The Week in Review

Weekly Market Recap: U.S. and Canada

Markets rallied across the board this week, as we saw continued moderating inflation and positive earnings reports. For those keen readers who note that inflation actually rose in Canada last month, you might ask can I say it’s ‘moderating?’ Let me explain. Yes, inflation did rise to 2% (more on this below), but that’s still within the Bank of Canada’s 1-3% range for the third straight month, so in comparison to where we’ve been over the past few years, I’m calling that moderate. Perhaps ‘stable’ is another way of putting it.

We also saw a surprise improvement in U.S. consumer sentiment and decent labor market data which adds to the upbeat sentiment. In Canada, strong retail sales data helped boost the TSX, which was also helped by a big rise in oil prices.

In terms of performance, the TSX led the week with a 2.26% gain, the Dow Jones followed closely with a 1.96% rise, and the Nasdaq 100 added 1.87%. Finally, the S&P 500 climbed 1.68%, capping off a solid week for U.S. equities overall.

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

TSX Returns | Week At-a-Glance

Major Economic Stories

The spotlight this week was on Canada’s inflation figures and retail performance, as well as U.S. jobs data and the latest Michigan Consumer Sentiment survey.

Here’s how things played out:

Canada’s Inflation Rate Climbs Back to 2%

Inflation rose to 2% in October, led by a slowdown in gasoline price drops, signaling stabilization within the Bank of Canada’s target.

Core inflation also ticked slightly higher.

• Inflation up to 2% from 1.6% in September.

• Gasoline prices fell 4%, less than prior drop of 10.7%.

• Shelter inflation eased to 4.8%; food inflation rose to 3%.

• Core inflation increased to 1.7%, with monthly prices up 0.4%.

Canada Retail Sales Beat Expectations

Retail sales in Canada posted a stronger-than-expected increase, marking a fourth consecutive rise.

The rise was supported by food and merchandise sales, while fuel and auto sales dragged.

• Retail sales up 0.7% month-over-month in October.

• Food and beverage sales surged 3%; merchandise up 0.8%.

• Gasoline sales fell 2.3% due to lower oil prices.

• Annual sales grew by 0.8%, maintaining upward momentum.

U.S. Jobless Claims Hit 7-Month Low

Initial jobless claims in the U.S. dropped to their lowest since April, pointing to the labour market's strength. However, just to keep things interesting, continuing jobless claims rose, coming in above expectations.

• Weekly claims fell by 6,000 to 213,000.

• Four-week average decreased to 217,750.

• Outstanding claims hit a 3-year high at 1.9 million.

• Labor market shows resilience

U.S. Consumer Sentiment at 7-Month High

Revised University of Michigan data showed consumer sentiment rising but tempered by post-election uncertainties.

• Sentiment revised down to 71.8 in November.

• Current conditions gauge revised to 63.9.

• 1-year inflation expectations at 2.6%, a 4-year low.

• 5-year inflation outlook rose slightly to 3.2%.

Key Takeaways From this Week’s Economic News

Canada’s Inflation: A Mixed Message

Inflation climbing back up to 2% isn’t perfect, but it does align with the Bank of Canada’s target. No doubt, it also confirms lingering pressures. The stabilization in shelter and food prices gives me encouragement yet rising core inflation is a reminder of the continuing underlying challenges. Gasoline’s reduced impact softens the inflation narrative, but the uptick in monthly core prices could weigh on the BoC’s December rate decision. I’m watching if these signals sway the central bank toward maintaining a cautious stance.

Retail Resilience Amid Selective Strength

Canada’s retail sales came in ahead of expectations, and this reflects resilience while at the same time reveals some key disparities. Growth in food, general merchandise, and health products is a positive, but declines in auto and fuel sales are a sign of shifting consumer priorities. It’s an interesting dynamic—higher food and merchandise sales might suggest confidence, yet persistent drags in other sectors hint at cautious spending patterns. Just another example of how the data can be interpreted in different ways. Sometimes, it’s as clear as mud.

U.S. Labor Market Defies Gravity

The U.S. labor market’s strength continues to defy expectations, as jobless claims hit a seven-month low. This adds breathing room for the Federal Reserve, but it also complicates their plans. If we continue to see a persistently tight labor market, that might keep inflation sticky, which could delay further rate cuts. The U.S. also saw a rise in outstanding claims (Continuing Jobless Claims have been on the rise since mid-2022) and this hints at growing structural pressures beneath the surface.

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

Our lead story this week focusses on the upcoming “GST Holiday” announced by the federal government this week. The temporary change will probably touch every Canadian to some degree, but I wonder by how much. That led me to this week’s poll question. What effect will this program have on your spending? Looking forward to your votes!

LAST WEEK’S POLL RESULTS

As of today, the Canada Post strike continues. Last week I asked you about whether the Government should considering privatizing Canada Post to make sure similar job action doesn’t occur. The people have spoken.

