The Week in Review

Weekly Market Recap: U.S. and Canada

Waterslides can be scary for some, (little known fact; I’m included in that group) and I wouldn’t be surprised if this week’s chart has a few investors on edge. Another well-know fact, hopefully; I’m not included in that group. It looks like we climbed the ladder on Monday, and then it was all downhill from there.

Each of the indices we track faced downward pressure, with early gains being wiped out by a selloff mid-week. No index emerged unscathed.

As performance goes, the Nasdaq 100 dipped by 0.61%, better than the S&P 500, which slipped 0.71%. The Dow Jones saw the steepest decline, falling 1.07%. The TSX was the shiniest of the dull stars this week, finishing down .40%.

S&P 500 Returns | Week At-a-Glance

TSX Returns | Week At-a-Glance

Major Economic Stories

Jobs reports in Canada and the U.S. took center stage this week, with both countries releasing employment reports. Canada’s unemployment rate edged lower, showing a slight improvement while U.S. job growth beat expectations and maintained a strong labour market narrative.

Here’s what happened this week:

Canada's Unemployment Rate Falls

Canada's unemployment rate dipped to 6.7% in December, a slight improvement from November's 6.8%, and below expectations of 6.9%.

Even with this good news, though, it remains the second-highest rate since September 2021, which shows a softening labour market as flagged by the Bank of Canada. Employment saw a strong gain of 91,000, but youth unemployment rose.

• Employment rose by 91,000, reaching 20,738,000.

• Youth unemployment increased (+17,600), while joblessness for core-aged workers (-27,000) and older workers (-14,700) fell.

• The labour force participation rate remained steady at 65.1%, a four-month high.

• The unemployed population dropped by 24,200 to 1,492,100.

US Unemployment Rate Drops

The US unemployment rate fell to 4.1% in December, below market expectations.

Employment increased by 478,000, while the number of unemployed individuals fell by 235,000. Key labour metrics, including the labour force participation rate and employment-population ratio, showed stability and slight improvements, confirming a relatively steady labour market.

• Employment increased by 478,000, while the unemployed population fell by 235,000.

• The labour force participation rate was unchanged at 62.5%.

• The employment-population ratio increased to 60%.

• December’s unemployment figures were the lowest since mid-2023.

US Job Openings Reach 8.1 Million

In another strong labour-related report, job openings in the US rose to 8.1 million in November, again beating expectations.

The increases were concentrated in professional and business services, finance, and private educational services.

• Professional and business services saw a jump of +273,000 in job openings.

• The South accounted for the largest regional increase in openings (+194,000).

• The number of quits fell by 218,000 to 3.1 million.

• Layoffs and discharges remained stable at 1.8 million.

US Adds 256,000 Jobs in December

The US economy added 256,000 jobs in December, the largest increase in nine months, led by gains in health care, retail trade, and government.

Even though we saw downward revisions for October and November, the annual total reached 2.2 million, another sign of a stable but slightly cooling labour market compared to 2023.

• Retail trade rebounded, adding 43,000 jobs in December.

• Health care and government sectors gained 46,000 and 33,000 jobs, respectively.

• Manufacturing saw a decline of 13,000 jobs.

• The average monthly job gain for 2024 was 186,000, down from 251,000 in 2023.

Key Takeaways From this Week’s Economic News

Canada’s Unemployment Rate Drops

What does this slight improvement in Canada's unemployment rate show us? I see a labour market that is hanging on but still facing real challenges, especially with youth unemployment on the rise, as I noted above. The Bank of Canada’s concerns about a softening market are valid, as the glaring disparity in job recovery across age groups highlights some serious vulnerabilities. If this continues, we should see slower consumer spending among younger Canadians (eventually). The effect this will have on the overall economy is yet to be determined, but it could be significant.

US Job Openings Exceed Expectations

The increase in US job openings to over 8 million shows continued resilience in hiring, especially in professional services and finance. However, the significant drop in quits shows that workers are prioritizing job security over career moves, likely due to growing uncertainty about the labor market and economic stability.

Also, the sustained uptick in hiring alongside declining quits might be a clue that we’re in the middle of a shift toward employer-driven labour dynamics after years of tight conditions.

US Adds 256,000 Jobs, Outpacing Expectations

This latest strong job growth is another bright spot for the US labour market. The cooling pace of job gains for the year implies a shift toward a more sustainable labour environment, and that’s important, but the data also shows that demand remains strong in essential services. I do note the decline in the manufacturing sector, though, and that could signal challenges in industrial activity heading into 2025.

