Investment

The Ups, Downs, and Future of Canada’s Stock Market (TSX)

Published

2 years ago

August 2, 2022

As an investor in the stock market, it’s become increasingly complicated to remain diligent throughout the unpredictable yet violent waves of volatility.

The TSX index since the beginning of the year is down just over 10%. As a result, investors have become more pessimistic as the market continues to trend downwards without much certainty ahead. Although, it’s important to remember that in the past 5 years, the TSX index has returned over 25%, which includes the massive crash in 2020 that decimated many investors.

However, continued fears of rising inflation and interest rates have lowered the risk tolerance of investors significantly compared to the same time a year ago. As of June’s Consumer Price Index (CPI) data, inflation in Canada is 8.1%, compared to 7.7% in the month prior. Interest rates are adding additional pressure to the average investor’s portfolios now that it has risen to 2.5%.

Although, small signs are beginning to show that inflation could be beginning to slow. International commodities have begun to fall after demand cooled off from all-time highs. Let’s uncover exactly why.

Commodities Adding Pressure

Since oil and natural gas companies control a sizable portion of the TSX index, it’s critical to understand where commodities are trading now, in the short-term, and even in the long term. Historically, sky-high prices that investors and consumers recently witnessed are not sustainable over longer periods. Although, that didn’t stop the WTI Crude price from reaching nearly $125 per barrel in March of this year.

As a result, Canadian oil companies such as Suncor, Cenovus, and Canadian Natural Resources saw their share prices rocket, in some cases, to all-time highs while massive growth in earnings followed shortly after. However, oil and gas prices are unlikely to remain as high, unless the supply for the commodities greatly reduces, thus increasing demand. This could, if the sell-off was substantial enough, rock the TSX index over the next coming months.

Monetary TIghtening Impacts Investors

Since raising interest rates to 2.5%, the Bank of Canada has begun incentivizing investors to look elsewhere in the market as bonds, GICs, and other low-risk asset classes become more favourable in a less certain market.

Interest rates affect more than the risk tolerance of investors as it also reduces the available money supply within the economy. With time, the Bank of Canada believes this could reduce inflation and potentially bring it down to its historical average of 3.8% or lower. Ideally, inflation between 1-2% would be optimal for more investors to feel comfortable investing in Canadian stocks once again. Runaway inflation affects balance sheets dramatically through rising costs associated with producing goods and services, a lower inflation rate would increase profit margins and possibly bring more value to shareholders through higher dividend payouts.

Summary

Overall, it appears the TSX index could face some headwinds from oil and gas stocks which have had their respective commodities decline over the past few months. Inflation has likely neared its peak as multiple major items in the inflation index have fallen compared to June’s data. Over the long term though, the TSX index is more than capable of producing stable returns for investors who are optimistic about the future of Canadian stocks. In fact, Canada’s economy remains one the strongest in the world, making it a compelling candidate for a bull market in the future.

Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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