Market Quote: U.S. Disinflation, North American Dividend Stocks
Author: The editor's desk
June 13, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Meal Ticket
It’s been an appetizing week for global markets with the main course being the release of the U.S. Consumer Price Index (CPI) on Tuesday. Surprisingly, it showed that inflation cooled more than expected in May, fueling a strong rally in the government bond markets and declines in the U.S. dollar. Thursday’s soft Producer Price Index (PPI) was a tasty side that corroborated the return of disinflation south of the border, at least for now, and suggests a lower print for the core Personal Consumption Expenditure (PCE) reading later this month.
All of that was capped off by an “amuse bouche” in the Federal Open Market Committee’s (FOMC) latest policy update on Wednesday afternoon. While mostly a non-event, the update did reflect a more dovish tone than the initial read by many global market participants. Moreover, data-dependence was emphasized throughout Chair Jerome Powell’s press conference, yet we’ll get a barrage of the U.S. Federal Reserves (Fed) speakers in the coming week, most of whom will have a chance to update their view as well.
Other noteworthy observations include Powell and other FOMC officials having low confidence in the forecasts and that the choice between one and two cuts this year was a close call for many of the committee’s members. Fed officials were also briefed on the latest CPI data, but most did not update their projections.
Balancing Act
North American dividend stocks have offered investors steady if not spectacular returns so far this year, but we believe potential opportunities for further gains may still exist across North America’s equity markets—albeit selectively.
In particular, we believe the sentiment and performance of dividend-paying Canadian sectors such as Telecommunications, Utilities, Banks and Real Estate Investment Trusts (REITs) could potentially benefit from the Bank of Canada’s decision to cut its key lending rate earlier this month and prospects of further cuts to come, but we also have our eye on a selection of high-quality names in growthier areas of the market – i.e. Canadian Industrials and U.S. Software – that are currently oversold relative to the broader market.
In our view, having a balance of opportunities — many with reasonable valuations — keeps us optimistic on the North American equity market through historically volatile summers.
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The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
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About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. Our companies deliver excellence in investing in the public and private markets through three business lines: AGF Investments, AGF Capital Partners and AGF Private Wealth.
AGF brings a disciplined approach, focused on incorporating sound, responsible and sustainable corporate practices. The firm’s collective investment expertise, driven by its fundamental, quantitative and private investing capabilities, extends globally to a wide range of clients, from financial advisors and their clients to high-net worth and institutional investors including pension plans, corporate plans, sovereign wealth funds, endowments and foundations.
Headquartered in Toronto, Canada, AGF has investment operations and client servicing teams on the ground in North America and Europe. AGF serves more than 800,000 investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.
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