Weekly Market Commentary August 11th, 2022

The Markets

If you have ever been camping, you may have banked your campfire by covering the hot coals with ash. It’s a process that keeps the coals burning low so the fire can be easily rekindled. The U.S. Federal Reserve has been trying to bank the fire of U.S. economic growth – and it’s proving to be challenging.

There are signs that U.S. economic activity is faltering. For example, economic growth declined during the last two quarters, the U.S. housing market appears to be cooling, and consumer sentiment is low, reported Colby Smith of Financial Times. However, last week’s data suggested some parts of the economy are still doing well.

• Unemployment fell to 3.5 percent, tying a five-decade low. The U.S. labour market added more than twice the number of jobs economists had expected, reported Jeffry Bartash of MarketWatch.
• Corporate profits grew in the second quarter. So far, 87 percent of the companies in the S&P 500 index have reported on second quarter earnings. While the pace of growth is slower than the five-year average, three-out-of-four companies have reported higher than expected profits, reported John Butters of FactSet.

“The blended…earnings growth rate for the second quarter is 6.7% today,” reported FactSet. “Six of the 11 sectors are reporting year-over-year earnings growth, led by the energy, industrials, and materials sectors. On the other hand, five sectors are reporting a year-over-year decline in earnings, led by the financials, consumer discretionary, and communication services sectors.”

It is, of course, prudent to point out that an earnings growth rate of 6.7 percent has not outpaced inflation.

• The services sector continued to recover. Economic activity in the services sector grew for the 26th month in a row. It was up 1.4 percentage points in July, according to the latest Services ISM® Report On Business®.

Last week, major North American stock indices stayed relatively flat, while yields on Treasuries and government bonds rose, both in the U.S. and Canada. If you have any questions or concerns about your investment portfolio or recent market conditions, please don’t hesitate to give us a call.

What do you do when it's really hot outside?

In the United Kingdom, they’re cooling off by eating ice cream. It has been hot in England this summer. During a multi-day heat wave, asphalt buckled at airports and on roads, and the British government recommended that people stay home.

Those who ventured out could visit a pop-up store offering a unique treat: ice cream flavoured to taste like savory sauces, condiments, breakfast cereals, and other foods that might be found in a British pantry. The adventurous could pick up pints of ice cream flavored to taste like:

• Tomato ketchup
• Rolled oats
• Coco pops
• Soy sauce
• Black tea
• Mayonnaise
• Salad cream
• Golden syrup
• Worcestershire sauce
• Baked beans

“’There's lots of weird flavours and... me and my sister were very excited to try lots of them," one nine-year-old customer told Natalie Thomas of Reuters.

What do you like to do when it’s hot outside?

Weekly Focus – Think About It

“Truth always carries with it confrontation. Truth demands confrontation; loving confrontation nevertheless. If our reflex action is always accommodation regardless of the centrality of the truth involved, there is something wrong.”

—Francis Schaeffer, American theologian and philosopher

Best regards,

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