Comments of the Week

👎 No

“Hard to say how privatizing will make the business run in the future. More expensive to mail something? I would rather see government actually make it cash-neutral than a private company turn a profit. It works well in all respects, doesn’t need inflated pricing from a corporation ” - maverick_83a

👍 Yes

“I think it should be sold. In this day and age the postal system is no longer a necessary infrastructure as it was years ago. I think the money the government is spending would be better allocated to internet infrastructure in underserved rural communities. ” - mjwebstuff

“Privatizing Canada Post would I think give us a more efficient organization. Certain stipulations could be set with the new company with regards to strikes, worker support, & hours of operation. With the way it is now the Postal Union is holding the population ransom. Its very hard for Seniors, new imigrants, small business and many other segments of the population. Canada has had to deal with 3 major strikes over a short period, the rail, the docks & the post office and they all have a very adverse effect on the ecconomy & peoples livelyhood. Unfortunately unions really dont seem to be concerned about the larger good only the money that the executive can pull in. Just look at the salaries of some of the union leaders. No equitable for the Canadian Population as a whole. Shameful ! Thank You” - entender1012

TAXATION
Canada’s GST Holiday: Relief or a Risky Gamble? 

• The federal government is temporarily pausing GST on select goods and services.

• The policy is intended to ease cost-of-living pressures and boost spending.

• Economists warn it could stoke inflation and complicate the Bank of Canada’s monetary policy.

• Financial markets are reducing expectations for rate cuts in 2024.

The federal government announced a temporary GST holiday this week, aimed at providing some financial relief to Canadians struggling with rising living costs. For two months, the Goods and Services Tax will be removed from certain discretionary purchases like furniture, electronics, and other non-essential goods. The policy is designed to put more money back in Canadians’ pockets while encouraging spending during the crucial holiday shopping season.

At face value, it’s an appealing idea. Consumers get a break from taxes on purchases that often come with higher price tags, and retailers stand to benefit from an uptick in sales. But this isn’t a blanket tax removal. Essentials like groceries and prescription medications, which are already GST-exempt, remain unchanged, so the savings will mainly be felt in discretionary spending categories.

The Good Intentions—and Big Risks

It’s no surprise to anyone that Canadians have been feeling squeezed by stubborn inflation, and any policy that offers tangible relief is bound to resonate with voters. That said, economists and market analysts are less enthusiastic.

The concern (and I do believe it’s a real concern) is that this tax break could do more harm than good by inadvertently fueling inflation. Lowering the effective price of goods might drive demand higher in sectors that are already dealing with supply chain challenges. When demand outpaces supply, prices can rise—a scenario that would undermine the intended relief of the GST holiday.

Then, we see another challenge with tax harmonization. Provinces with harmonized sales taxes, like Ontario and Nova Scotia, will need to adjust their systems to align with this federal policy. That creates administrative burdens, perhaps bordering on nightmares, and could lead to inconsistencies in how the policy is rolled out across Canada.

Market Reaction and Economic Implications

Financial markets have already started to react. Bond yields moved higher following the announcement, showing a strong consensus that traders believe the GST holiday will make it harder for the Bank of Canada to cut rates in December.

For the Bank, this creates a tricky balancing act. On one hand, fiscal policies like the GST holiday are outside its control, but they have real consequences for inflation. If inflation ticks higher because of this policy, the Bank of Canada might have to keep rates at current levels for longer—and that’s a move that could hurt consumers in the long run.

My Take

Yes, the GST holiday might sound like a win for consumers, but I think it’s more complicated than that. For one, the benefits will likely be uneven. Lower-income households may not see much relief since essentials like most food and medications are already exempt. Meanwhile, middle- and higher-income households, who are more likely to spend on discretionary items, stand to gain the most.

The bigger worry for me, as I just touched on, is how this policy might interfere with the Bank of Canada’s work. Keeping inflation stable is still a challenge, and the last thing we need is a policy that makes that more difficult. By stimulating demand in certain sectors, the GST holiday risks undoing progress made over the past year.

If the holiday achieves its goal of boosting spending without causing a significant inflationary spike, it could be considered a win. But in my view, the short-term gains might not be worth the potential long-term costs.

Read the Full Story here

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THE US DOLLAR
U.S. Dollar Set for Longest Run of Gains in a Year 

• U.S. dollar rallied on safe-haven demand.

• Geopolitical tensions and risk aversion drove demand for dollar-denominated assets.

• Emerging market currencies struggled as a result.

• Investors eye Fed rate signals and global economic stability.

The U.S. dollar is on a tear, and this week’s rally makes it the dollar’s longest winning streak in over a year. With so much geopolitical uncertainty out there, dollar-backed assets feel like the safest bet, so it’s not hard to see why.

