On Friday, August 26, the annual Jackson Hole Symposium was held in Wyoming. Each year the Federal Reserve-sponsored conference focuses on critical economic issues facing the world economy. This year, the focus was on Fed Chair Jerome Powell and the Federal Reserve's stance on using interest rates to battle inflation going forward. Comments made by the Fed not only pertain to the US, but many central bankers and finance ministers globally also look to the US for guidance

Canada’s inflation rate showed signs of slowing down, but we are not out of the woods just yet. The Consumer Price Index (CPI) for July increased 7.6% year-over-year, down from 8.1% in June. This was the first month-over-month disinflation since July 2021.

The Federal Reserve increased its main policy rate by 0.75% for the second time in a row. This is the United States’ fourth rate hike of 2022, increasing the benchmark interest rate to a target range of 2.25% to 2.50%.

The May CPI data out of the US came in much hotter than expected. Most analysts had expected year over year inflation to hit 8.3% but instead flew right past that to a new 40 year high of 8.6% (highest since 1981). The inflation numbers are being led by food and energy prices, which even when excluded; still puts inflation at an eye watering 6% year over year. Canadian energy and mining stocks declined as commodities fell after China imposed new lockdowns in parts of Shanghai, lowering the demand outlook. U.S. stocks also fell for a second day as concerns grew after Europe’s central bank became the latest to signal restrictive policies to combat inflation. The ECB made no change to the deposit rate, which was widely anticipated, but is preparing to hike by a quarter-point next month, and again by either that amount or more if inflation persists. In Canada the labour force survey was released today and showed a concerning increase in private sector unemployment (up 2%) and a shift to public sector jobs – an increase of 11%.

On Wednesday, May 18, Statistics Canada released April’s inflation report with a year-over-year increase of 6.8%, increasing marginally from the 6.7% recorded in March 2022. This new 31-year high deviated from economists' expectations of a slight decrease from last month. This begs the question, are we seeing the peak of this challenging inflationary environment or will it continue to edge higher?

This year has been extremely difficult for global stock as markets have struggled with inflation fears, rising interest rates, the Russia-Ukraine War, and lingering effects of the COVID-19 pandemic. In North America, every major index is negative on the year. The TSX is the breadwinner with a whopping -7.24% return YTD and the biggest loser being the NASDAQ at -27.32%.

The Federal Reserve announced its second rate hike of 2022 to increase the benchmark interest rate from 0.50% to 1.00%. This is the first 50 basis point hike since 2000 and the first time the central bank raised rates in back-to-back meetings since 2006.

You may have heard economists talking about the risk of “stagflation” following news the US economy shrank in the first quarter of 2022. But what is stagflation exactly and should you be worried?

Last week, Argentina’s congress approved a restructuring deal for $45 billion in debt owed to the International Monetary Fund (IMF). Following two years of negotiations, President Alberto Fernández urged his parliament to approve the deal prior to a payment of $2.8 billion due on March 22. The agreement ultimately removes the threat of an imminent default on $19 billion of repayments due this year. The terms of the agreement require Argentina to gradually reduce the budget deficit over the next three years while curbing central bank money printing in exchange for a four-and-a-half-year grace period on IMF payments.

With the news of Russia’s invasion of the Ukraine, the economic impact of the conflict has already been felt.

The political factors involved in Russia’s military action against its neighbouring nation are complex and date back to the Second World War. We recognize that this is not a simple situation that can be explained away from a financial perspective either. But with so much uncertainty, the focus that we have is the impact that this news will have on our clients. We do hope that all those involved and affected by these circumstances, whether Ukrainian, Russian, or otherwise will come to a swift and peaceful resolution.

North American markets saw one of their worst weeks post-pandemic from Jan. 17th to 21st and the bleeding has continued into this week with markets opening deep in the red on Monday. Investor’s sentiment is currently cautious/bearish due to the impending rate hikes from Central banks, Q4 earnings season, inflation numbers, and heightened tensions in Ukraine.

Due to the new COVID-19 variant, the markets have been put in a state of flux. Investing in blue-chips with dividends may seem obvious but it is reliable.

Argentina’s midterms legislative elections implications on The Blue Chip Swap spread.

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Bank of Canada will shift its quantitative easing program to a reinvestment phase.