by Dillon Culhane, Tom Nakamura, Auritro Kundu, AGF Investments
Members of AGF’s Investment Management Team weigh in on the week that was in global financial markets.
Rotate This
“The S&P 500 broke below its 200-day moving average of roughly 4,200 this week and is down 10% from its late July high; on the back of stubbornly high bond yields and mixed responses to quarterly earnings from some of the mega-cap growth companies given high expectations. Conversely, many out-of-favor defensive, bond-proxy stocks (Utilities, Telecoms, Consumer Staples) outperformed amid a lower bar.
Oil prices declined as Israel delayed its ground invasion of Gaza, but significant upside risk remains if the conflict widens to involve Iran – leading to real physical supply risk. Gold prices held just below the US$2,000/ounce level after rallying the previous two weeks on Middle East tensions.
We expect the minor rotation under the surface of the market to continue as investors try to determine the peak in bond yields, while digesting continued economic data, geopolitical tensions, and quarterly earnings releases.”
Bank Shots
“The Bank of Canada and the European Central Bank left policy unchanged this week and provided balanced comments around their respective outlooks. Both central banks are dealing with inflation that is receding but not yet at a comfortable level against a backdrop of slowing economic growth.
A strong third quarter GDP print in the United States was consistent with recent data, but the country’s core reading for personal consumer expenditures (PCE) slowed to 2.4% quarter-over-quarter versus an expectation of 2.5%. This is a key inflation measure and increased the chances that the Fed is done with hiking rates and helped to stabilize U.S. Treasury markets.
Central bank watchers will key in on announcements from the Bank of Japan, the U.S. Federal Open Market Committee (FOMC) and the Bank of England next week with some additional focus on the U.S. Treasury’s plans for the fourth quarter.”
Partly Cloudy
“The technology sector has witnessed a contrast in the performance of key companies thus far in third quarter earnings season. Expectations for a robust recovery in cloud computing were mixed, as investors wait for optimization efforts by customers to abate and growth to accelerate again. Notably, one cloud computing leader did exceed expectations, with generative artificial intelligence (AI) being a key contributor.
In fact, a prominent trend emerged with the increasing allocation of information technology (IT) budgets and CEO-level focus on generative AI. There is belief in a substantial growth in IT budgets for the following year, underscoring generative AI’s pivotal role in driving digital transformation.
Furthermore, digital transformation is viewed as a recession-resilient strategy, helping organizations enhance productivity, reduce costs, and innovate new business models amidst macroeconomic headwinds.”
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The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
Commentary and data sourced from Bloomberg, Reuters and company reports unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of October 26, 2023 and are not intended to be comprehensive investment advice applicable to the circumstances of the individual. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained here.
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