June 30, 2022 Newsletter
Tangents: Happy Friday Eve.
1908: A giant fireball, most likely caused by the air burst of a large meteoroid or comet flattens 80 million trees near the Stony Tunguska River in Yeniseysk Governorate, Russia, in the largest impact event in
recorded history. Go to article »
1934: The “Night of the Long Knives’, takes place in which German dictator Adolf Hitler has his SS guards execute leading officials of the SA, a Nazi paramilitary group whose methods of violent intimidation played a key role in Adolf Hitler’s rise to power. Hitler had feared that the group had become too powerful.
The wheels are — literally — coming off electric vehicles. — Anjani Trivedi
Gucci has launched a collection for pets. Would Fido ever forgive you though? (h/t Andrea Felsted)
In 1922, Klondike bars sold for just 10 cents apiece. They’re technically cheaper now. You don’t hear about many products getting cheaper over time… Learn how this beloved — and affordable — ice cream snack has stayed relevant over decades.
Mystery rocket that smashed into the moon left 2 craters, NASA says. NASA has photographed the crash site of the mysterious rocket that smashed into the far side of the moon in March, and the unidentified spacecraft left behind a weird double crater that has scientists puzzled. Images of the crash site were taken by NASA’s Lunar Reconnaissance Orbiter (LRO) on May 25 and released on June 24. The photos show that the wayward debris (the origins of which are still contested) somehow punched out two overlapping craters when it smashed into the far side of the moon traveling at roughly 5,770 mph (9,290 km/h). Full Story: Live Science (6/29)
Never-before-seen microbes locked in glacier ice could spark a wave of new pandemics if released. Stunned scientists have uncovered more than 900 never-before-seen species of microbes living inside glaciers on the Tibetan Plateau. Analysis of the microbes’ genomes revealed that some have the potential to spawn new pandemics, if rapid melting caused by climate change releases them from their icy prisons. Full Story: Live Science (6/30)
Ancient ‘bear dog’ found in France named after child-murdering cyclops. With jaws equipped to tear the flesh from the bones of their prey, extinct carnivores known as “bear dogs” were powerful predators that prowled Asia, southern Africa, Europe and North America more than 7.5 million years ago.
Now, researchers have unearthed the jawbone of one of these extinct carnivores in the Pyrenees mountain range in Europe, shedding light on just how deadly bear dogs were, and confirming how widely they were distributed around the world. Full Story: Live Science (6/30)
PHOTOS OF THE DAY
A girl plays at a fountain to cool off herself at a park, under the strain of Tokyo’s most intense June heatwave since records began in 1875
Photograph: Kim Kyung-Hoon/Reuters
People buy sacrificial animals ahead of Eid al-Adha at a market in the Imbama district. Eid al-Adha is one of the holiest Islamic festivals of the year. It marks the yearly pilgrimage, known as hajj, to visit Mecca. During Eid al-Adha Muslims slaughter an animal and split the meat into three parts: one for family, one for friends and relatives. and one for the poor and needy
People attend the San Diego county fair, as Americans prepare for their annual July 4 holiday, in California
Photograph: Mike Blake/Reuters
Ommegang Oppidi Bruxellensis’s historical parade in Brussels city centre. More than 1,400 performers will participate in a reenactment of the entry of Charles V into Brussels in 1549
Market Closes for June 30th, 2022
|Bonds||% Yield||Previous % Yield|
10 Year Bond
10 Year Bond
30 Year Bond
|WTI Crude Future||105.76||109.78|
On this day in 1938, in a move the New York Stock Exchange had resisted for a decade, William McChesney Martin was elected the NYSE’s first paid, independent president. In a sign that he took his independence seriously, Mr. Martin immediately sold his stake in his own brokerage firm and auctioned off his seat on the exchange. His starting salary: $48,000.
By Stefanie Marotta and Ana Paula Barreto Pereira
(Bloomberg) — This was supposed to be a blowout year for Canadian equities, benefiting from soaring commodity prices and a forceful post-pandemic rebound in consumer spending.
Instead, the country’s benchmark index is slumping amid the global stock selloff, though not as badly as its US counterpart.
The S&P/TSX Composite Index declined 11% in the first half of 2022 as recession fears weighed on the value-heavy market, outperforming the S&P 500 Index, which fell 21%.
