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North American stock indexes edged up on the week, even as the headline all-items U.S. consumer price index rose to an annual rate of 5% in May. The core index, excluding food and energy prices, jumped to 3.8%. Analysts pointed to strong demand as the economy re-starts following the pandemic lockdown, and consequent supply-chain disruptions leading to temporary shortages, and thus higher prices.
The spike in the inflation rate had already been telegraphed by the U.S. Federal Reserve, which expects the rate to decline again as supply bottlenecks are eased. Markets had discounted the rising inflation rate as a transitory phenomenon, and therefore remained relatively calm during the week, ending with small gains. While analysts do not expect any immediate action by the Fed to tighten monetary policy at next week’s meeting of the rate-setting Federal Open Market Committee, investors are less sanguine, taking a wait-and-see approach.
The S&P 500 Composite Index rose 0.4% on the week, closing at a fresh record high, while the Nasdaq Composite Index gained 1.9%. Toronto’s S&P/TSX Composite Index advanced 0.6% on the week, buoyed by strength in the energy sector with a 2.0% gain in the price of crude oil. Even gold, a sensitive barometer of inflationary pressure, eased back on the week, closing with a 0.8% loss on the week.
* BMO launches U.S. all-cap ETF. BMO Investments Inc. on June 10 debuted its BMO U.S. All Cap Equity Fund ETF Series (TSX: ZACE), which aims to provide long-term capital growth by investing primarily in stocks of U.S. companies of any size of market capitalization. The fund is actively managed by Brian Belski, Chief Investment Strategist, BMO Capital Markets.
The fund uses a model encapsulating Mr. Belski’s latest U.S. strategy research regarding the S&P 1500, sectors, industries, and style preferences. The portfolio tactically incorporates various investment styles based on the market cycle and Mr. Belski's broad strategy opinions.
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