Oct. 19–23, 2020

What happened last week

Markets were choppy, as prospects for U.S. economic stimulus fluctuated

The benchmark U.S. stock indexes were up and down through the week, reacting to corporate earnings, economic data, and ongoing reports of progress (and setbacks) toward a much-anticipated economic relief package for the U.S. economy. Canada’s TSX, with its heavier weighting toward the energy sector, struggled – especially, as global demand for oil remained under pressure and inventories rose in the U.S.

Markets remained sensitive to developments in Washington, D.C., including the ongoing stalemate between Democrats and Republicans over additional fiscal stimulus for the U.S. economy. With the U.S. election just over a week away, both parties tried to avoid being seen as holding up relief for American businesses and individuals – what could amount to the vicinity of US$2 trillion. But, the two sides remained far apart in key areas, including: how to allocate money for testing and tracing; how to safely reopen schools and the economy; the amount of aid for state and local governments; the level of school funding; and liability protection for employers. For more insight into what the U.S. presidential election could mean for your investments, read our U.S. presidential election: Market insight & analysis report.

Canada avoided a snap federal election

The leadership and direction of Canada's economy was put to the test on Wednesday, as Parliament voted on the creation of a committee that would investigate the alleged mishandling of COVID-19 spending. Prime Minister Justin Trudeau's minority Liberal government deemed the vote “a matter of confidence in the government,” which would have triggered a federal election if they lost. As it turned out, the Liberals ultimately won, with the support of the New Democratic Party. While the Conservative opposition motion would have established a special committee to investigate several government-spending decisions related to the pandemic, the government argued that this new committee would have paralyzed its ability to respond to the crisis.

U.S. reported falling unemployment

The U.S. Department of Labor reported that the number of Americans filing for unemployment benefits fell during the week ending Oct. 17. It’s the third decline in four weeks, which suggests that a recovery in the U.S. labour market may be underway. Initial claims dropped by 73,000 to 787,000, while the number of people already receiving benefits fell by 1.02 million to 8.37 million. This was better than economists expected, according to Bloomberg.


The stock and bond market*
INDEX CLOSE WEEK YTD
S&P/TSX Composite 16,304.08 -0.82% -4.45%
Dow Jones Industrial Avg. 28,335.57 -0.95% -0.71%
S&P 500 Index 3,465.39 -0.53% 7.26%
NASDAQ Composite 11,548.28 -1.06% 28.71%
10-yr GoC Yield 0.64% 0.07% -1.06%
10-yr U.S. Treasury Yield 0.85% 0.09% -1.07%
WTI Crude Oil (US$/bbl) 39.85 -2.28% -34.89%
Canadian Dollar US$0.7610 0.40% -1.16%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending October 23, 2020. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.


What’s ahead

Bank of Canada interest-rate announcement: In its last decision, on Sept. 9, the Bank of Canada left its benchmark interest rate unchanged at 0.25% and confirmed its commitment to keep it there until the economy stabilizes. The next decision will be announced on Wednesday (Oct. 28).

Circle these dates

  • Nov. 3: U.S. presidential election
  • Nov. 4-5: U.S. Federal Reserve meetings and statement

Key take-away

Be informed (not influenced) by the news: Media and news reports can be informative and beneficial, but they shouldn’t be a driving force in your decision-making. Market performance always needs to be put into perspective, with your goals at the centre. Speaking with a financial professional can add far greater value than merely following the headlines.


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