March 20, 2023 Newsletter

Dear Friends,

Tangents: Happy Monday.  Spring Equinox at 5:24 EST in the Northern Hemisphere.  😊

March 20, 1916: Albert Einstein publishes his general theory of relativity.
March 20, 1997: Liggett Group settled 22 state lawsuits by admitting the industry markets cigarettes to teenagers and agreeing to warn on every pack that smoking is addictive.  Go to article > 
 
Ovid, writer, b. 43 BC.
Henrik Ibsen, writer, b.1828.

Northern delights: What makes the Finns so damn happy?

7,000-year-old cult site in Saudi Arabia was filled with human remains and animal bones: Archaeologists in Saudi Arabia have discovered ancient human remains buried near hundreds of scattered animal bones inside a 7,000-year-old desert monument, a ritual site used by a prehistoric cult.   The remains, those of an adult male approximately in his 30s, were found inside a mustatil, a structure that takes its name from the Arabic word for rectangle.
Full Story: Live Science (3/17) 
PHOTOS OF THE DAY

Luxor, Egypt
This undated photo shows a mural, part of a zodiac diagram found on the ceiling of the Temple of Esna in Luxor, Egypt. A complete zodiac diagram was found on the ceiling of a Roman-era temple in the southern Egyptian province of Luxor, the country’s ministry of tourism and antiquities said
Photograph: Xinhua/Rex/Shutterstock

Shawnee, US
A motorist is silhouetted against the setting sun in the state of Kansas on the eve of the vernal equinox, that marks the beginning of spring in the northern hemisphere with the day and night being roughly equal in duration
Photograph: Charlie Riedel/AP

Tokyo, Japan
People enjoy cherry blossoms
Photograph: Androniki Christodoulou/Reuters
Market Closes for March 20^th, 2023

