Dear valued client,
Earnings season rolled on this week as big names in technology such as Google and Microsoft demonstrated they were on solid financial footing in Q1 of 2023. Meta’s earnings were the biggest positive surprise as the company posted revenues that showed a 3% increase from a year ago. This was a relief as the Facebook parent company had previously posted three straight quarters of falling revenue.
While the tech world buoyed the market, it couldn’t escape the shadow cast by First Republic Bank. The regional bank headquartered in San Francisco suffered over $100 billion in deposit outflows last quarter, despite the aid of other large American banks a few weeks prior. First Republic is exploring the option of selling tens of billions of dollars in assets to help bolster its balance sheet and remain solvent.
U.S. GDP slowed to a 1.1% growth in Q1 of 2023 (compared to 2.6% in Q4 and 3.2% in Q3 of 2022) in the midst of sticky inflation and rising interest rates. Businesses have pulled back sharply by reducing inventories as well as the number of employees they have on payroll in order to level out their balance sheets. Personal consumption, however, has been a bright spot for the economy as the PCE showed a 3.7% increase in purchases this quarter. Inflation and the trajectory of interest rates will continue to play central roles in how the economy performs over the next several months.
Tensions are rising on our side of the border as members of the Public Service Alliance of Canada (PSAC, i.e., federal government employees) have been on strike since April 19. On Wednesday, 35,000 CRA workers joined 120,000 other employees on the picket line, demanding higher wages to keep up with inflation and flexibility around working from home. This is one of Canada’s largest strikes ever and carries economic implications of approximately $200 million per day (good luck getting your passport renewed anytime soon!). Chris Aylward, President of the PSAC, has been imploring PM Trudeau to negotiate a deal that is fair for all parties involved.
“To be free, the workers must have choice. To have choice they must retain in their own hands the right to determine under what conditions they will work.” – Samuel Gompers
Have a terrific weekend,
PW