Underscoring the market effects of inflation, Suncor Energy, one of Canada’s largest energy companies, soared 43%, while Shopify Inc. plunged, losing more than C$170 billion in market capitalization.
Recession Risks Put Canada’s Stock Market Beat in Jeopardy Here’s a look at some of the standout stock movers of the first half:
Once Canada’s most valuable publicly traded company, Shopify has sunk 77% this year amid a broad selloff in technology stocks and slowing e-commerce traffic.
The tumble makes the beleaguered stock and the S&P/TSX Information Technology Sector Index the market’s worst performers.
Even Shopify’s 10-for-1 stock split on Wednesday wasn’t enough to drum up investor interest, with the share price falling on the news.
Soaring oil prices boosted energy stocks, which are up 24% this year.
Oil and gas stocks may have more room to run.
Earnings in the sector are expected to skyrocket, with the blended forward 12-month average earnings per share expected to jump 59%, compared with 30% for the S&P/TSX and 20% for the S&P 500, according to Bloomberg data. Nine of the top 10 performers on the S&P/TSX are energy stocks, with Spartan Delta Corp. and Athabasca Oil Corp. leading gains with 109% and 107% increases respectively.
Meanwhile, financial stocks have spiraled as rising interest rates and record inflation spook investors.
Banks and insurers, which make up nearly one-third of the broader market, have weighed on the benchmark.
Canada’s largest lenders were down 20% last week from their record high in February and have continued to hover near that territory. If a recession ravages markets, heavyweight financials could take another chunk out of the index. Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Toronto Dominion Bank led the losses, all falling more than 12% in the first half.
The Canadian market started off the year strong, climbing as investors pivoted away from growth stocks toward value.
As recession fears set in, the benchmark has descended further into the red while maintaining its outperformance over US equities.
The S&P/TSX has handily beat the S&P 500 Index this year, and many market strategists expect the index to end the year by outperforming its US counterpart for the first time since 2016 – – so long as the economy avoids a downturn into a recession and oil demand remains high.
–With assistance from Stephen Kirkland.
* This quarter, the index fell 14%, heading for the biggest decline since the first quarter of 2020
* This month, the index fell 9%
* So far this week, the index fell 1.1%
* The index declined 6.5% in the past 52 weeks. The MSCI AC Americas Index lost 14% in the same period
* The S&P/TSX Composite is 15.1% below its 52-week high on April 5, 2022 and 1.1% above its low on June 23, 2022
* The S&P/TSX Composite is up 0.8% in the past 5 days and fell 9% in the past 30 days
* S&P/TSX Composite is trading at a price-to-earnings ratio of 14.7 on a trailing basis and 11.6 times estimated earnings of its members for the coming year
* The index’s dividend yield is 3.1% on a trailing 12-month basis
* S&P/TSX Composite’s members have a total market capitalization of C$3.06t
* 30-day price volatility rose to 19.29% compared with 19.17% in the previous session and the average of 20.27% over the past month
| Index Points | |
Sector Name | Move | % Change | Adv/Dec
Materials | -82.9247| -3.6| 5/46
Energy | -47.1424| -1.3| 2/35
Financials | -31.5504| -0.5| 8/20
Information Technology | -22.7059| -2.2| 2/12
Consumer Staples | -15.0890| -1.9| 2/9
Industrials | -8.8722| -0.4| 17/12
Consumer Discretionary | -6.5853| -1.1| 4/9
Communication Services | -5.1874| -0.5| 0/7
Health Care | -3.1369| -4.0| 0/7
Utilities | 1.2351| 0.1| 5/10
Real Estate | 4.6598| 0.9| 20/3
| | |Volume VS| YTD
|Index Points| | 20D AVG | Change
Top Contributors | Move |% Change | (%) | (%)
Shopify | -18.6400| -5.6| 717.4| -76.9
Nutrien | -13.8600| -3.4| 2.4| 7.8
Royal Bank of Canada | -13.6600| -1.1| -9.4| -7.2
Fairfax Financial Holdings | 2.0090| 1.9| 41.2| 9.6
Thomson Reuters | 2.3030| 1.5| 15.0| -11.3
Brookfield Infrastructure | 4.3200| 2.9| 41.2| -4.2
By Rita Nazareth
(Bloomberg) — The selloff in stocks deepened after weak consumer-spending data fueled worries about a recession, with the S&P 500 suffering its cruelest first-half since Richard Nixon’s presidency.
