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It’s been an interesting week and it would be easy to ascribe the latest rally to improving economic stats like New Home Sales, GDP Growth and or the jump in US personal income and personal spending. However, I don’t think any of that mattered as investors stepped back into the market in the belief Fed Chair Jay Powell would continue his zero interest rate even before today’s announcement and after the “asset tapering” speeches by other prominent Fed Presidents. It’s all predicated on inflation being transitory and not the beginning of a long term sustained trend in rising prices. Intuitively, how can rising deficits not lead to a spike in the long term outlook for inflation? Personally I am leaning towards the hawkish comments made by Bullard and Kaplan…well that and rising energy prices coupled with a price spike in semiconductor chips that go into everything from autos to toasters. Plus Canada’s Industrial product prices has increased 15% in the last 12 months. Ultimately those price increases will hit us in our pocket books. And it seems corporation after corporation is raising the minimum wage without government intervention. Yesterday Lulu Lemon joined the crowd of corporations that now face the difficult task of either passing on the costs to its customers or eating them resulting in lower future corporate earnings. Time will tell. Meanwhile, on the corporate front, our banks all reported third quarter earnings and in aggregate surpassed $14 Billion dollars.

Turning to next week, in addition to US Pending Home Sales and Consumer Confidence, investors will also view the employment stats for August. Best guess is another 800,000 more jobs. Of course there will be the usual smattering of corporate earnings with names like Zoom Video, Campbell Soup and Broadcom in the US and Laurentian Bank and BRP in Canada. Speaking of Canada, Stats Can is expected to report a 5.6% annualized rate of GDP growth for the second quarter as well as the monthly PMI data for manufacturing.

Beyond that we see the usual headlines regarding spiking covid cases, hurricane Ida heading towards the US Gulf Coast plus the ongoing tragedy in Afghanistan. We pray the loss of life will be minimal but that may not be the case. We are lucky to live in a part of the country that is sheltered from most of those problems.

Stay Safe and Happy Trading.

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