THIS WEEK’S POLL QUESTION
(Results in Next Week’s Newsletter)

We’re less than two weeks away from Donald Trump’s inauguration, and the tariff talk rhetoric is heating up. What's your take on this? Do you think the tariff threats are a legitimate concern, or just political posturing?

Answer this week’s poll question and don’t forget to share your thoughts!

LAST WEEK’S POLL RESULTS

Last week I asked whether you felt Amazon was warranted in demanding workers return to the office, making the break from the remote work that so many have become accustomed to. The results are in!

Comments of the Week

👎 Return to Work

“I vote no but not necessarily from an efficiency standpoint explicitly. I feel it is better for society as a whole that we are in office more regularly for the social impact it has on our personal and global wellbeing.” - alexiraedevereaux

“I like going in to 'the office', change of scene, see more people, so it's not a problem, but my job requires me to be there most days to supervise people. I'm not sure it improves productivity; it could go either way. The days I work from home...I tend to 'work late' to just 'finish that last thing'...I think it depends on the person and their situation; commuter time, daycare, the job they have. Going to work on a daily basis at a set time has been the norm since the Industrial Revolution, but that doesn't mean it is good. there, that's my wishy washy answer!” - mrrobpog

“I believe there is no way to replace real social life. Go for a coffee and have a small talk can trigger new ideas to solve problems or suggestions. Also it could reduce stress.

The downside is commuting and the time it takes. But I believe it could help. At the end maybe the best solution is hybrid but in short term back to office is needed to break the remote habit.- claudio

👍 Allow Remote Working

“A theory: It’s possible the decision is tied to tax deals where Amazon has negotiated to open an office in a certain province/city. Part of the tax deals was to have high paid individuals in an actual office so they could spend money on lunches and go shopping after work in the community.” - mjwebstuff

“Returning to the office would make QOL lower and that could harm employee morale.” - tochitocchi

TRADE NEGOTIATIONS

Canada’s Tariffs Threats Spark Trade War Tensions  

• Canada proposes retaliatory tariffs on U.S. goods in trade dispute.

• Tensions rise following U.S. tariff hikes on Canadian steel and aluminum.

• Affected industries include automotive, agriculture, and raw materials.

• Canadian officials call for renewed dialogue to prevent escalation.

The government of Canada is proposing new tariffs on U.S. imports, escalating a trade dispute that began with recent U.S. tariff increases on Canadian steel and aluminum. The government says that the potential retaliatory measures, which target a range of American goods, are meant to protect domestic industries and encourage negotiations.

Impact on Industries

The automotive and agriculture sectors are expected to feel the brunt of these tariffs. Canadian farmers and manufacturers, which are already facing pressures from rising costs, could see further disruptions. Meanwhile, U.S. exporters of dairy, lumber, and manufactured goods are likely to be affected as Canadian businesses look elsewhere for suppliers. Officials on both sides of the border have expressed a willingness to negotiate, but concrete plans aren’t obvious at this point.

Future Prospects

This trade conflict risks putting more strain on Canada-U.S. economic relations, especially if additional tariffs follow. If we end up in a prolonged dispute, we’d see weakened supply chains and increased costs for consumers in both countries. Nothing has been decided yet, but many are still holding out hope that a resolution is possible if both nations prioritize economic stability over political battles.

Read the Full Story here.

TAXATION

Canada Considers Changes to Capital Gains Tax    

• Proposed capital gains tax changes spark debate among policymakers.

• New rules could increase tax liabilities for high-income investors.

• Critics argue it could deter investment in Canadian businesses.

• Supporters claim it addresses income inequality and fiscal gaps.

It was huge news in June last year when the government of Canada announced significant changes to its capital gains tax policy, which could impact high-income earners and investors. Proponents of the higher inclusion rate say the reforms would create a more equitable tax system by addressing income inequality. But critics warn that these changes would bring potential repercussions for capital markets, including reduced investment activity and economic growth.

Rationale Behind Changes

Supporters argue the existing tax system disproportionately benefits wealthier Canadians, enabling them to pay lower effective tax rates. By increasing capital gains taxes, they argue that the government is just trying to close fiscal gaps to help fund social and other government-run programs.

