Daily Commentary

MarketMinder’s View: September Canada CPI inflation slowed from August’s 3.2% y/y to 3.1%. Under the hood, Canada’s results largely mirrored trends in other developed economies: Higher wartime energy prices aren’t spilling elsewhere. See Canada’s core (excluding food and energy) CPI slowing from August’s 2.1% y/y to 2.0% in September. This is a tad quicker than rates from March – July but below post-pandemic readings. On a category level, September’s year-over-year inflation slowed in food, household furnishings, health and personal care products, recreational activities and tobacco and alcohol (per FactSet). So higher oil and gas price pressures aren’t rippling through the economy—which the experts interviewed here acknowledge. However, some economists expect the Bank of Canada to hike preemptively—which would be a mistake. Non-energy inflation hasn’t spiked. Without spiking money supply, it remains unlikely to heat up meaningfully. For stocks, none of this is new or surprising. But watching for central bank error, in Canada and elsewhere, is worthwhile, given the potential economic risk (e.g., inverting the yield curve).

MarketMinder’s View: America’s budget deficit nearly hit $2 trillion this year, rising 12% from last year’s $1.78 trillion gap. This piece highlights a common fear: a higher deficit-to-GDP ratio and its debt burden implications. Scale and context show why these are off base. First, today’s roughly 6% deficit-to-GDP sits below levels seen in the early 2010s and early 2020s—neither of which prevented economic or market growth in the years that followed. These higher levels weren’t permanent. They reflected higher public spending following the global financial crisis and COVID pandemic. Secondly, the amount of debt matters less than the government’s ability to service it. And while US debt is rising, tax revenues can still cover them several times over. This false fear’s ongoing prominence suggests the bull market’s wall of worry still has bricks to climb.

MarketMinder’s View: China’s National Bureau of Statistics announced GDP and a spate of other data on Sunday. The results extend the longer-running, slowing-growth trend, with external demand robust and domestic demand tepid. The article suggests foreign demand reliance creates a slippery slope if the global economy stops buying Chinese goods and services. That is possible but not probable at this point. Rising trade volumes indicate resilient demand, and it doesn’t seem Chinese factories and ports are slowing down. Domestically, data have been lackluster: “Retail sales were weak through the third quarter. A prolonged housing market crash, which has driven existing-home prices down roughly 40 percent since 2021, has wiped out much of the middle class’s savings and left millions of households reluctant to spend. Sales of cars and other durable goods, including household appliances, have plummeted.” Retail sales rose just 1.1% y/y in September, a contrast to industrial production’s 5.5% growth. The handwringing here reminds us of worries about “unbalanced” growth, i.e., China’s economy relying too much on external demand. For investors, think globally. While China’s numbers face understandable scrutiny, it is still contributing nicely to the global economy—other countries’ trade data confirm as much. That reality is enough to exceed low expectations.