Correction Territory

The Week in Review

Correction Territory

If you were looking for a rebound from last week's down markets you were out of luck again, as the major North American stock markets extended losses, with the S&P500 closing in on correction territory. The index has now fallen 10% from its most recent high in July.

Faring worst for the second straight week was the Nasdaq, losing 2.61% of its value over the past five trading days. The Dow Jones Industrial Average declined by 2.14%, the Toronto Stock Exchange dropped by 2.07%, and the S&P500 was down 2.53%.

In this edition we'll hear what JPMorgan Chase CEO Jamie Dimon said about his views on where the economy is headed and why he sold one million shares of the company he heads up. Also, we'll look at the latest Bank of Canada rate decision, we'll review the poor earnings results we saw from both Tesla and Ford, we'll discuss Air Canada's efforts to extract passengers from the Canada Transportation Agency's compensation backlog and finally, at long last you can easily microwave Instant Ramen Noodles!

Dimons in the Rough

Its been quite a week for JP Morgan Chase chief executive officer Jamie Dimon.

First off, he spoke at the Future Investment Initiative Summit in Saudi Arabia and warned that he has very little confidence in the ability of the central banks to manage us through a potential market crash. He emphasized the needs for the banks to not focus too much on any one course of action, but rather to prepare for various possibilities and probabilities. These comments come on the heels of him saying earlier this month that we may be in the "most dangerous time the world has seen in decades."

Then, to top off his headline grabbing week, on Friday he announced he'll be selling a million shares of JP Morgan Chase, which will be the first time in almost 18 years that he has trimmed his position in the company. Although this unexpected move did certainly grab the attention of the markets, Dimon pointed out that the family owns 8.6 million shares and noted that the intent of this divestiture is for financial diversification and tax planning purposes. He emphasized that the prospects for the company remain very strong.

YOUTUBE INSIGHTS

The markets have extended losses, but why?  Click on this thumbnail to learn about a few valuation metrics that can help you make more informed investment decisions.

You Can Bank on Tiff

As widely expected, the Bank of Canada announced Wednesday it was holding its key overnight rate at 5.0%, but did note that it was open to more rate hikes as it tries to make sure inflation doesn’t get away on them. Governer Tiff Macklem mentioned (warned maybe?) that the overnight rate that could stay above its 2% target for another two years.

As part of its announcement, the Bank noted that it now expects Canadian inflation to average around 3.5% for the next 12 months and then fall back to 2% around the middle of 2025.

The Bank of Canada also cut its 2023 growth forecast to 1.2% from the 1.8% it predicted in July.

Overall, the report from the Central Bank was a tad gloomy, but I’d also say realistic. We’re currently seeing a combination of slower growth and higher inflation rates and this isn’t an ideal atmosphere for businesses. In summary, the bank said:

“Governing Council wants to see downward momentum in core inflation, and continues to be focused on the balance between demand and supply in the economy, inflation expectations, wage growth and corporate pricing behaviour.”

Anyone Know a Good Mechanic?

It's there's been a lot of squeaking and rattling in the automotive space over the past while, first with the ongoing UAW strikes and disruptions, and now with bad earnings reports. Both Tesla and Ford have now reported quarterly earnings and the markets were not impressed with either of them.

First off, and most notable with Tesla, the ever optimistic Elon Musk struck a generally downbeat tone on the company's earnings call. I'm going to cut him some slack and conclude that his negative tone wasn't just because his net worth took a $30 billion hit, although I know if my net worth dropped by $30 billion I'd probably be in a bad mood too.

Musk spoke extensively about Tesla's Cybertruck project, advising that investors should lower expectations. He did confirm that the company plans to make the first Cybertruck deliveries November 30th but added that it will take "18 months before it's a significant cash flow contributor."

Tesla's share price was now down 15% in the two days following the earnings call, and have now fallen round 30% from its most recent highs in July.

Then on Friday, the share price of Ford was down 12% after it reported earnings that missed expectations and revealed that demand for its EV products were less than the company had planned for. From its recent highs back in July, the stock is now down almost 34%.

Ford revealed that it will be delaying around $12 billion in spending on EV manufacturing capacity, pointing back to the lack of demand and notably withdrew its full-year guidance.

Coffee, Tea, Coupon?

Depending on the circumstances, when you're the victim of a flight disruption you may be eligible for compensation. The Canada Transportation Agency (CTA) says it's dealing with a backlog of more than 61,000 cases and says that passengers looking for compensation must wait for over 18 months for a possible resolution.

In its effort to deal with this huge problem, Air Canada has begun offering settlements to selected passengers on the condition that they will remove their case from the CTA. So far, the program has not gone smoothly.

There are numerous reports of passengers who say that the settlement offer they got from the airline falls way short of what they should be entitled to. Obviously, there are some aspects of a claim that aren't black and white and might be up for interpretation. But there are cases where the compensation falls under federal regulations and it's predetermined what amount should be paid for a particular disruption. For example, if a flight is delayed at least nine hours and falls under an airline's control, the mandated payment is a $1,000. That sounds pretty straightforward. But it appears as though under this new program Air Canada is trying to make settlements at a reduced amount, hoping that the Passengers will accept a lower amount in lieu of having to go through the hassle and waiting that it would take to settle it through the CTA process.

As part of its response, Air Canada is saying that they are making their best efforts to reduce the backlog from the system, and they point out that passengers are free to reject their offers.

Nuke Your Noodles!

OK, I'll admit this isn't exactly a story that will help you improve your investment returns, but I couldn't pass it up.

Although noodle connoisseurs around the globe have long used workarounds to microwave instant noodles, you'll soon be able to easily make Instant Ramen Noodles in your microwave without the hassle of removing them from the package! Yes, I know it's not that hard to boil up some water as has been necessary for the past 50 years, but university dorm students around the world will be celebrating at this new level of convenience. Beginning in 2024, Ramen Cup Noodles will be shipped out in new packaging, with Styrofoam becoming a thing of the past. The noodle cup will now be made of a recyclable paper product and is part of an a broader effort by Nissin Foods USA to become more environmentally friendly.

Students everywhere, Rejoice.

Weekly Winners & Losers

Winners

There weren't a ton of big gainers in the markets this past week, with the overwhelming direction being down. But, here are a few companies that did have a not-too-bad week, and even a few that put in very strong performances

The Top Gainers were:

Umbra Companies (UCIX), up 56%
MSP Recovery (LIFW), up 34.13%
Endeavor Group Holdings (EDR), up 27.16%
Deckers Outdoor (DECK), up 15.83%
Willis Towers Watson PLC (WTW), up 11.21%
Rollins, Inc. (ROL), up 9.23%
RTX Corporation (RTX), up 9.11%

Losers

As was the case last week, there was no shortage of companies losing value over the past 5 trading days. Here's a look at the top losers for the week.

The Biggest Loser were:

TransUnion (TRU), down 33.05%
Align Technology Inc. (ALGN), down 29.25%
Whirlpool Corp (WHR), down 20.85%
Hasbro Inc. (HAS), down 18.23%
Enphase Energy (ENPH), down 16.99%
Ford (F), down 14.43%
Chevron (CVX), down 13.47%
Nuvei Corporation (NVEI), down 11.28%
Alphabet (GOOGL), down 9.90%
Shopify (SHOP), down 9.27%