Recap: Week Ending April 24, 2015
Equity markets traded up last week, continuing the sideways action which appears to have seized up most markets over the course of the past few months of trading. The NASDAQ 100 index performed extremely well last week, closing the week up 4.25%! The S&P 500 performed well, however, not as well as the NASDAQ, only closing the week up 1.75%. For the past nine trading weeks, the S&P has been trading in about a 4% range. As equities moved higher last week, the price of US Treasury Bonds fell as investors sought higher returns in equities. The price of the long 30-year bond fell 1.55% last week to close out at 161.69. The sideways movement comes as the market appears to continue to have mixed views in regards to the future of interest rates. As the US Federal Reserve continues to announce contradictory remarks, economic data also remains mixed. One of the largest movers as a result of the lack clarity is the US Dollar Index. So far this year the index is up 7.35% and 21.53% in the past 12 months. The move higher has without a doubt hampered any upside action which could have occurred in US equities. A move higher in interest rates will cause the US Dollar to move higher against a basket of currencies as investors will flock to the US Dollar to receive higher returns on investments. Gold commonly has a negative correlation with the US Dollar. So far for the 2015 calendar year the price of gold has fallen about 0.25%, however, over the course of the last 12 months the price of the precious metal is down 9.4%.
The Toronto Stock Exchange, TSX, is also seeing sideways movement. Last week the TSX saw a rally of 48 points or 0.31%. The low volatility follows a prior week which also saw a lack of direction. With this being said, the TSX remains at its highs for the 2015 year, which is about 2.5% from multiyear highs which the index established at the beginning of September 2014. The TSX has been unable to catch a bid as both the price of gold and the Canadian dollar have rallied recently. The TSX commonly has a high correlation with both of these assets; however, it appears that this relationship may have broken down. Taking this into consideration makes one wonder what would cause the TSX to trade higher. The Canadian economic calendar for this week looks quiet with the most important data being released both Thursday and Friday. Friday will see the release of the GDP MoM figures for February. The prior reading came in at -0.1%. The RBC Manufacturing PMI for April will be released Friday. The previous reading on the PMI was 48.9.
This week appears to look like it may be a quiet one once again with the economic calendar looking relatively light. The highlight of the week will be without a doubt the United States Federal Reserve interest rate decision which will be released Wednesday afternoon. The market will look to see some clarity in regards to any comments to follow the announcement. A change in the rate is not expected, however, something may come from the Fed in regards to their view on the direction of the economy. This economic release could remove the overall market from the ongoing sideways action which has taken control.