Can it be? Most experts think the Fed will finally move on rates in December. That and more from Prab Sagoo, associate director at Nasdaq Advisory Services, in his weekly commentary.
- Strong payrolls data from the U.S. late last week quickly moved market sentiment, with most now expecting a rate hike from the Federal Reserve in December. Canadian jobs data was also strong, helped by election hiring and domestic deficit data indicated that we are starting to see some benefits from the weak Canadian dollar.
- The immediate result of a prospective Fed hike is a strengthening U.S. Dollar, which does not bode well for oil prices. As such, we expect some ongoing weakness in energy stocks that will weigh on the TSX (energy stocks account for a 20% weighting on the TSX). However, this should help financials, which are still in the red for the year.
- Other headwinds still remain for domestic stocks. Slowing global growth is still a concern, with data continuing to indicate a slowdown is very present in the Chinese economy, the extent of which is being hotly debated. Furthermore, corporate earnings have been far from stellar, though the broader indices seem not to have noticed and continue to march towards new highs.
- The TSX has been significantly underperforming U.S. indices since the September-end rally began, something that we expect may continue.