April 26th 2023, 2:01:21 pm

(about a month ago)

There may be more tightening pain ahead.

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North American stock markets struggled to advance last week as the economic and inflation reports reemphasized that the economies are strong and can withstand higher rates for longer. S&P 500 declined 0.28% while Nasdaq rose 0.59% as Tesla had a strong week. Toronto Stock Exchange index declined 0.47%.

The US inflation report came in at 6.4% and Canada's at 6.3%, both slightly higher than expected. US and Canada’s job reports showed extremely higher than expected hiring which more than negates the layoff by big tech companies and keeps the job market super tight and unemployment at record high. Producers' inflation rising higher than forecast which puts pressure on companies which may not be able to path the higher prices to customers. 

Therefore, the US central bank which has repeatedly asserted that they will continue with their interest rate increases to control inflation will probably do so but the markets keep ignoring the determination of the central bank to fight inflation.

Canada however is different since the central bank has noted that they are done for now but with higher rates in the US and still high inflation, they may have to introduce more rate hikes to prevent currency deflation. Meanwhile, household debt and high mortgage rates are eating into households' income and higher rates could potentially hurt the economy and Canadians beyond repair.