Michael Brown, a senior research strategies at Pepperstone Group, said in a Bloomberg TV interview that the conditions for a strong USD aren’t going anywhere soon.

Emerging Market Impact

Of course, there’s a flip side. Emerging market currencies are taking a hit as the dollar strengthens, and that’s not good news for countries with heavy dollar-denominated debt. We’re seeing central banks in some of these economies stepping in to defend their currencies, which could put additional strain on their financial systems. It’s a tough position to be in—balancing inflation at home while dealing with external pressure from the dollar.

Conditions Look Good, But Risk is Still There

I think the dollar’s rally has legs, at least in the near term, unless the Fed surprises markets with overly dovish signals. But I’m also mindful of the risks. A strong dollar hurts U.S. export competitiveness, and if it stays this strong for too long, we could see it weigh on American growth. For now, though, the it’s full steam ahead.

Read the Full Story here.

HOUSING
Mortgage Rule Change Sparks More Competition

• Borrowers switching lenders at renewal get a break.

• No stress test means more choices and savings.

• Lenders will need to work harder to keep clients.

• Industry feedback played a big role in this shift.

Ever since it was launched back in 2018, the mortgage stress test has been a thorn in the side of many Canadian homeowners, but here’s some refreshing news: it’s officially been dropped for uninsured mortgage renewal.  OSFI (Canada’s banking regulator) announced the change this week and honestly, it’s a win for homeowners looking to switch lenders at renewal. Now, you can shop around for better rates without having to qualify under the minimum qualifying rate (MQR). Leah Zlatkin, a mortgage pro at LowestRates.ca, summed it up perfectly: “This eliminates a barrier that previously prevented borrowers from accessing better rates.”

More Choices (and Savings!) for Borrowers

Here’s the kicker: this change could save people a lot of money. Victor Tran from RATESDOTCA pointed out that lenders will now have to step up their game to retain clients at renewal. If switching providers is easier, lenders are going to have to offer more competitive rates and terms, and for a lot of homeowners, that could mean significant savings.

Before this change, sticking with your current lender was often the only choice, even if it cost you more. Now, you have the freedom to explore and find something better.

A Change Driven by Homeowners

This isn’t just a top-down decision. OSFI says they made the move after hearing from Canadians and industry players who wanted a fairer system, and it makes sense! Switching to a new lender at renewal shouldn’t be so complicated and dropping the stress test levels the playing field and gives borrowers the confidence to shop around. For me, this feels like a much-needed step toward putting power back in homeowners’ hands.

Read the Full Story Here

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OTHER NEWS FROM THE PAST WEEK

Canadians’ Credit Risk Rises as Missed Payments, Debt Levels Grow
A rising number of Canadians are falling behind on payments, with household debt levels climbing as interest rates remain high. Analysts warn that financial strain could intensify if rates stay elevated.

What’s Included in the GST Cuts and What Isn’t?
The federal GST holiday excludes essentials like groceries and medications but applies to discretionary goods. Critics argue this approach benefits middle- and upper-income households more than those struggling most with affordability.

October Inflation a ‘Disappointment’ for the Bank of Canada
October’s inflation rebound to 2% has left the Bank of Canada in a tight spot ahead of its December decision. While still within target, rising core inflation may delay any easing in monetary policy.

Canada’s Housing Affordability Improves Again, but Homes Still Not Affordable
Despite some recent improvements, home affordability remains a challenge in most Canadian cities. Higher mortgage rates are offsetting modest price corrections, keeping ownership out of reach for many.

Bitcoin Is at the Doorstep of $100,000. What to Know
Bitcoin is nearing the $100,000 milestone, with investors eyeing its recent rally. Analysts warn that volatility and regulatory risks remain high, even as enthusiasm for digital assets grows.

McDonald’s Is Giving Its Menu the Biggest Shakeup in Years
McDonald’s is revamping its menu, rolling out new items to appeal to younger demographics. Industry watchers see this as a move to maintain its market edge amid growing competition.

DirecTV Cancels Agreement to Merge with Dish
DirecTV’s merger with Dish has fallen apart, leaving the satellite TV industry in limbo. Analysts say regulatory challenges and diverging strategies played a role in the breakdown.

TJ Maxx Says Trump’s Tariff ‘Chaos’ Will Help the Chain
TJ Maxx expects its off-price model to benefit from supply chain disruptions and tariff policies, as brands offload excess inventory. The company sees this as an opportunity to grab market share.

King Charles’ Coronation: Britain Spent $91 Million Amid Crisis
The U.K. spent $91 million on King Charles’ coronation despite an ongoing cost-of-living crisis. Public backlash has grown as taxpayers question spending priorities during economic hardship.

Why X’s New Terms of Service Are Driving Users Away
X (formerly Twitter) is facing backlash over new terms of service, which critics argue undermine user privacy and free speech. Some users are flocking to alternative platforms in protest.

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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