February 18, 2022
This Week in the Markets
The S&P/TSX Composite Index fell 2.02% over the last five days, reaching 21,501.98 Tuesday afternoon before dropping to 21,023.91 on Friday. As of Friday, February 18 at 4:11 pm EST, Canada’s main stock index was trading at 21,008.20.
In U.S. markets, the OTCQX Composite is down 0.81% on the day, and the Nasdaq Composite is down 1.23% today as of 4:27 pm EST.
Gold Futures
Gold prices rallied on Thursday, rising to over US$1,900 for the first time since June 2021.
Influenced by Biden’s suggestion that Russia’s attack on Ukraine was imminent, investors retreated to the safety of gold bullion, leading to a decline in US stocks.
“Not only do the events on the Ukrainian border have investors seeking out safe-havens,” Craig Erlam, senior market analyst at OANDA, told Reuters, “but it (gold) also offers inflation protection at a time of surging prices and the prospect of higher oil and gas prices, if Russia does invade.”
The precious metal saw mild corrections in the early hours on Friday and is now holding just under US$1,900 per ounce.
Currently, gold is trading at US$1,897.80 per ounce as of 4:27 pm EST on Friday.
Global Tensions Rise
On Thursday, U.S. President Joe Biden warned that Russia’s invasion of Ukraine is imminent, saying that “every indication we have is that they’re prepared to go into Ukraine and attack Ukraine.”
On Friday, reports began surfacing that civilians were being evacuated from Russian-backed separatist regions of eastern Ukraine, appearing to confirm reports of Russian invasion. Russia continues to deny any plans of invasion and a Kremlin spokesperson denies involvement in the evacuation, but sources say conflict has already begun in eastern Ukraine.
Meanwhile, the rising conflict continues to create uncertainty in global markets, with Wall Street facing volatility amidst opening trading on Friday.
Inflation Concerns
In the United States, inflation is at its highest level in 40 years, rising 7.5% year-over-year, while Canadian inflation just hit its highest rate since 1991, going up to 5.1% in January.
According to wage data from Stats Canada, wages only rose 2.4% in 2021 compared to the 5.1% uptick in CPI year-over-year, meaning that Canadians experienced a decline in purchasing power as prices, on average, rose faster than wages.
Low income Canadian households have borne the brunt of inflation hikes, with nearly three-in-five Canadians saying that it is currently difficult to feed their household, according to a new study from the Angus Reid Institute. Only 24% of Canadians are optimistic about their financial future, according to the study, while 29% expect their financial standing to worsen in the coming year.
Gas and home prices are also at record high levels. Gas prices increased 4.8% in January, rising 31% compared to last year. Housing prices in metropolitan areas, like Toronto and Vancouver, are also reaching never-before-seen levels, with home prices in Toronto reaching a record $1.163 million average price – up 28.3% since November 2020.
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Sources:
https://www.reuters.com/world/biden-says-threat-russian-invasion-is-very-high-2022-02-17/
https://www150.statcan.gc.ca/n1/daily-quotidien/220216/dq220216a-eng.htm?HPA=1
https://angusreid.org/canada-economy-inflation-rate-hike-debt/
https://www.cbc.ca/news/business/canada-inflation-january-1.6353464
https://www.cpacanada.ca/en/news/pivot-magazine/2022-02-16-housing-market
https://www.theguardian.com/business/2022/feb/10/us-inflation-reached-highest-level-40-years-january
