|  | | | | | Your weekly commentary – For the week ended December 15 | | Global equity markets advanced over the week ended December 15. The U.S. Federal Reserve Board ("Fed") held steady and demonstrated a more cautious tone as it signalled a strong likelihood of interest rate cuts next year. The S&P/TSX Composite Index finished higher, led by the Health Care sector. U.S. equities also finished in positive territory. Yields on 10-year government bonds in Canada and the U.S. fell sharply. Oil and gold prices finished higher over the week. | Canadian home sales activity drops- Canada's real estate market continues to feel the pressure from higher mortgage rates and elevated prices.
- Existing home sales in Canada dropped by 0.9% in November, extending the multi-month decline. Home prices also dropped, with the benchmark home price falling by 1.1% in November.
- Housing starts dropped by 22% to 213,000 units in November, their lowest level since May. Both single- and multi-unit starts fell over the month.
- To increase supply amid affordability concerns, the federal government has looked to the past to increase supply. In a move like that enacted after World War 2, the government is moving forward with building a catalogue of home designs, which are expected to be done more quickly and at a lower cost.
- Unlike the program then, this one will be focused on building multiplexes and laneway homes, among others, as opposed to the wood-frame detached homes back then.
| Fed points to peak interest rates- As was widely expected, the Fed held its federal funds rate steady at a target range of 5.25%‐5.50% at its final meeting of 2023.
- With inflation moderating and economic activity slowing, the Fed took a relatively cautious stance. Fed officials signalled the possibility of three interest rate cuts towards the back end of 2024, but they didn't completely rule out the possibility of more interest rate increases with inflation remaining above the Fed's target.
- Inflation continued its downward path in November. The U.S. inflation rate was down to 3.1% in November, the lowest rate since June.
- The drop came amid a fall in energy prices, while food and apparel prices softened.
- While headline inflation was down, core measures, which exclude volatile items such as energy and food, remained elevated at 4.0% in November.
| ECB and BoE hold steady to end 2023- Across the Atlantic, two major central banks held their last meetings of 2023, keeping their respective interest rates steady.
- The European Central Bank ("ECB") kept its key interest rate unchanged at 4.50% in November, matching expectations.
- The ECB reiterated its commitment to keep rates at restrictive levels as elevated inflationary pressures persist. Europe's central bank sees inflation easing over the next few years, inching closer to its target by 2025.
- At a third straight meeting, the Bank of England ("BoE") held its policy interest rate steady at 5.25%.
- There were three officials who voted for another 25-basis-point rate hike, but the majority believed the current level was restrictive enough to help bring down inflation.
| Retail sales growth in China picks up- Domestic demand in China appears to be picking up as the end of 2023 nears, supporting the notion economic conditions are stabilizing in the world's second-largest economy.
- Retail sales rose by 10.1% in November over the same month last year, outpacing the 7.6% year-over-year growth in October.
- November's increase benefited from a rise in sales for clothing, furniture and communications equipment.
- Another key part of China's economy, industrial production, also advanced in November. Industrial production rose by 6.6% year-over-year, its sharpest pace of growth since February 2022 as output for manufacturing and mining grew.
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| | | | Equity markets | Level | YTD | 1 Yr | | S&P/TSX Composite Index C$ | 20,529.15 | 5.90% | 4.74% | | MSCI USA Index US$ | 4,504.78 | 23.75% | 23.27% | | MSCI EAFE Index US$ | 2,192.98 | 12.81% | 13.24% | | MSCI Emerging Markets Index US$ | 1000.89 | 4.65% | 4.55% | | MSCI Europe Index US$ | 1,986.25 | 14.71% | 13.63% | | MSCI AC Asia Pacific Index US$ | 165.60 | 6.33% | 5.91% | | Fixed income market | Level | YTD | 1 Yr | | FTSE Canada Universe Bond Index C$ | 1,122.93 | 6.83% | 3.22% | | FTSE World Broad Investment Grade Bond Index US$ | 213.19 | 5.42% | 3.62% | | Currency | Level | YTD | 1 Yr | | CAD/USD | 0.7474 | 1.10% | 1.87% | | Commodities | Level | YTD | 1 Yr | | West Texas Intermediate (US$/bbl) | 71.43 | -11.00% | -6.15% | | Gold (US$/oz) | 2,019.62 | 10.72% | 13.66% | | Silver (US$/oz) | 23.86 | -0.41% | 3.34% |
| | Market performance – as at December 15, 2023 | | | | | |
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This commentary represents Canada Life Investment Management Ltd.'s views at the date of publication, which are subject to change without notice. Furthermore, there can be no assurance that any trends described in this material will continue or that forecasts will occur; economic and market conditions change frequently. This commentary is intended as a general source of information and is not intended to be a solicitation to buy or sell specific investments, nor tax or legal advice. Before making any investment decision, prospective investors should carefully review the relevant offering documents and seek input from their advisor. You may not reproduce, distribute, or otherwise use any of this article without the prior written consent of Canada Life Investment Management Ltd. Privacy, legal, copyright and trademark information
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