| Your weekly commentary – For the week ended March 17 |
| Given the collapse of Silicon Valley Bank ("SVB") and challenges at Credit Suisse Group AG, concerns about the global financial system challenged investor confidence. However, expectations for the U.S. Federal Reserve Board ("Fed") to make a smaller rate increase at its next meeting eased weakening investor sentiment. The S&P/TSX Composite Index declined over the week, while the S&P 500 Index advanced. Oil prices fell sharply in response to economic concerns. Yields on 10-year government bonds in Canada and the U.S. ended lower. |
Concerns remain over the strength of the global financial sector- The collapse of SVB sent waves throughout financial markets, and resulted in concerns about contagion throughout the industry.
- The U.S. Treasury allowed the Federal Deposit Insurance Corporation to complete the resolution of SVB and protect all depositors.
- Credit Suisse noted material weaknesses in its reporting as its largest shareholder refused to extend it capital. The Swiss National Bank stepped in and lent the firm US$54 billion, hoping to stabilize it through this period of weakness. (March 19 update: lending deal failed. Switzerland's biggest bank, Union Bank of Switzerland, has agreed to buy its ailing rival Credit Suisse in an emergency rescue deal.)
- The European Central Bank raised its key interest rate by 50 basis points to 3.50%, while reiterating the European banking sector remained strong. The central bank is prepared to act should conditions deteriorate.
- The global financial sector's struggles raised expectations for a relatively smaller rate increase from the Fed.
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Signs of stability in Canadian real estate- Earlier in 2023, the Bank of Canada signalled its intention to pause interest rate increases, which may support demand in Canada's real estate market.
- Sales of existing homes increased by 2.3% in February, while the benchmark home price fell 1.1%, the slowest pace of decline since March 2022.
- Housing starts in Canada rose by 13.0% in February, its first increase in five months, suggesting builders may be getting more confident about the housing market.
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U.S. inflation rate eases- The U.S. inflation rate was 6.0% in February, moderating to its lowest level since September 2021.
- February's slowdown was largely in response to easing price growth for food and energy.
- Inflation remains high and broad-based. The core inflation rate was 5.5% in February.
- The result puts the Fed in a difficult spot, given its goal to bring down inflation versus its role in helping to support the financial system amid the SVB collapse.
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Chinese data pointing to improving conditions- Economic data out of China may give reason to believe economic conditions are improving.
- For the January to February period, retail sales rose 3.5% year-over-year, reversing three straight declines.
- Over the same period, industrial production rose by 2.4% year-over-year.
- Both improved compared to December as economic activity picked up amid easing lockdown restrictions and the Lunar New Year holiday.
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| Equity markets | Level | YTD | 1 Yr | | S&P/TSX Composite Index C$ | 19,387.72 | 0.01% | -10.95% | | S&P 500 Index US$ | 3,916.64 | 2.01% | -11.22% | | Dow Jones Industrial Average US$ | 31,861.98 | -3.88% | -7.59% | | MSCI EAFE Index US$ | 1,986.73 | 2.20% | -7.58% | | MSCI Emerging Markets Index US$ | 951.56 | -0.50% | -15.11% | | MSCI Europe Index US$ | 1,776.33 | 2.58% | -6.63% | | MSCI AC Asia Pacific Index US$ | 157.57 | 1.18% | -11.53% | | Fixed income market | Level | YTD | 1 Yr | | FTSE Canada Universe Bond Index C$ | 1,094.22 | 4.10% | -1.54% | | FTSE World Broad Investment Grade Bond Index US$ | 208.06 | 2.89% | -9.36% | | Currency | Level | YTD | 1 Yr | | CAD/USD | 0.7283 | -1.22% | -7.97% | | Commodities | Level | YTD | 1 Yr | | West Texas Intermediate (US$/bbl) | 66.74 | -17.36% | -35.59% | | Gold (US$/oz) | 1,989.25 | 9.06% | 2.39% |
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| Market performance – as at March 17, 2023 |
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