Weekly Market Update
Schulich Finance Association
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Macroeconomic Update?
Inflation: U.S. inflation started the year stronger than expected, with headline CPI rising 0.5% m/m and core CPI increasing 0.4% m/m—both above consensus estimates of 0.3%. This growth was driven by rises in shelter costs, transportation prices and a rebound in core goods inflation. Grocery store price increases also contributed to the headline figure. As a result, annual inflation for headline and core CPI came in at 3.0% and 3.3%, respectively.??
The non-housing services inflation rose to 0.76% month-on-month from 0.20% in the previous month which was due to strong post new year increases in prices of car insurance, airfares, car rentals and other recreational services. The housing services inflation sub-index increased to 0.4% month-on-month. This increase is mostly due to increases in hotel prices in the last month as both housing rental prices and purchasing prices remained at the standard 0.3% increase m/m. Consumption, which declined during the start of the year due to adverse weather impacts, is forecasted to grow in the month of February. Source?
Retail Sales: Retail Sales declined across sales categories with Headline sales decreased by 0.9%, far more than expected at 0.2%. There was also a 2.8% drop in auto sales, following a strong year-end performance that had led to a steady decrease in the inventory-to-sales ratio in the sector since August. This can be attributed to the decline in inventory following a strong holiday season. However, there was also increased sales in segments such as restaurants, general merchandise stores, miscellaneous retailers, and gasoline stations. Source?
Trade: Canadian exports ended the last year on a high note, which was due to increased exports of energy products. The commencement of the Trans Mountain pipeline operations in the first half of the last year was a key factor in the improvement of energy exports. Outbound shipments of metal and non-metallic mineral products rose to a record high by the end of the year and auto shipments also ended the year on higher-than-expected levels. Exports to the US also increased by 5% m/m, likely due to the potential implementation of the tariffs from the US government, combined with high energy prices.??
Canadian Imports saw an increase due to a surge in the prices of consumer goods products as the volumes of the consumer goods were up just 0.6%. Over the quarter, inbound shipments of industrial machinery and equipment declined at an annualized rate of 6%, signaling weaker business investment. In contrast, consumer goods volumes jumped by 13% annualized, suggesting that lower interest rates are beginning to stimulate demand.?
This led to the shift of Canadian trade balance into a surplus of $0.71 bn, which is still lower than expected surplus of $1 bn. However, the uncertainty regarding the potential US tariffs may lead to negative business sentiment in Canada and can be potentially bad for the economy at a time when the Canadian economy is still operating on the whirlwinds. Source?
Equities Market?
U.S. equity markets closed mixed on Friday, with the S&P 500 holding steady, the Nasdaq gaining 0.4%, and the Dow Jones slipping 165 points. A sharper-than-expected 0.9% decline in January retail sales sparked concerns about consumer resilience, though markets steadied despite geopolitical and policy uncertainties, including new tariffs and delayed reciprocal trade measures. Tech stocks led gains, while consumer staples and healthcare lagged. Corporate earnings drove notable moves: Airbnb surged 14.4% on robust results, while GameStop and Moderna also climbed. For the week, major indices advanced, with the S&P 500 up 1%, the Dow rising 0.3%, and the Nasdaq jumping 1.7%. (Link1)?
Inflation remains a focal point, as January’s CPI rose 0.5% month-over-month, lifting the annual rate to 3.0%, while PPI climbed 3.4% year-over-year—exceeding forecasts. These figures have pushed expectations for Federal Reserve rate cuts to July or later. Despite lingering price pressures, strong earnings from companies like AppLovin, Robinhood, and Shopify have buoyed the S&P 500, keeping it on track for weekly gains. (Link 1) (Link2) (Link3)?
Investor caution persists, however, with U.S. equity funds seeing $2.25 billion in outflows for the second straight week. Mid-cap funds bore the brunt of withdrawals, while large-caps attracted modest inflows. Trade tensions added to volatility, as markets weighed President Trump’s planned 25% tariffs on steel and aluminum. Selective bets emerged amid the uncertainty, such as Viking Global Investors’ sizable stake in Boeing, signaling confidence in aerospace’s recovery. With the Fed likely to hold rates steady, investors are closely tracking economic data and earnings for directional cues. (Link 1) (Link2) (Link3)?