International Markets

Bonds

Currencies

Commodities

Market Commentary:
📈 On this day in 1602, the Western world’s first major publicly traded company was born, as the Dutch legislature granted a monopoly on trade to the Verenigde Oostindische Compagnie, or Dutch East India Company, which dealt in booming consumer products like cloves, tea, black pepper and Chinese porcelain. In 1609, the company’s directors declared that investors couldn’t sell their shares back to the company, but only to other investors—giving birth to the modern stock market.  The Dutch East India Company lasted 196 years.
Canada
By Bloomberg Automation
(Bloomberg) — The S&P/TSX Composite rose 0.7% at 19,519.43 in Toronto.
The move follows the previous session’s decrease of 0.8%.
Today, energy stocks led the market higher, as 7 of 11 sectors gained; 143 of 235 shares rose, while 85 fell.
Canadian Natural Resources Ltd. contributed the most to the index gain, increasing 2.6%.
Spartan Delta Corp. had the largest increase, rising 5.8%.
Insights
* This quarter, the index rose 0.7%
* This month, the index fell 3.5%
* The index declined 11% in the past 52 weeks. The MSCI AC Americas Index lost 13% in the same period
* The S&P/TSX Composite is 12.1% below its 52-week high on April 5, 2022 and 9.2% above its low on Oct. 13, 2022
* The S&P/TSX Composite is down 0.4% in the past 5 days and fell 4.9% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 12.5 on a trailing basis and 12.7 times estimated earnings of its members for the coming year
* The index’s dividend yield is 3.3% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.1t
* 30-day price volatility rose to 11.70% compared with 11.46% in the previous session and the average of 9.08% over the past month
================================================================
|Index Points | |Sector Name | Move | % Change | Adv/Dec
================================================================
Energy | 64.5126| 2.0| 36/3
Financials | 31.6804| 0.5| 17/12
Materials | 18.6890| 0.8| 31/17
Communication Services | 12.8518| 1.3| 5/1
Consumer Staples | 8.5343| 1.1| 9/2
Consumer Discretionary | 3.6426| 0.5| 7/8
Real Estate | 0.4523| 0.1| 13/7
Health Care | -1.6488| -2.4| 2/4
Industrials | -2.0542| -0.1| 13/14
Utilities | -4.7740| -0.5| 4/11
Information Technology | -5.8846| -0.5| 6/6
================================================================
| | |Volume VS| YTD |Index Points | | 20D AVG | Change Top Contributors | Move | % Change | (%) | (%)
================================================================
Canadian Natural Resources | 13.5500| 2.6| -1.3| -6.3
RBC | 12.3600| 1.0| -43.8| 1.0
Suncor Energy | 9.9850| 2.7| -20.1| -5.4
Canadian Pacific | -2.1870| -0.3| -33.7| 4.8
Canadian National | -2.8550| -0.4| -44.8| -2.0
Shopify | -11.8200| -2.3| -25.5| 27.5
US
By Rita Nazareth
(Bloomberg) — Stocks finished higher as regulators worldwide rushed to shore up market confidence, with the recent financial turmoil spurring speculation on a slower pace of tightening from major central banks.
An earlier flight-to-safety bid waned, with all 11 groups in the S&P 500 gaining.
A gauge of US lenders climbed after last week’s 15% rout.
First Republic Bank plunged 47% to a record low, missing out on a rebound by its regional peers led by New York Community Bancorp.
UBS Group AG rose as investors focused on the upside of its Credit Suisse Group AG takeover.
Following the biggest weekly surge for the Nasdaq 100 since November, the tech-heavy measure underperformed as a recovery in risk appetite sent Treasuries slumping.
Global central banks witnessed no dash for dollars after uniting with the Federal Reserve to ease access to supplies of the US currency — an indication that the latest bout of banking turbulence may not be causing undue stress to the financial system.
To a large extent, the market feels the turmoil is not systemic and there will be a solution to “contain the damage,” according to Chuck Cumello, chief executive officer at Essex Financial Services.
That doesn’t mean there won’t be other “landmines” out there, so that’s going to be a challenge, he added.
“Monday’s session was relatively tame versus what we anticipate will be a week of elevated realized volatility,” said Ian Lyngen at BMO Capital Markets. “Conviction is scarce in the current environment and this observation applies not only to the Fed, but also to the evolution of the banking sector stress.”
Just a couple of weeks ago, investors were betting the Fed would raise rates close to 6% and the European Central Bank would hike past 4%.
Now markets imply the tightening cycles are almost over and wager on four rate cuts in the US by year-end.
Overnight indexed swaps price in a 75% chance of a quarter-point hike by the Fed this week.
Swap traders currently see the Fed’s benchmark ending the year around 4% — a whole percentage point below the central bank’s rate estimate in the December “dot plot” that comes as part of the quarterly economic projections.
In keeping with the theme of instilling confidence in the banking system, Fed Chair Jerome Powell will possibly reiterate that further progress needs to be made toward the goal of price stability, Lyngen noted.
A “dovish hike” remains our bias, he added.
“We expect a 25 bp hike and higher dots in the dot plot,” said Chris Low, chief economist at FHN Financial. “50 bp would be reckless, but no hike would suggest the bank crisis supplants the fight against inflation. 25 bp seems just right. Of course, our view from midtown Manhattan may not be quite the same as the Fed’s from central DC. If the Fed chooses not to hike, the language they use to couch that choice in will be key to shaping the entire yield curve.”
Market easing expectations have “run wild” because the media blackout has restrained Fed-speak, according to Win Thin at Brown Brothers Harriman.
While nobody knows the extent to which the recent turmoil is impacting the rate hike debate, Fed officials will likely fall in line with ECB President Christine Lagarde, who last week stressed that there is no trade-off between price and financial stability.
“This was a very strong statement that suggests any banking sector issues won’t derail the tightening cycle,” he noted. “We think this view is held by pretty much every central bank, including the Fed, which supports our call for a 25 bp hike this week.”
Morgan Stanley’s Michael Wilson said the stress in the banking system marks what’s likely to be the beginning of a painful and “vicious” end to the bear market in US stocks.
“This is exactly how bear markets end — an unforeseen catalyst that is obvious in hindsight forces market participants to acknowledge what has been right in front of them the entire time,” Wilson wrote.
Bank failures, market turmoil and ongoing economic uncertainty as central banks battle high inflation have increased the chances of a “Minsky moment,” according to JPMorgan Chase & Co.’s Marko Kolanovic.
The term, named for the late American economist Hyman Minsky, refers to the end of an economic boom that has encouraged investors to take on so much risk that lending exceeds what borrowers can repay.
At that point, any destabilizing event may force investors to sell assets for cash to repay their loans, sparking a market meltdown.
“Even if central bankers successfully contain contagion, credit conditions look set to tighten more rapidly because of pressure from both markets and regulators,” Kolanovic wrote.
The Federal Home Loan Bank System issued $304 billion in debt last week, according to a person familiar with the matter, who asked not to be identified discussing non-public data.
That’s almost double the $165 billion that liquidity-hungry lenders tapped from the Fed.
In the likely volatile period ahead, high-quality, defensive assets should be sought out, while diversification will be increasingly important, said Seema Shah at Principal Asset Management.
Keith Lerner at Truist Wealth, says he also prefers staying defensively positioned even as the market appears to be fairly resilient.
“Although a Fed pause or pivot could trigger a short-term rally, we don’t see this as a cure-all, especially if the economy falls into recession later this year,” Lerner added.
“The Fed’s reaction function to current events will likely be less aggressive in providing monetary support relative to past periods given the conundrum of still-elevated inflation.”
The banking-sector turmoil combined with a previous increase in funding pressures has left financial markets also keenly attuned to what the Fed will say about its $8.6 trillion balance sheet.
Until this month that had been shrinking as part of the Fed’s efforts to return it back to pre-pandemic levels.
But now it has started to expand again as the Fed acts to bolster the banking system through a slate of emergency lending programs.
Its latest step came Sunday, when it moved with other central banks to boost US dollar liquidity.
Some say financial-stability concern may spur policymakers to dial back the runoff of its bond portfolio, a process known as quantitative tightening that’s designed to drain reserves from the system.  
Key events this week:
* US existing home sales, Tuesday
* US Treasury Secretary Janet Yellen to appear at Senate subcommittee hearing, Wednesday
* FOMC rate decision, news conference from Chair Jerome Powell, Wednesday
* EIA crude oil inventory report, Wednesday
* Eurozone consumer confidence, Thursday
* BOE interest rate decision, Thursday
* Swiss National Bank rate decision and press conference, Thursday
* US new home sales, initial jobless claims, Thursday
* US Treasury Secretary Janet Yellen testifies to a House  Appropriations subcommittee, Thursday
* Eurozone S&P Global Eurozone Manufacturing PMI, S&P Global Eurozone Services PMI, Friday
* US durable goods, Friday

