IAIC Market Update - November 8, 2021

(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?

• Following last week’s action by the Bank of Canada to eliminate its bond-buying program, the U.S. Federal Reserve (Fed) took a similar and more protracted approach. Both are reducing support for economic recovery to curtail inflation. Additionally, the temporary nature of price increases is being questioned. As a result, the Federal Reserve will reduce bond purchases by $15 Billion/month from the current $120 Billion/month total. If this reduction schedule holds, the bond-buying program (known as quantitative easing) will end in June of next year. The purchases of bonds help to stimulate economic activity by reducing long term interest rates. Fed Chair, Jerome Powell, indicated that short term interest rates would remain unchanged. A video of Powell’s announcement is available here. 
• Canada added 31,000 jobs in October and the unemployment rate fell to 6.7%. September reported nearly five times as many jobs, which may indicate a softening of employment results. 
• In September the U.S. economy underperformed in job creation and has since rebounded by adding 531,000 jobs in October, lowering the unemployment rate to 4.6%. The American wage rate has increased by 4.9% compared to the same period last year. Rising U.S. wages along with more persistent housing costs and food prices may have contributed to the Fed’s decision to slow its bond purchasing program to temper inflation.
  
  

What’s ahead for this week?

• In Canada, the economic announcements scheduled are not significant for most retail investors. Bond markets in Canada (and the U.S.) will be closed on Thursday for Remembrance Day. It will be an important week for earnings results as several Real Estate Investment Trusts (REITs) will be announcing their performance figures.
• In the U.S., the most recent inflation numbers will be released through the announcement of the Consumer Price Index. Wholesale inventories will be announced and the Chair of the Federal Reserve, Jerome Powell, will be speaking at several conferences and will likely comment on the Fed’s decision from last week.
• Globally, China will announce its inflation numbers for both consumers and companies as their CPI and Producer Price Index (PPI) are released. Germany will also release its CPI.