“It could become a very big problem”
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Good morning!
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It’s ugly outside.
On Friday, the S&P 500 stock index fell below its mid-June low at 3,666, erasing the summer rebound. Fueled by fears of rising inflation and a global recession, the rout swept through bonds, energy, metals – just about everything but the US dollar.
But if US equities struggled, the S&P/TSX composite fared worse. Canada’s main stock index posted its biggest drop in more than three months on Friday as oil prices fell. For the week, the index lost 4.7% and fell about 16% from its March closing high.
The dawn of a new week doesn’t look much better as the sell-off in global risk assets continues today.
“These are uncharted waters,” Sam Stovall, chief investment strategist at CFRA Research, told Reuters. “The market is currently going through a crisis of confidence.”
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Crisis indeed. That sentiment was reflected in a new poll from personal finance site Finder which found that 24% of Canadians have no confidence in the stock market and plan to cash out this year. In other words, that’s 7.5 million Canadians ready to cut their losses.
“Based on our data, we see that one in four Canadians are looking to minimize their market losses by cashing out in 2022. This could become a really big deal,” said Romana King, chief financial editor at Finder, in the press release. .
Nearly half of those asked about their investment plans, 41%, stick to the market, planning to buy and hold for the long term. But 74% are not convinced of a return on their investments this year.
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According to the poll, confidence in stocks varies by region, with Ontarians the least confident and British Columbians the most. One in three investors in British Columbia are somewhat or very confident of meeting or exceeding their return in 2022, the highest in Canada. Alberta investors are the most likely to stay the course, with 49% employing a buy and hold or long-term strategy, although 45% are unsure of the market.
Pessimism is far from being a uniquely Canadian phenomenon. According to strategists at BofA Global Research, investor sentiment is “unquestionably” the worst since the global financial crisis, with its bullish and bearish indicator returning to its maximum level of declines.
“The 3rd Great Bond Bear market is a doozy so far,” with the highest government bond losses since 1920, the strategists led by Michael Hartnett said in their weekly rating The Flow Show.
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Cash inflows reached $30.3 billion in the week to September 21, while stocks saw outflows of $7.8 billion. Bonds lost US$6.9 billion and gold US$400 million.
And we haven’t seen the lows yet, analysts said.
“The inflation/rates/recession shocks are not over, plus the bond crash in recent weeks means the highs in credit spreads, the lows in equities are not here yet,” Hartnett’s team said.
Goldman Sachs Group Inc. cut its year-end S&P 500 target by 700 points to 3,600 last week, and Bank of America Corp. suggests it could go even lower.
“Munch at 3,600 SPX, bite at 3,300, gorge at 3,000,” Hartnett’s team said.
Investors now have a reason to enter the market.
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HISTORICAL STORM Waves crash near a damaged house built near the shore as Hurricane Fiona passes the Atlantic settlement of Port aux Basques, Newfoundland and Labrador. The historic storm battered eastern Canada, forcing evacuations, uprooting trees and power lines and reducing many homes to “just a pile of rubble”, Reuters reports. The extent of the destruction will only be known in the days and weeks to come. But with the storm packing gusts of up to 170km/hour sweeping homes, bridges and roads, Fiona recalled the damage caused by other storms, including Hurricane Dorian in 2019, which was reported to have had a $105 million insurance bill. . Prime Minister Justin Trudeau said the Canadian Armed Forces would be deployed to help with the cleanup. Read the heartbreaking story on the ground on Newfoundland’s battered coast. Photo courtesy of Wreckhouse Press via Reuters
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- The Chamber of Commerce of Metropolitan Montreal will host a debate on the major issues related to the economy of Quebec and Montreal
- Today’s data: Wholesale sales in Canada
- Earnings: Dye and Durham
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Retail sales data released on Friday suggests that the Bank of Canada’s rate hikes are starting to affect something other than the housing market.
Sales fell more than expected in July and although lower gasoline prices were the cause, the decline was widespread, said CIBC economist Karyne Charbonneau, noting that the only sectors where sales increased were sporting goods and miscellaneous stores (which include pet stores and cannabis stores). stores).
The advance estimate for August foresees a rise but it is moderate, at 0.4%.
Charbonneau says this sign of weakness in retail sales which have remained resilient finally offers proof that the impact of rising rates is being felt.
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“This is the type of data the Bank of Canada will be looking for as it enters what should be the final stage of its hiking cycle,” Charbonneau wrote. “We continue to expect another 50 basis point increase in October, before further evidence of a slowing economy allows the Bank to suspend rate hikes.”
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Savvy financial skills to balance our budgets are even more important in this time of high inflation. But it’s not only a good idea for us to learn how to better manage our money, it’s equally important to teach our children. Sandra Fry writing for the Financial Post has some tips on how parents can teach their children good money management. One: start the process as soon as your kids start asking you to buy things for them. Find all the tips here
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Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.
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