Dear valued client,
Markets had a strong week overall, posting gains both in Canada (+2.9%) and the U.S. (+4.7%), led by encouraging corporate earnings reports. Companies such as Netflix (added 2.4 million subscribers), Goldman Sachs (thanks to the merging of their investment banking and trading units), as well as Procter and Gamble (see list below of brands they own) all posted reports that beat Wall Street expectations – and were rewarded accordingly.
Canada’s inflation figures came in for the month of September at 6.86%, down from 7.01% in August. It’s an encouraging sign, especially compared to other major economies (the UK’s inflation is currently at 10.1%… a contributing factor to PM Liz Truss’ resignation after only 45 days in office). Although inflation is tapering, central banks will likely continue to raise interest rates until their target is reached.
The good news is that, if we use history as our guide, markets will likely resume their upward trend long before inflation hits central banks’ 2-3% target. The last time inflation surpassed 8% was in January 1982. From there, it was nearly a year and a half before rates fell back below the 3% mark. However, stocks began to recover well before then, posting positive annual returns from 1982 to 1989.
Supply chain disruptions have had an enormous impact on inflation, and yet another event this week may add to the pile-on. Water levels of the Mississippi River are approaching their lowest levels in 30 years, thereby creating traffic jams (more than 2000 barges are backed up along the river), adding pressure to shipping prices, as well as threatening jobs that depend on this critical trade route. Water levels are low because there has been no rain (less than one inch since Sept. 1st). The Mississippi is crucial in that it is used for 92% of U.S. agricultural exports, and 78% of global exports of soybeans and feed grains. As a point of reference, the river was closed 3 times in 2012, resulting in losses of $35 billion.
On the Ukrainian front, Russia attacked its capital this week with drone strikes aimed at energy and infrastructure targets that killed at least 8 people. Russian President Vladimir Putin has declared martial law in the four annexed regions of Ukraine (Donetsk, Kherson, Luhansk, and Zaporizhzhia) leaving the door open for sweeping new restrictions, possibly including: banning public gatherings, introducing travel bans and curfews, and censorship, among others. Does Putin have the authority to do this? Who knows. He has a habit of imposing his will wherever he sees fit.
On the topic of war, I’d like to close with a passage from a 1954 book by Archbishop Fulton J. Sheen entitled Science, Psychiatry and Religion.
It reads,
“There is an illusion that war is always wrong and that the world should be free from war. This is false. There must always be war, but the war should not be on the outside; it should be on the inside. As we war against the evil within us, the wars on the outside decrease. The reason we happen to live in a century of wars is because we have neglected to wage battle against the forces that destroy the mind and soul. He who does not find the enemy within will find the enemy without. Whatever happens first to the mind happens later to the world. If the mind itself is wrong, the outside world will be crazy.”
Have a terrific weekend,
PW
PS. Here are some brands that Procter and Gamble own:
- Always
- Ariel
- Bounty
- Charmin
- Crest
- Dawn
- Downy
- Fairy
- Febreze
- Gain
- Gillette
- Head & Shoulders
- Olay
- Oral-B
- Pampers
- Pantene
- Tide
- Vicks
(And these are only the brands with net annual sales of more than $1 billion).
