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North American stock markets posted strong gains on the week, with the S&P 500 Composite Index closing at a fresh record high, advancing 3.8% on the week, as investors bought heavily into information technology, energy, consumer staples and materials. The Nasdaq Composite Index rose 3.6% on the week, propelled by strong gains in information technology. The gains came against a backdrop of another hike in the U.S. consumer price index, to an annual 6.8% in November, the highest rate in 39 years. Investors seemed unfazed by this, however, as the increase had been widely anticipated, and did not crack the 7.0% threshold that some analysts had forecast.
Markets had experienced some volatility earlier in the week after U.S. Federal Reserve Chair Jerome Powell had dropped the word “transitory” when describing current inflation rates, while suggesting that the Fed’s program of bond buying would be tapered off more quickly than anticipated early next year. That fed into speculation that at next week’s meeting of the rate-setting Federal Open Market Committee, the Fed would announce an end to tapering in spring 2022 to be followed by a succession of as many as three rate hikes, beginning in mid-2022. The yield on the bellwether 10-year U.S. Treasury bond gained over 14 basis points on the week, closing at 1.486%.
Toronto’s benchmark S&P/TSX Composite Index gained a more subdued 1.3% on the week, helped along by consumer discretionary and consumer staples stocks, which benefit from stronger economic growth. Crude oil gained 8.7% on the week, buoying the energy sector to a 1.4% gain on the week. Gold remained unchanged on the week.
Canadian investors closely watch the Bank of Canada’s policy statement on Dec. 8, as it kept interest rates unchanged. In its accompanying comments, the Bank said the economy had “considerable momentum” going into the final quarter of the year, bringing the employment rate to its pre-pandemic levels.
The Bank also said it expects the effects of global supply constraints, which feed through to prices in a broad range of goods, to take some time to work their way through, given existing supply backlogs. The Bank expects inflation to remain high in the first half of 2022 and ease back towards 2% in the second half. It also said that given continuing excess capacity, “the economy continues to require considerable monetary policy support.” So while its program of bond buying has ended, the Bank will keep its policy rate “at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved.” In other words, the Bank of Canada is signalling a less hawkish outlook for at least the first quarter of next year.
* Ninepoint launches silver ETF. Ninepoint Partners on Dec. 10 announced the listing of its Ninepoint Silver Equities Fund (NEO: SLVE) on the NEO Exchange. Managed by the team of Maria Smirnova, Shree Kargutkar, and Jason Mayer of sub-advisor Sprott Asset Management, the fund aims for long-term capital growth by investing companies that are involved in the exploration, mining, production, or distribution of silver. The fund can also invest in silver and silver certificates.
* Purpose repurposes floating rate income fund. Purpose Investments Inc. announced on Dec. 10 that it has changed the name, trading symbol, and investment objective of its Purpose Floating Rate Income Fund to Purpose Global Flexible Credit Fund (TSX: FLX). The fund’s new investment objectives are to maximize total return from current income and long-term capital appreciation by investing in a diversified mix of global fixed-rate and floating-rate debt securities, including high-income securities.
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