Crossing the U.S. border, Canada’s S&P/TSX Composite fell 0.8% to 25,483 on Friday, paring its weekly gain to 0.15% as corporate setbacks overshadowed broader optimism. Enbridge slid 5.5% amid regulatory concerns, Agnico Eagle dropped 5.1% on lower gold output, and TC Energy declined 3.1% following pipeline earnings worries. Fairfax Financial bucked the trend, rising 3.5% on strong premium growth. (Link1)?
The Canadian market remains cautious, balancing U.S. trade risks—including impending steel/aluminum tariffs—against support from rising commodity prices. Gold and oil gains have lifted resource and energy stocks, while investors increasingly favor safe havens like gold and uranium. The loonie hovered near an eight-week high despite tariff threats, reflecting broader confidence in commodity-driven resilience. While geopolitical and inflationary risks linger, strong raw material prices and defensive sector positioning suggest near-term stability for the TSX. (Link 1) (Link2) (Link3) (Link 4) (Link5) (Link6)?
Both U.S. and Canadian markets face headwinds from inflation, policy shifts, and trade tensions, but robust corporate results and commodity strength provide counterbalance. Investors remain data-dependent, with central bank patience and earnings momentum shaping near-term trajectories.?
Fixed Income Market??
The fixed income market saw upward pressure this week, with Canadian 10-year government bond yields rising from 3.06% to 3.18% and 2-year yields increasing from 2.66% to 2.77%. In the U.S., the 10-year Treasury yield eased slightly from 4.51% to 4.47%, and the 2-year yield ticked down from 4.28% to 4.26%. Global sentiment was influenced by strong demand in U.S. high-yield credit and optimism in emerging markets. Inflation concerns, driven by proposed tariffs under the Trump administration and a strong U.S. jobs report, initially pressured bond markets, but softer inflation data in January helped ease fears of excessive price levels. [Link] [Link]?
U.S. fixed income reflected a "twist flattening" of the yield curve amid mixed signals. The Consumer Price Index (CPI) showed a slight core inflation rise, lifting shorter-term yields, while weaker business activity surveys kept longer-term yields in check. Federal Reserve Chair Jerome Powell’s testimony reinforced the Fed’s inflation focus while noting mixed economic signals. His remarks maintained the rate pause but left the possibility of future cuts open. Fiscal policy uncertainty, particularly regarding tariffs, added complexity as markets balanced inflation concerns against potential growth constraints.? [Link] [Link]?
In Canada, bond yields climbed, with the 10-year rising to 3.18% and the 2-year to 2.77%, driven by expectations of monetary easing by the Bank of Canada (BoC). At its February 4th meeting, the BoC held rates steady at 3.00%, citing economic slack and ongoing tariff uncertainty. Headline inflation remained stable at 2%, but short-term metrics indicated slight upward pressure, which policymakers downplayed as manageable. Employment recovery was slow but steady, reinforcing expectations of further rate cuts. These factors steepened Canada’s yield curve, reflecting investor anticipation of easing monetary policy. [Link]?
Despite modest GDP growth and stabilized housing activity, tariff uncertainty weighed on investment decisions, delaying broader economic recovery. However, analysts noted opportunities in longer-term maturities, where real returns remain attractive amid moderating inflation and likely rate cuts. Long-term government bonds offer strong yields and potential capital appreciation, while provincial bonds, with their yield premiums and strong credit ratings, provide compelling alternatives. Investment-grade corporate bonds also stand out for those seeking balanced risk and reward. [Link]?
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Commodities??
Oil:??
As of Friday evening, a barrel of WTI oil is trading at $70.7 per barrel as hopes of a peace deal looms between Russia and Ukraine which tempered supply concerns.? There is a high-level US-Ukraine meeting at Munich conference.? For more information, please visit More work needed to stop Putin, Zelensky says at summit meeting with Vance - live updates - BBC News.? Recently, the US tightened its sanctions on Iranian and Russian Tankers and that is driving up transportation cost. US sanctions strand Iran, Russia oil on tankers, driving up crude costs | Reuters.? With a maximum pressure campaign on the horizon, and with the intent to significantly reduce Iran’s oil export to just 100,000 barrels per day from current production of ~1.5million barrels per day.? Trump Cracks Down on Iran Oil but Sanctions May Not Stick | OilPrice.com Oil price seems to be trading low and would be a buying opportunity.? With Trump’s tariff on Steel, the steel required by oil & gas companies will increase which push the cost up for US E&P producers and would theoretically lower oil production.? For more information on how the Steel tariffs would impact Canada, please visit: How U.S. steel and aluminum tariffs would impact Canada’s economy - RBC Thought Leadership?