Investor Concerns

As always, there are two sides to this argument. Critics caution that these changes could have unintended consequences, such as discouraging entrepreneurship and reducing the appeal of Canadian businesses to foreign investors. The government has not yet finalized the reforms, but their potential economic implications are already sparking heated debate.

Read the Full Story here.

THE BANK OF CANADA

Strong Jobs Data Weakens Bets on Rate Cut

• Strong labour market data reduces likelihood of a Bank of Canada rate cut.

• December job growth outpaces expectations.

• Analysts revise their forecasts for monetary policy decisions this month.

• Bond yields rise as traders adjust to lower rate-cut probabilities.

In the wake of Canada’s stronger than expected December employment report, market expectations for a Bank of Canada rate cut have faded. With unemployment declining and job creation exceeding forecasts, the Bank of Canada may end up doing an about face and opt to maintain its current policy stance rather than providing further economic stimulus.

Market Reaction

Bond markets wasted no time in reacting, and we saw yields rise as traders adjusted their expectations. Earlier forecasts had placed a 30% chance of a January rate cut, but those odds are now falling.

What’s Next?

If we see this economic momentum continue, the central bank will face increased pressure to adjust course and rethink its plans for 2025. It would be a good idea in the coming months to closely listen to what Tiff Macklem has to say, and carefully read between the lines for clues as to what action they might take.

Read the Full Story Here.

HOUSING
Rental Prices Hit a 17-Month Low in December  

• Average asking rents across Canada fell by 3.2% year-over-year in December.

• National average rents dropped to $2,109, marking a 17-month low.

• Ontario saw a 4.7% decrease, while British Columbia fell by 0.5%.

• Manitoba recorded the highest annual rent growth at 5%.

I know it doesn’t feel like it to many, but the stats say that average asking rents across Canada fell to $2,109 in December, a 3.2% drop compared to the same month in 2023. This is the fifth consecutive month of rent decreases and a 17-month low, according to the latest report from Rentals.ca and Urbanation. The decline follows years of rent growth, including 8.6% in 2023 and 12.1% in 2022. It’s nice to see the correction, but rents still remain 16.8% higher than they were five years ago.

Regional Breakdown

Ontario, one of the most expensive provinces for renters, recorded a year-over-year decrease of 4.7%, with average asking rents falling to $2,332. BC saw a more modest decline of 0.5%, taking its average rents to $2,487. As an outlier, Manitoba stood out with a 5% annual rent increase, the highest in Canada, bringing average rents there to $1,618.

Market Drivers

Urbanation president Shaun Hildebrand says the rental market’s softening in 2024 was due to several factors, including multi-decade highs in apartment completions, slowing population growth, and a weakening economy. He says that while these trends offered temporary relief for renters, the report makes it clear that affordability challenges persist, especially in major metropolitan areas.

Policy Implications

Going forward, if we do see continued moderation in rent prices, it may provide some breathing room for political higher-ups who are grappling with Canada’s housing crisis. Sadly, long-term affordability does remain a major concern for many, especially as rent levels are still historically high even when you factor in these recent declines.

Read the Full Story Here.

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OTHER NEWS FROM THE PAST WEEK

Meta Compromises with Trump Ahead of Inauguration
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What’s Next After the TikTok Ban?
Following the federal ban on TikTok, users and creators are scrambling to pivot platforms, while experts analyze potential economic and cultural fallout for the U.S. tech landscape.

Grocers Allegedly Short-Changing Customers on Meat Products
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Canada’s Job Market Resilient in December
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Tesla Issues Recall Over Rearview Cameras
Tesla is recalling thousands of vehicles over faulty rearview cameras. Owners are advised to visit service centers for free repairs as the issue could pose a safety risk.

The "Magnificent 7" and Nvidia: What’s Next?
Investors in Nvidia and the "Magnificent 7" face uncertainty as the tech rally slows. Analysts question if these giants can maintain momentum in the face of growing market challenges.

Market Movers

Top 10 Weekly Gainers

Top 10 Weekly Losers

10 Most Overbought Stocks

10 Most Oversold Stocks

The Relative Strength Indicator (RSI) can provide a signal that suggest a stock is either overbought or oversold.
📈A stock that has an RSI over 70 is considered to be in “overbought” territory. This might suggest that the stock is due for a pullback, however it is not a recommendation to sell.
📉A stock that is trading with an RSI below 30 is considered to be in “oversold” territory. This might suggest that the stock is due for a recovery, however it is not a recommendation to buy. Always perform your own due diligence.

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