Friday Market Insights – Quiet markets but continued positive economic reports

Thomas Holloway: [00:00:04] Hi, folks, and welcome to the Genus Friday Market Insights, today’s June 4th. And my name is Thomas Holloway. I’m a portfolio manager and I’m joined by Justin Hahn, the Genus macro portfolio strategist. Can you kick us off with what happened this week in markets that were as interesting to you?

Justin Hahn: [00:00:23] Yes. So the markets this week were relatively flat and quiet as we hover around the all time high levels for a lot of the indexes. In quarter one, we saw Canadian GDP expand by about five point six percent, led by the residential investments as the housing market still remains strong there. We also saw continued strength in the US economic numbers with services PMI as they’re coming in at record highs, which is very positive for the markets. And we also saw manufacturing PMI bounce up as well above the 60 above the 50 expansionary mark, this would mark the 12th straight month of expansionary territory for the PMI numbers. We also saw the job numbers released today a bit stronger than a bit weaker, sorry than expectations, but the markets actually took that positively, which will cover a bit later. In addition, we also saw the OECD increased global growth estimates for twenty twenty two, up to about four point four percent from 4.0 percent, and also increasing Canada’s GDP estimate to about six point one percent and three point eight percent for this year and next year.

Thomas Holloway: [00:01:28] Great, good summary. Thank you. So kind of quiet in the market prices, but information continuing to come in around the reopening and such. So Justin you mentioned, the services and the manufacturing versions of the PMI.

Justin Hahn: [00:01:42] Yeah. So the recent services PMI as this week, were actually the strongest on record and kind of illustrates the pent up demand that’s been going on due to all the covid Lockdown’s last year. We also still believe there is more upside on the service side, at least as we head into the summer months and Travel and leisure pick up as well as vaccination efforts continue in the US, manufacturing has also rebounded, still not as high it was a couple of months ago. But it is, like I mentioned before, the 12th to 12th straight time that the reading has been above 50 since April of last year.

Thomas Holloway: [00:02:17] Great. But let’s start off maybe with a topic that’s still super interesting for us to watch, but I guess away from the exactly what Genus in. And that’s on both crypto markets and the continuing kind of saga of the meme stocks such as EMC and GameStop. What’s the latest there, Justin?

Justin Hahn: [00:02:37] Yeah, we’re seeing a similar situation as we saw in January and February during those two peaks where we’re seeing a lot of these heavily shorted companies like EMC and GameStop saw up with retail investors coming in. Actually, I think I saw today’s report showing that AMC actually owned by about 80 percent retail investors, which is quite a large portion. Part of this cost could be due to the lackluster performance we’ve seen in the crypto currencies for cryptocurrency have crashed quite a bit after Chinese and US regulators began to step in. And also with Tesla pausing its Bitcoin purchases due to the environmental impact, this also points out the amount of excess liquidity we have in the markets with all the pent up demand from last year and all of the extra stimulus given through stimulus checks and other methods floating around in the markets. These stocks are more treated as trading vehicles, more of day trading vehicles than actual fundamental investments. So we kind of are straying far from it and not really looking at it too much, but following the news around it. We also saw EMC today come in and say they’re giving out free popcorn to all the investors that they have. So, I mean, if you think about it, any company that would give out free popcorn, you would probably expect the stock to go up as well.

Thomas Holloway: [00:03:56] Yeah, it’s a fascinating idea. It’s like, you know, you could buy one share for I think it’s around fifty or sixty dollars, that’s a little bit pricey for a bag of popcorn. But you can almost justify the share purchase just on that one offer. And you know, the other thing that came out this morning that Justin mentioned was the the monthly non-farm payrolls report. So this is really the one, the big the biggest monthly series that any macroeconomist looks at to understand the health of the US economy. And in turn, maybe the global economy comes out early in the morning on the first Friday of the month. So today was non-farm day. What did you see there Justin?

Justin Hahn: [00:04:34] Yeah. So the US job numbers this month came in slightly below expectations actually for the second straight month. But we still saw unemployment rates still move down to about five point eight percent, although unemployment still remains strong. Economists expectations, we believe, have been a little bit too overoptimistic about the pace of the job growth. This actually became quite a positive for the markets. The markets actually shot up today, especially in the tech sector after the weaker job numbers. This is mainly due to a lot of the fears on investors mind currently. Is the Fed increasing rates a little faster and begin tapering their large balance sheets, but with a little bit of a slowdown in the job data, investors are more optimistic about a longer run there and a more cautious Fed, despite also the increase in volatility we’ve seen in the equity markets. The bond markets have actually been trading quite range with the US ten year at about one point five to about one point seventy five percent. And it’s been like that for the past few months. So we haven’t really seen too much new signals from the bond market.

Thomas Holloway: [00:05:38] Ok, so we’re going to leave it there. Beautiful end of the week here in Calgary. I think it’s the same in Vancouver for weather. So I hope clients enjoy the weekend if if that’s able to hang in there. If you as always, if you have more questions or things you’d like to hear us chat about, reach out to your portfolio manager or reach out to me if you like, or just in and with that. Thanks again for your business. And we’ll talk to you soon.

Justin Hahn: [00:06:04] Thanks everyone.