Gold?
Gold was trading for $2880 USD/t.oz, it had a pull back after reaching record highs of $2940.? Recently the Bank of England has been transferring Gold to the US with roughly 8,000 bars moved out which equate to about two percent of the total gold stock in the Bank of England.? Why are U.S. banks flying gold from London to New York? | The Independent.? The minimum waiting time for gold to load out of the Bank of England has reached four weeks due to London gold market seeks to borrow gold from the central bank.? The increased demand for gold would be due to potential tariff preparation.? For more information, please visit London gold market queues up to borrow central bank gold after big shipments to US, sources say | Reuters?
Copper?
Copper is trading at $4.6 USD/Lbs as of Friday night, Copper was trading at ~$4USD/Lbs during the beginning of the year and the economy doesn't improve by as much as the market expected.? The recent rise is due to the military conflict between DRC Congo vs M23 rebels' group. M23 just entered second major city in Bukavu.??? DR Congo conflict: M23 rebels enter second major city Bukavu.?? DRC Congo is the #2 copper producer in the world which surpassed Peru production in recent years.? How has the DRC become a powerhouse in the copper industry? - Fastmarkets?
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Alternative Investments?
Brookfield Oaktree’s Expansion into Australia’s Private Market?
Brookfield Oaktree Wealth Solutions has launched the Oaktree Strategic Credit Fund, targeting Australia's private credit market. This fund offers wholesale investors access to a diversified portfolio across sectors such as software, real estate, and healthcare, aiming to mitigate risks associated with specific market cycles. Despite global financial authorities' increased scrutiny and calls for regulation, Brookfield Oaktree remains confident in its robust risk assessment practices and the low default rates within the private credit market. The firm plans to reach $100 billion in assets over the next five years, with additional investment vehicles in the pipeline. The Australian?
Growth of Interval Funds??
Interval funds have emerged as significant players in the alternative investment landscape, experiencing record growth. These funds offer a structured approach to liquidity, bridging the gap between illiquid private markets and the increasing demand for accessible alternative investments. At the Blue Vault Alts Summit, industry experts highlighted the role of interval funds in reshaping advisor strategies, emphasizing their potential to provide investors with diversified exposure to alternative assets while managing liquidity constraints effectively. Investment News? ???
Equity
When KinderCare Learning Companies filed for an IPO on September 6, 2024, with support from the private equity company Partners Group, it marked a significant milestone in the equity market. Due to market conditions, the childcare provider withdrew its initial 2021 IPO application. This action represents yet another instance of a company backed by private equity going back to the public, indicating an increasing level of confidence in the IPO landscape as the market circumstances normalize. Link??
Real Estate Update?
With its recent announcement of a rate reduction, the Bank of Canada provided much-needed support to the real estate market. Homebuyers and the housing industry are expected to benefit from this change, according to experts, especially after months of high mortgage rates that reduced demand. Affordability issues had caused home sales in areas like Toronto and Vancouver to decline, but the rate decrease is anticipated to stimulate the market with more buyers, stabilizing or even increasing sales numbers. Because more people may now think about buying homes, this development may also lessen the burden on rental markets. Link??
Cryptocurrency Update??
The market for cryptocurrencies is still very volatile, driven by discourse about the direction of technology as well as governmental concerns. Introduced around this time, the Global AI Treaty has generated a lot of discussion about innovation vs regulation, with ramifications for the cryptocurrency industry. The discussion surrounding cryptocurrencies and decentralized finance is also getting more intense, given the growing usage of AI in blockchain and cryptocurrency trading platforms, as governments and tech leaders consider how to strike a balance between AI-driven innovation and essential safeguards. How AI is incorporated into the bitcoin industry may change due to the continuous regulatory scrutiny. Link?
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