Posted at 8:00 a.m.
When asked what will allow the stock markets to return to a sustainable upward trend, it seems that inflation is one of the unavoidable factors. With the announcement of the latest data on the consumer price index (CPI) in the United States on Wednesday, futures contracts on the Dow Jones index immediately jumped by more than 500 points. After rising 1.3% in June, the change in the index was virtually nil in July. The annual variation fell from 9.1% to 8.5%, a drop a little greater than the expectations of the experts who predicted 8.7%.
But be careful, because the game is not yet won. “Not only is there still a long way to go to bring inflation back to a satisfactory level, but the risks remain on the upside,” warns Benoit P. Durocher, senior economist at Desjardins. It should therefore come as no surprise that stock market volatility will continue for quite some time.
The share price of Nuvei Yet seemed to be in recovery mode, dropping from $40 to $54 since July 26. But half-hearted remarks from the company’s management during the release of second-quarter financial results last Wednesday shook investor confidence once again in the payment solutions provider, whose stock was touching $170. less than a year ago. Management mentions, among other things, that higher inflation, rising interest rates and a greater slowdown in activity in terms of digital assets and cryptocurrencies will affect the results of the coming quarters. Several analysts took the opportunity to butcher their target price, including Richard Tse of National Bank Financial, who reduced his from $100 to $75.
The leaders of CAE painted a rather optimistic picture during the Investor Day they held at the beginning of June. But the most recent quarter results released last week surprised investors, when they included an unfavorable adjustment of about $28.9 million to the profits of two of their contracts in the defense sector. The stock price has fallen over 23% since then. At mid-session Friday, the title was trying to regain some composure. Moreover, this decline brings the title in a favorable situation from the angle of the risk / return relationship, according to Fadi Chamoun, analyst at BMO Capital Markets. He nevertheless reduced his target price from $42 to $36.
Although BRP been the subject of a cyberattack that has paralyzed its operations for a few days, the situation at the Quebec manufacturer of recreational vehicles does not seem to worry investors too much, because the share price even rose this week. On August 7 and 8, the firm held its Club BRP 2023 in Salt Lake City, Utah, where it presented its new products. The reaction of the participants to the event was enthusiastic and it shows that the management has certainly not been idle during the pandemic, notes Benoit Poirier, analyst at Desjardins. He sees significant growth opportunities in the short, medium and long term.
Savaria disclosed last Wednesday quarterly results showing a solid performance and good earnings before interest, taxes and amortization, according to Frederic Tremblay, analyst at Desjardins. The stock of this accessibility industry leader reacted well to the announcement of the results, as it tries to continue a recovery that began last month from a low of 52 weeks.
The strong words of central bankers and the resulting decisions, as well as the perception that the inflation rate had peaked, allowed stock markets to close higher for a fourth consecutive week. These subjects will certainly be on the agenda when the Federal Reserve of Kansas City holds its renowned annual symposium in Jackson Hole, Wyoming, from August 25 to 27, which brings together numerous economic and financial personalities. To be continued.