Brexit talks as they hopefully resolve before the end of the second quarter.
Thank you for reading,
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