Some of the main moves in markets:
Stocks
* The S&P 500 rose 0.9% as of 4 p.m. New York time
* The Nasdaq 100 rose 0.3%
* The Dow Jones Industrial Average rose 1.2%
* The MSCI World index rose 0.7%
Currencies
* The Bloomberg Dollar Spot Index fell 0.4%
* The euro rose 0.5% to $1.0723
* The British pound rose 0.9% to $1.2279
* The Japanese yen rose 0.3% to 131.43 per dollar
Cryptocurrencies
* Bitcoin fell 0.3% to $27,890.29
* Ether fell 2.3% to $1,758.27
Bonds
* The yield on 10-year Treasuries advanced five basis points to 3.48%
* Germany’s 10-year yield advanced two basis points to 2.13%
* Britain’s 10-year yield advanced three basis points to 3.31%
Commodities
* West Texas Intermediate crude rose 1.2% to $67.57 a barrel
* Gold futures rose 0.5% to $2,000.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Isabelle Lee, Vildana Hajric, Emily Graffeo, Carly Wanna, Angel Adegbesan, Peyton Forte and Edward Bolingbroke.
Have a lovely evening.

Be magnificent!

As ever,

Carolann
The simplest questions are the most profound.  Where were you born? Where is your home? Where are you going?
What are you doing? -Richard Bach, b. 1936.

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM
Senior Investment Advisor

Queensbury Securities Inc.,
St. Andrew’s Square,
Suite 340A, 730 View St.,
Victoria, B.C. V8W 3Y7

Tel: 778.430.5808
(C): 250.881.0801
Toll Free: 1.877.430.5895
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www.carolannsteinhoff.com