The tone this morning remains positive

Posted: Tuesday, February 5, 2019 - 09:11 EST

The tone this morning remains positive, which is extending the equity rally from January.  The economic calendar has been light so far this week while Asian markets remain closed for the holiday.  However, steps towards ongoing trade discussions between China and the U.S. have provided support for investors.  Yesterday evening, Federal Reserve Chair Powell along with Vice Chair Clarida were invited to dinner with President Trump to discuss recent economic developments, along with the outlook for growth, employment and inflation.  Last year, while the central bank raised rates once a quarter, Trump was critical that the Fed was raising rates too quickly.  During the meeting, Powell kept the same rhetoric as the recent monetary policy statement indicating that the FOMC will continue to set monetary policy with careful, objective and non-political analysis.  The path of policy will depend entirely on incoming economic data and what that information would mean for the outlook.

With the State of the Union address from President Trump set for this evening, the Canadian corporate credit market continued to be resilient yesterday.  Positive earnings reported after market close yesterday will again add to the risk-on rally this morning.  Investors will track year-end earnings that continue to trickle in.  In the secondary market, spreads again tightened by 1-2bps across all sectors, as demand for corporate credit remains strong given the lack of new issuance.

Equity Markets:

  Index Level % Change QTD YTD Q3 2017 Q4 2017 Q1 2018 Q2 2019 Q3 2019 Q4 2019
S&P 500 2,724.87 0.68% 8.86% 8.86% 4.48% 6.64%

-0.76%

3.43% 7.71% -13.52%
TSX

15,602.32

0.62%

9.17%

9.17%

3.68% 4.44%

-4.52%

6.77% -0.56% -10.11%

Rates:

 

Today

% Change

QTD change

YTD change

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Canada 5 Year

1.87%

0.01% -0.02% -0.02% 1.75% 1.87% 1.97% 2.07% 2.34% 1.89%
Canada 10 Year 1.96% 0.00% -0.01% -0.01% 2.10% 2.05% 2.09% 2.17% 2.43% 1.97%
Canada 30 Year 2.20% 0.02% 0.02% 0.02% 2.47% 2.27% 2.23% 2.21% 2.42% 2.18%
30yr Generic Corporate A rated Spread 1.50% 0.00% 0.00% 0.00% 1.24% 1.21% 1.24% 1.28% 1.30% 1.50%
30yr All-in Corporate A rated Yield

3.70%

0.02% 0.02% 0.02% 3.71% 3.48% 3.47% 3.45% 3.72% 3.68%
US 10 Year 2.73% 0.01% 0.05% 0.05% 2.33% 2.41% 2.74% 2.86% 3.06% 2.69%
CDX IG 65.017 -0.105                

The information contained herein is intended for advisors for general information only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in the commentary and expressed by the portfolio manager are subject to change without notice and are provided in good faith without legal responsibility. All market data is sourced from Bloomberg.