Author: Danny Popescu | November 8, 2021
Following last week’s action by the Bank of Canada to eliminate its bond-buying program, the U.S. Federal Reserve (Fed) took a similar and more protracted approach. Both are reducing support for economic recovery to curtail inflation, which is much higher than either central bank would prefer. Additionally, the temporary nature of price increases is being questioned. As a result, the Federal Reserve will reduce bond purchases, which have been $120 Billion per month by $15 Billion each month. If this reduction schedule holds the bond-buying program (known as quantitative easing) will end in June of next year. The purchases of bond helps stimulate economic activity by reducing long term interest rates. Fed Chair, Jerome Powell, indicated that short term interest rates would remain unchanged. A video of Powell’s announcement is available at: https://www.federalreserve.gov/monetarypolicy/fomcpresconf20211103.htm
Canada added 31,000 jobs last month and the unemployment rate fell to 6.7%. The prior month had nearly five times as many jobs, which may indicate a softening of employment results. Last month the U.S. economy underperformed in job creation but has rebounded by adding 531,000 jobs in October and lowering the unemployment rate further to 4.6%. Also, the American wage rate has increased by 4.9% compared to the same period last year. Rising U.S. wages along with more persistent housing costs and food prices may have contributed to the Fed’s decision to slow its bond purchasing program to temper inflation.
Positive economic predictions are beginning to emerge as exists as-chain disruptions are expected to ease over time and the effects of the Delta variant of the coronavirus become more muted.
What’s ahead for this week and beyond?
In Canada, the economic announcements scheduled are not significant for most retail investors. Bond markets in Canada (and the U.S.) will be closed on Thursday for Remembrance Day. It will be an important week for earnings results as several Real Estate Investment Trusts (REITs) will be announcing their performance figures.
In the U.S., the most recent inflation numbers will be released through the announcement of the Consumer Price Index. Wholesale inventories will be announced and the Chair of the Federal Reserve, Jerome Powell, will be speaking at several conferences and will likely comment on the Fed’s decision from last week.
Globally, China will announce its inflation numbers for both consumers and companies as their CPI and Producer Price Index (PPI) are released. Germany will also release its CPI.
Have a great week.
“I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of Harbourfront Wealth Management. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by Harbourfront Wealth Management Inc.”
Disclaimer – This information transmitted is intended to provide general guidance on matters of interest for the personal use of the reader who accepts full responsibility for its use and is not to be considered a definitive analysis of the law and factual situation of any particular individual or entity. As such, it should not be used as a substitute for consultation with a professional accounting, tax, legal or other professional advisor. Laws and regulations are continually changing, and their application and impact can vary widely based on the specific facts involved and will vary based on the particular situation of an individual or entity. Prior to making any decision or taking any action, you should consult with a professional advisor. The information is provided with the understanding that Harbourfront Wealth Management is not herein engaged in rendering legal, accounting, tax or other professional advice. While we have made every attempt to ensure the information contained in this document is reliable, Harbourfront Wealth Management is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is,” with no guarantee of completeness, accuracy, timeliness or as to the outcome to be obtained from the use of this information, and is without warranty of any kind, express or implied. The opinions expressed herein do not necessarily reflect those of Harbourfront Wealth Management Inc. The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are not to be construed as a solicitation or offer to buy or sell any securities mentioned herein. Harbourfront or any of its connected or related parties may act as financial advisor or fiscal agent for certain companies mentioned herein and may receive remuneration for its services. The comments and information pertaining to any investment products (The Portfolios) sponsored by Willoughby Asset Management are not to be construed as a public offering of securities in any jurisdiction of Canada. The offering of units of The Portfolios is made pursuant to the Offering Memorandum or Simplified Prospectus and only to investors in Canadian jurisdictions. Important information about The Portfolios is contained in the Offering Memorandum or Simplified Prospectus available through Willoughby Asset Management. Commissions, trailing commissions, management fees, performance fees, and expenses all may be associated with investments in The Portfolios. Investments in The Portfolios are not guaranteed, their values change frequently, and past performance may not be repeated. Historical annual compounded total returns including changes in unit value and reinvestment of all distributions do not take into account sales, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Unit values and investment returns will fluctuate and there is no assurance that The Portfolios can maintain a specific net asset value. Harbourfront Wealth Management Inc. (“Harbourfront”) has relationships with related and /or connected issuers, which may include the securities or funds discussed in this commentary and are disclosed in our Statement of Policies Regarding Related and Connected Issuers. This policy is included in your new client package, on our website, or can be obtained from your investment advisor.
Click below to return to the Newswire portal.