Weekly Market Commentary - November 3rd 2022

The Markets

Earnings season has arrived, the time when companies share how well they performed during the previous quarter. Earnings reports are important because they provide information about a company’s financial health. Shareholders pay particular attention to earnings, which are company profits after expenses have been subtracted.

At the end of last week, slightly more than half of the companies in the S&P 500 index had reported results for the third quarter of 2022. The blended earnings growth rate* for the S&P 500 was 4.1 percent, year-over-year, according to I/B/E/S data from Refinitiv.

The worst performing sector was communication services, which includes some big technology names; earnings for the sector were down 20.9 percent for the third quarter. At the other end of the spectrum was the energy sector with year-over-year earnings growth of about 136 percent. The sector was led by big oil companies, some of which posted record profits, reported Sabrina Valle and Ron Bousso of Reuters.

The weaker performance of technology companies helps explain why the Dow Jones Industrial Average (Dow), an index that includes large blue-chip companies, has outperformed the technology-heavy Nasdaq Composite index recently.

Investors were also encouraged by last week’s economic data. The Personal Consumption Expenditure Price Index (PCE), which is the U.S. Federal Reserve’s favoured measure of inflation, “…increased 4.2 percent [in the third quarter], compared with an increase of 7.3 percent [in the second quarter]. Excluding food and energy prices, the PCE price index increased 4.5 percent [in the third quarter], compared with an increase of 4.7 percent [in the second quarter]”, reported Barron’s. North of the border, the Consumer Price Index increased by 6.9 percent year-over-year by the end of September.

While recent stock market gains have been a respite for investors, corporate earnings are not as strong as the top line numbers suggest. When the energy sector is excluded, the blended corporate earnings rate was down 3.5 percent for the third quarter.

Last week, major North American stock indices rose, and yields for most Treasuries and Government bonds moved lower, both in the U.S. and Canada.

*The blended rate combines actual earnings/profits for companies that have reported with consensus estimates for companies that haven’t yet reported.

Source: FactSet

We look forward to seeing you this weekend!

We are happy to announce that now that we have more in-person events happening, we will be attending the Canadian Veterinary Medical Association (CVMA) and the Society of British Columbia Veterinarians (SBCV) Trade Shows in Vancouver this weekend!

We look forward to seeing our veterinarian clients out there as well as meeting new people. Make sure to stop by our booth and sign up for our giveaway.

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What do you know about economics?

Adam Smith defined economics as “an inquiry into the nature and causes of the wealth of nations.” Alfred Marshall offered an alternative option: Economics is the study of humans “in the ordinary business of life.” No matter how you define it, economics shapes and influences our lives. Test your knowledge of all things economic by taking this brief quiz.

1. The first version of the board game Monopoly was created to help people understand the: 

a. Harm done by monopolies 

b. Advantages of monopolies

c. How family members think and collaborate

d. None of the above 

2. What is the paradox of thrift?

a. Saving more can lead to economic growth

b. Shoppers can find valuable items in thrift stores

c. Saving more can lead to economic slowdown

d. Spending less today could mean having more in retirement

3. Which of the following is not thought to cause prices to increase?

a. The Fed raising rates

b. Consumer spending

c. Demand for goods increasing

d. People thinking prices will move higher

4. Generally, macroeconomics considers the role of governments in a market economy. What historical event led to the study of macroeconomics?

a. The Credit Crisis of 1772

b. World War II

c. The Great Depression

d. The Oil Crisis of 1973

The answers can be found below.

Weekly Focus – Think About It

“Economics is extremely useful as a form of employment for economists.”

—John Kenneth Galbraith, economist

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