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Well it’s good to be back in sunny Victoria. Michele and I spent the last two weeks at the family cabin on Savary Island enjoying a bountiful supply of crab and salmon. However like all Bokor vacations, this one came with a hiccup. In this case I dislocated my shoulder falling out of a boat on day four and while that was painful, popping it back in was even more so. It resulted in a non-stop rotation of ice packs strapped to my arm accompanied by a judicious supply of rum to numb the inside and outside of the damaged shoulder socket. Fortunately I was also able to reach out to a team of medical professionals for some sage advice. Unfortunately, they were well into their third bottle of BC red wine and suggested I stop falling out of boats followed by “if it hurts to move your arm, don’t… ha aha ha ha!

Meanwhile, during our vacation, corporate earnings continued to surprise to the upside and coupled with dovish comments from the US Federal Reserve the last week of July, provided enough support and stability to keep markets on an even keel. However, with Covid cases spiking during our holidays, there was definitely an underlying current of uncertainty which was bolstered by a lack of progress on a US infrastructure stimulus bill. That kept enough money on the sidelines pending today’s jobs data. Well the US added a staggering 943,000 jobs in July and with a concerted effort by Government and industry to encouraging vaccinations, investors liked the news and stepped in to send markets to record highs.

The key question that remains is when will the Fed start to taper their monthly bond buying activities. There is a building consensus that Mr. Powell may wait too long and all the extra credit in the system could generate multiple asset bubbles as free money rolls into stocks, real estate, commodities and crypto currencies. In my opinion, he needs to act sooner rather than later. Anecdotally, I continue to see evidence of supply shortages leading to rising costs that in turn are being passed down to the end consumer. In my book that is inflation and more it takes hold the greater the likelihood it may lead to imbedded cost push inflation rather than a onetime transitory spike in prices. Time will tell…well actually we get the latest inflation numbers on Wednesday and Thursday so stay tuned on that front.

Meanwhile, If you look at the smart money, bond yields rose on the jobs data along with the US Dollar both of which hurt commodities like gold, copper and crude oil. Mind you I am not counting out gold and oil as investments. Middle East tensions continue to rise and it will take a lot of negotiating to stop OPEC infighting and with global economies restarting, demand for crude should lead to higher prices. But even if they don’t Canadian and US oil companies will be making a lot of money with crude above $65 per barrel.

On the plus side, rising bond yields are good for financials so no surprise they were some of the best performers on Wall and Bay Street this week.

On the corporate earnings front 1100 US corporations report and if they mirror the earlier releases, we could see additional gains in stock prices.

Happy trading.

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