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 Sector Scopes Update March 2024 & S&P/TSX Composite Index (TSX.I)

Trading in equities and bonds had been choppy over the last week as investors waded through a number of central bank and other developments then exploded to the upside yesterday afternoon and overnight, sending the S&P 500 up above 5,200 to a new all-time high.

The big Fed meeting turned out to be a neutral nothingburger with no change to interest rates, no change to the member forecast of 3 rate cuts this year, no change to the neutral tone with inflation still not subdued, and no change to Quantitative Tightening. The Fed did raise its 2024 US GDP growth forecast to 2.1% from 1.4% and raised its interest rate forecasts for 2025 and beyond, but the market action indicates traders viewed the current stance as bullish for stocks. Treasury yields, meanwhile, declined following the Fed move even though the US central bank reduced its rate cut expectations for future years. This morning, the Swiss National Bank announced a surprise 0.25% interest rate cut to 1.50%, offsetting the Jank of Japan’s interest rate increase earlier in the week. The Bank of England stayed the course on interest rates. Flash PMI reports rolling out from around the world this morning have been mixed. Tomorrow brings retail sales reports for Canada and the UK. One-week returns for countries around the world have mostly landed in a range between -2.0% and +2.0% with Japan and the US among the leaders, while Hong Kong and Australia have been among the laggards. We may see continued volatility tomorrow as it is Quadruple Witching Day when many Options and Futures expire at the same time.

Despite yesterday’s gains, there are some issues simmering away beneath the surface investors should note. Although eight of the eleven main industry groups are up over the last week, Information Technology, which has been driving the bus since this current market advance started in October is still down over the last week. The strongest groups have been Energy and Materials which were boosted by rising Crude Oil, Copper and Gold prices, which can be seen as a sign that inflation may not go away as quickly as the central banks would like.

Next week has a very busy and compressed schedule for economic news. Due to the upcoming Good Friday holiday, Thursday the 27th is the last business and trading day of the week, month and quarter. Ahead of that a number of reports are on the way including a US GDP update, more housing data, durable goods orders, Chicago PMI and Core PCE inflation. The earnings calendar, in contrast, is very light after today with Nike and FedEx reporting after the close.

In this edition of Equity Leaders Weekly, we look at what the Sector Scopes are telling us about investor sentiment and capital flows within equity markets and at recent gains in the S&P/TSX Composite Index.

Sector Scopes Update March 2024

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