(Toronto) The strength of the energy and industrial sectors helped push up the main Canadian stock index on Monday.
The S&P/TSX Composite Index rose 52.51 points to 22,373.38.
With the US stock markets closed for the Memorial Day holiday, the situation was relatively calm north of the border since Wall Street has a lot of influence over Bay Street, noted Les Stelmach, portfolio manager at Franklin Templeton Canada.
In Canada, this week will bring results from big banks after TD got the ball rolling last week. The bank reported a drop in profit for the quarter due to costs related to U.S. investigations into its anti-money laundering program.
Investors will be looking to see how much money banks are setting aside for bad loans, Mr. Stelmach said.
“I think bank profits have withstood most economic cycles, but there’s just a persistent theme around stress on the consumer, rising mortgage rates, mortgage renewals, as we persist in this environment higher interest rates,” he argued.
“I don’t think you’ll see anything earth-shattering in the quarterly results,” he added.
As has been the case in recent months, markets will be interested in banks’ prospects for the rest of the year, Mr. Stelmach said, reflecting continued uncertainty over possible bank rate cuts. interest.
“Inflation remains a concern in the United States in particular, and so this could keep [la Réserve fédérale américaine] away for longer than we think,” he stressed.
Heading into 2024, markets were pricing in about six Fed rate cuts this year, Mr. Stelmach said, but that number has been significantly reduced. Now, many market observers believe it is possible that the central bank could make a single interest rate cut in 2024, after a series of stronger-than-expected economic data dampened expectations for with regard to rate cuts.
In Canada, economic data is much more favorable to a rate cut, Mr. Stelmach said, but the Bank of Canada finds itself in a difficult situation because it does not want to diverge too much from the Fed. Excessive divergence could hurt the Canadian dollar, he said, and put Canada in a difficult position if economic surprises change the trajectory of rates in the United States or elsewhere.
This week, the United States will also deliver economic reports on consumer confidence, GDP and the personal consumption expenditures (PCE) index, which Stelmach said is another important indicator of inflation.
“The U.S. economy as a whole has been stronger than people expected,” he said.