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Cacic Wealth Management

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Address 500 Centre Street SE 27th Floor Calgary AB, T2G 1A6
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Milan Cacic

August 03, 2023

Financial literacy Economy In the news News Weekly update Weekly commentary
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IT'S EASIER TO SWIM WITH THE STREAM!

The below chart shows what the market expectations are for the Fed funds rate in the United States. As you can see, the market is predicting a pause in rates going forward and a cut in rates starting in March 2024. Overall, it’s more difficult for the market to go up in a rising interest rate environment. It's kind of like trying to swim against a river. Having said that, the reverse is also true – it's easier for stocks to go up in a declining interest rate environment. The simple reason is that consumers and corporations have more money to spend on personal items or growing businesses rather than spending on debt servicing.

 

US 3 month sercured overnight financing rate forward curve August 2023 to January 2025

 

Earnings are starting to grow again

 

Below is a chart of the earnings-per-share growth of the S&P 500 on an annualized basis. As you can see in 2022, earnings dropped as much as 27% year-over-year. But so far in 2023, we have had two consecutive quarters of year-over-year growth in earnings.

 

Historically speaking, earnings growth tends to go up for many years - not just quarterly. If we combine the fact that earnings are starting to grow again with the notion that rates in the United States should start to decline sometime next year, we create an environment that is ripe for the stock market to go up. Let's hope history repeats itself.

 

S and P 500 index as reported EPS growth, quarterly, year over year percentage

 

I've also included a piece from our CIBC Economics team entitled "Monthly world markets report ".

 

As always, if you have any questions, please feel free to give us a call at any time.

 

Have a great long weekend.

 

Milan

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CIBC Private Wealth” consists of services provided by CIBC and certain of its subsidiaries through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC Private Wealth services are available to qualified individuals. Insurance services are only available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are only available through CIBC Wood Gundy Financial Services (Quebec) Inc.


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