Bottom Line: There are still reasons to be wary of China—strict COVID policies are not going away anytime soon.
Recently, we’ve seen European energy prices come down a bit despite Russia’s Gazprom restricting supply by temporarily shutting off the Nord Stream pipeline. On the surface, this appears to be a violation of basic rules of supply and demand—if the supply goes down, shouldn’t the price go up? But it makes sense when you consider that investors had already priced in much of the risk of Russia limiting energy supply. Overall, though, this is very bad news and demonstrates why we’re remaining underweight Europe. Russia still has the capability to do major damage to the European economy, and their power will only increase as the colder winter months approach. There are also many uncertainties around the Russia-Ukraine war, which does not appear to be any closer to being resolved. That dark cloud will hang over the European economy for the foreseeable future.
Bottom Line: The probability of a long-lasting recession remains higher in Europe than anywhere else and this decline in European energy prices should only be considered temporary.
Bottom Line: Canada’s economy is still fundamentally strong, but a weakening consumer is a cause for some concern.
- Stocks slumped this week, still drying off the cold water tossed on the market by Fed Chair Powell in Jackson Hole.
- The S&P 500 slipped 3.3%, with technology and materials posting the deepest declines, and industrials not too far ahead. All other sectors were also in the red on the week.
- Meantime, the TSX gave back 3.0%, with materials and energy dragging as oil prices fell. Consumer staples posted the lone gain in a defensive week.
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