IAIC Market Update - March 21, 2022

(source: Bloomberg https://www.bloomberg.com/markets, MSCI https://www.msci.com/end-of-day-data-search and ARG Inc. analysis)

What happened last week?

• Equities performed exceptionally well as the TSX set a new all-time high and U.S. indices made major gains. The S&P 500, Dow, and NASDAQ have Year-to-Date negative performance as many unwound their positions in 2022. Institutional investors drove last week’s gains as the unwinding slows allowing fewer sellers to be outnumbered by buyers. Also, the interest rate increase was anticipated and had been priced-in prior to the announcement. (Source) 
• Canada’s Consumer Price Index (CPI) rose an additional 0.6% in February and the annualized rate of inflation is 5.7%, the highest it has been since August 1991 when it was 6.0%. Food, housing, and gasoline were major contributors. Gasoline, for example, has risen 32% since February 2021, which is prior to the effects of the invasion of Ukraine. Thankfully, the rate is well below the 7.9% U.S. inflation rate, but still well above the range that the Bank of Canada has set as its target. (Source) 
• In response to U.S. inflation sitting just under 8%, the Federal Reserve increased interest rates on Wednesday afternoon. The federal funds rate increased by ¼% to a range of ¼% to ½%. This was the first increase since 2018. The Fed’s mandate is to maximize employment and manage long-term inflation at 2%. Based on the current rate of domestic inflation and international pressures the Fed “anticipates that ongoing increases in the target range will be appropriate.” As many as six interest rate increases are expected from the Fed in the coming months. (Source) 
  
  

What’s ahead for this week?

• In Canada, February’s industrial products and raw materials inflation and manufacturing sales will be released. The federal government’s budget balance for January is scheduled.  Provinces are reducing or ending pandemic restrictions, creating confusion for communities, students, and workers.
• In the U.S., Purchasing Managers Indexes from Market and ISM representing optimism for corporate expansion, new home sales, pending home sales, and durable goods orders will be released.
• Globally, Eurozone consumer confidence, Japan’s machine tool orders, PMI and department store sales, European Central Bank’s economic bulletin are scheduled for announcement.