I’m back after a week off and fresh as a daisy. Julie and I headed up to Tofino for a few days and witnessed the power of the Pacific up close and personal with that big storm last Wednesday. All I can say is wow, those were some seriously big waves.

So what’s been happening while I was away? Well for starters, CIBC did a 2 for 1 stock split, so if you see CM’s share price seriously lower than your last statement, it’s because you have twice as many shares (splits are generally viewed as a positive for share growth). In the broader view, the past week saw earnings fall short of expectations in reports from some large retailers, sending nervous equity markets into a bit of a tailspin. But there’s a macroeconomic story woven into the themes that were common to several of them. First, there were signs that retailers are having difficulty passing on all of the increase in their costs in what they can charge their customers. That may well be an early signpost for a turn in inflation, at least in the goods side of the economy. Pressed by higher prices for essentials like food and gasoline, and despite rising wages, Americans might not quite have enough to cover escalating inflation in everything else on the shelf. Some reported rising inventories, consistent with official data that showed a climb in retail inventories since the start of the year. While supply chains aren’t fully healed, and can’t be while parts of China are in severe lockdowns, we might be seeing at least some relief on that front, which would also be a dampener on inflation. Consumer spending was still reasonably healthy in the first quarter, and could be revised higher given an upward revision to retailing data. But a handoff is underway from goods consumption, which has been miles above trend, towards services, which are outpacing the goods sector in year-on-year volume growth for the first time since the pandemic. The services sector is less constrained by capacity limitations — it’s easier to get a hotel room these days than a newly made vehicle — and better positioned to absorb additional demand without as much of an inflationary bump. In other U.S. news, the Biden administration is preparing to authorize the release from the Northeast Home Heating oil reserve if conditions deteriorate. President Biden also reiterated that the U.S. is considering reducing Chinese tariffs, and that the policy towards Taiwan (including using force to defend) hasn’t changed.

Across the pond in the Eurozone, the European Central Bank’s Lagarde basically commits to raising rates at the July and September meetings (25bps each) when she says that the ECB “will be in a position to exit negative rates by Quarter three”. Additionally, the Lagarde says that if the inflation outlook stabilizes, the ECB will continue to move to neutral rate in a “gradual” manner. However, if inflation expectations become de-anchored, then “we would need to withdraw accommodation promptly to stamp out the risk of a self-fulfilling spiral”. Earlier today, Lagarde further clarifies and says that rates may be positive at the end of Quarter three (“can be at zero, or slightly above zero”). Ukrainian President Volodymyr Zelenskyy addressed global business and political leaders at the World Economic Forum on Monday, urging stiffer sanctions on Russia. Meanwhile, the Russian army met heavy resistance in the southern Ukrainian city of Melitopol.

Asian markets pulled back, led by internet and technology stocks. China will offer tax relief of over US$21 billion to boost its economy amid growing concerns fueled by COVID-19 lockdowns. Japan's manufacturing activity for May grew at the slowest pace in three months, reflecting supply bottlenecks from parts shortages and China's COVID-19 lockdowns.

Oil prices are up on expectations of higher fuel demand from the U.S. summer driving season, despite worries over a possible global downturn.

As always, give us a call if you have questions, or if you’d like to get together for a review.

And I see 5 names on our RSVP list for Monday’s first event since the pandemic – I’d love to see more of you! Please let me know if you’d like to join in on the festivities (don’t worry – we’ll learn something too).