- Big Tech Drags Stock Indexes
On June 21, 2023, the stock market showed a mixed performance as tech stocks declined, impacting Wall Street's five-week rally (Quin, 2023). The S&P 500 closed 0.5% lower, with the Nasdaq composite experiencing a more significant drop than other indices. Federal Reserve Chair Jerome Powell emphasized that bringing inflation back down to the desired 2% level will be lengthy. He hinted at a slower pace of interest rate hikes, comparing it to gradually reducing speed on a highway as the destination approaches. The decline in tech stocks, influenced by rising interest rates, particularly affected high-growth companies such as Nvidia, Tesla, and Microsoft. Conversely, Dollar Tree saw a rise in its stock price by 4.6% after maintaining its earnings forecast for the fiscal year.
- Bank of Canada Hikes Interest Rates Again
The Bank of Canada increased interest rates earlier in June, to 4.75%, due to robust and resilient consumer spending, as the benchmark rate was deemed insufficiently restrictive to meet the two per cent inflation target (Lord, 2023). Consumer spending remained strong, particularly in automobiles, furnishings, and household goods. Despite higher interest rates, housing activity and prices demonstrated resilience. Economists anticipate another 25-basis-point rate hike in July, supported by recent retail data highlighting robust consumer spending.
- Housing Market Rebound Exceeds Expectations but Don’t Expect it to Last
The Canadian housing market made a remarkable comeback this spring, catching many by surprise (Heaven, 2023) . In May, home sales surged by 5.1% compared to April, marking the fourth consecutive monthly increase and a 1.4% rise from the previous year. The provinces of British Columbia and Ontario were at the forefront of this surge, with notable increases in sales witnessed in Vancouver, 35%, and Toronto, 32%. Additionally, prices experienced a steady climb for the second month in a row, with the national composite MLS Home Price Index rising by 4.1% over the past two months. This resurgence in the housing market can be attributed to the Bank of Canada halting its rate-hike campaign, reigniting demand. However, it is anticipated that the recent rate hike will have an impact on the market's momentum in the coming period.
- Don’t Expect Food Prices to Drop Anytime Soon
Food prices in Canada have increased by 18% over the past two years (Janzen & Fan, 2023). Factors like supply chain disruptions, geopolitical conflicts, and increased input costs have contributed to this rapid increase. Although these drivers are now showing signs of moderation, the demand for more expensive groceries may decrease as individuals, particularly those with lower incomes, adapt their purchasing habits to cope with the rising cost of living. It is unlikely that food prices will come down from their current levels anytime soon, as ongoing challenges such as extreme weather events, like heat domes and mass flooding, an ageing population, and the existing labour shortages continue to impact the food supply chain.
Financial Tip of the Month:
Make it a habit to pay yourself first by promptly transferring a comfortable amount from your pay cheque into a High-Yield Savings Account. If your company offers the convenience of splitting your paycheques into multiple accounts, seize this opportunity to help grow your savings.
At Alpen Investment Advisors, your trusted North Vancouver iA Investia team, we are committed to keeping our valued clients informed. We trust that you have found this market recap informative and insightful. Please do not hesitate to reach out to your dedicated North Vancouver financial advisor, jonathan@alpenia.ca for any questions about your portfolio or to help navigate the process of growing and preserving your wealth.
References:
Heaven, Pamela. “Housing Market Rebound Not Expected to Last | Financial Post.” Financial Post, 19 June 2023, financialpost.com/news/housing-market-rebound-not-expected-to-last.
Lord, Craig. “Bank of Canada Hiked Rates amid ‘surprisingly Resilient’ Consumer Spending.” Global News, 21 June 2023, globalnews.ca/news/9783897/bank-of-canada-june-interest-rate-hike-explained/.
Janzen, Nathan, and Fan. Claire. “Proof Point: Food Inflation Will Slow, but Don’t Expect Prices to Drop.” RBC Thought Leadership, 14 June 2023, thoughtleadership.rbc.com/proof-point-food-inflation-will-slow-but-dont-expect-prices-to-drop/.
Quinn, Rob. “Falling Tech Stocks Drag Indexes Down.” Newser, 22 June 2023, www.newser.com/story/336806/falling-tech-stocks-drag-indexes-down.html.
