Canada’s main stock market, the Toronto Stock Exchange, closed up near 50 points on Monday, making it four winning days in a row for total gains of near 150 points, with the resources heavy index buoyed today by higher commodity prices.
According to Vince Cignarella on BNN TV, in the US — where both the S&P and Nasdaq lost about 0.1% each — there was selling off in ETFs related to indices, more so than the selling off of individual stocks.
In the absence of market drivers today, Cignarella noted focus appears to be already on US CPI data due this week amid reports that the New York Fed found Consumer Expectations showing short, medium and long term expectations for inflation all dropped. Also, household wealth expectations were buoyant.
This comes as Wells Fargo Investment Institute published Monday an Institute Alert: ‘What’s next for inflation, and investment implications’ in which it said the recent decline in commodity prices may produce a sudden drop in headline inflation in the coming months, although it added other components are likely to keep inflation higher for longer.
Ironically, perhaps, today gold pushed back above the US$1,800 mark for just the second time in five weeks despite higher bond yields as the US dollar moved lower. Gold for December delivery closed up US$14.00 to US$1,805.20 per ounce.
And West Texas Intermediate (WTI) crude oil closed higher as worries that major economies will tip into recession because of interest-rate hikes faded. WTI crude closed up $1.75 to settle at US$90.76 per barrel, Marketwatch reported. October Brent crude, the global benchmark, was last seen up $1.71 to US$96.63, while Western Canada Select was up $2.63 to US$71.18 per barrel. Goldman Sachs on the weekend lowered its forecast for Brent crude for the final quarter of this year to US$125, down from its prior estimate of US$130 as it remains bullish on oil prices.
Among other key takeaways in its Alert, WFII said the Federal Reserve is unlikely to pivot to an accommodative policy until inflation returns to somewhere between 2% and 3%. It added: “Policy seems set to reduce economic growth until demand roughly matches supply.” And although WFII believes a recession will result from persistent inflation and continued increases in interest rates, it also expect a recovery beginning in mid-2023.
And in a separate equities spotlight, WFII said its base case is for a moderate U.S. recession over the next 12 months. Historically, it noted, equity markets have been mixed prior to official recessions, but tend to bottom before the economic contraction ends. “In our view,” it said, “during late cycle and early recessionary periods, investors should consider moving up in quality and reducing cyclical exposure in favor of defensive sectors.”