It was a rout for the history books, with the benchmark gauge down 21% in the first six months of the year — the most for such a span since 1970.
The superlatives kept piling up across Wall Street, with 10-year US yields plunging to about 3% from a decade-high of 3.5% in mid-June.
The dollar had for its best quarter since 2016.
The nearly 60% drawdown in Bitcoin since the end of March was the largest since the third quarter of 2011.
US consumer spending fell for the first time this year, suggesting an economy on somewhat weaker footing than previously thought amid rapid inflation and Federal Reserve hikes.
A view that central banks need to act fast because they misjudged inflation has roiled markets, with traders ramping up bets the economy will buckle under aggressive tightening.
“The stagflation that has gripped our country right now is going to make it tough on the stock market over the intermediate term,” said Matt Maley, chief market strategist at Miller Tabak.
“When demand is not the key reason why inflation is a problem, a slower economy is not going to help bring inflation down as much as some experts seem to think.”
Key segments of the world’s biggest bond market — such as the difference between five and 10-year yields — have inverted, signaling bets that higher rates will hurt the economy.
Inversions have generally preceded recessions by about six to 18 months, according to data compiled by Bloomberg.
After a rough first half of the year, July will be pivotal for the future direction of markets amid corporate earnings, key inflation data and the Fed meeting, according to Greg Marcus, managing director at UBS Private Wealth Management.
He says volatility will probably remain elevated until there’s evidence that inflation is moderating, recession risks are receding and geopolitical threats are declining.
Over the past few months a strategy that had worked well for a decade has been met with fresh lows in the market.
Traders have shunned the “buy-the-dip” mantra while embracing the “sell-the-rally” mode.
As a result, the S&P 500 entered a bear market for the second time since 2020, having plunged over 20% from its January peak.
But dismal performance is not an indication of what’s to come.
The US equity benchmark lost 21% in the first half of 1970, during a period of high inflation that the current environment has been compared with.
It gained 27% during the last six months of that year.
“We’re going to have a double-digit return between now and the end of the year,” Jonathan Golub, head of US equity strategy at Credit Suisse, told Bloomberg Television. “We don’t have a profit problem as much as people say.”
Earlier this week, Goldman Sachs Group Inc. strategists noted that US profit margin estimates are way too optimistic, putting stocks at risk of more declines when Wall Street analysts downgrade their expectations.
Morgan Stanley’s Lisa Shalett said Monday analysts need a reality check about their earnings projections for this quarter.
Elsewhere, oil suffered its first monthly slide since November as OPEC+ completed the return of output that it halted during the pandemic.
Gold dropped for a third straight month.
What to watch this week:
* Eurozone CPI, Friday
* US construction spending, ISM Manufacturing, Friday
Some of the main moves in markets:
* The S&P 500 fell 0.9% as of 4 p.m. New York time
* The Nasdaq 100 fell 1.3%
* The Dow Jones Industrial Average fell 0.8%
* The MSCI World index fell 1%
* The Bloomberg Dollar Spot Index fell 0.4%
* The euro rose 0.4% to $1.0481
* The British pound rose 0.4% to $1.2173
* The Japanese yen rose 0.6% to 135.74 per dollar
* The yield on 10-year Treasuries declined seven basis points to 3.02%
* Germany’s 10-year yield declined 18 basis points to 1.34%
* Britain’s 10-year yield declined 16 basis points to 2.23%
* West Texas Intermediate crude fell 3.6% to $105.82 a barrel
* Gold futures fell 0.6% to $1,807.30 an ounce
–With assistance from Andreea Papuc, Denitsa Tsekova, Cecile Gutscher, Lu Wang, Elaine Chen, Isabelle Lee, Vildana Hajric and Enrique Roces.
Have a wonderful weekend everyone.
Our doubts are traitors,
And make us lose the good we oft might win,
By fearing to attempt. –William Shakespeare, 1564-1616.
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
Toll Free: 1.877.430.5895