Philippe Pratte in the spotlight: Perspectives on the technology and real estate sectors in Les Affaires
This month, Philippe Pratte, President and Portfolio Manager at Pratte Portfolio Management, was asked twice by Les Affaires to share his expertise on key sectors of the economy. In the first article, Philippe gave his analysis of the potential of the technology sector, highlighting the growing impact of artificial intelligence. In a second article, he took a look at the real estate market, offering an optimistic outlook for the end of the sector's period of stagnation.
In the first article published by Les Affaires, Philippe Pratte analyzes the potential of the technology sector, focusing on the rise of artificial intelligence. He explains how this technology is transforming major industries such as healthcare and financial services, while offering sustainable growth opportunities for innovative companies. According to Philippe, AI is a long-term driver of change, and investors need to identify companies capable of mastering these technologies to seize these new market opportunities.
In a second article published by Les Affaires, Philippe Pratte discusses the recovery of the real estate sector after a period of slowdown. He points out that, despite the challenges posed by rising interest rates, the market is showing signs of stabilization. In his view, this improvement opens up investment opportunities, particularly in the residential and commercial segments. Philippe stresses the importance of a selective approach, as some areas and property types may grow faster than others as the economy regains momentum.
In conclusion, Philippe Pratte's analyses in both articles illustrate his expertise in identifying investment opportunities. His analysis of the technology sector highlights the transformative potential of artificial intelligence, while his outlook on real estate focuses on the sector's recovery, even in the face of rising interest rates. By adopting a selective approach, investors can take advantage of these fast-growing sectors, be they technological innovations or promising real estate markets.
Market Brief
Monday
- S&P 500: +0.77%, closing at 5,859.85 points, an all-time record.
- Dow Jones: +0.47%, closing at 43,065.22 points, its first time above 43,000.
- NASDAQ: +0.87%, closing at 18,502.69 points.
The technology sector recorded notable gains, led by Nvidia (+3%), which reached a new high of $138 per share. Other semiconductor stocks, such as ASML (+2.8%), ARM Holdings (+3.5%) and Applied Materials (+2.2%), also posted solid gains, reinforcing the positive momentum of technology stocks.
Crypto-currencies also benefited from the bullish day. Bitcoin jumped 5% to US$65,700, while Ethereum gained 8%. The rally was fueled by renewed investor confidence in risky assets.
In China, the absence of any significant new economic stimulus measures prompted contrasting market reactions. While the Shanghai index jumped 2.1%, Hong Kong's Hang Seng index fell 0.7%. Oil prices retreated by 2% to US$81.54 on persistent concerns over Chinese demand, leading to a fall in energy company shares.
Copper and other commodity prices also fell, weighing on mining stocks such as Freeport-McMoRan (-2.4%). This drop is mainly due to the persistent weakness of demand in China and the lack of stimulating news to boost its economy.
The third-quarter earnings season was kicked off by solid gains in the banking sector. JPMorgan Chase (+3.5%) and Wells Fargo (+2.8%) gave the markets a boost. Investors now await results from major companies such as Bank of America, Goldman Sachs, and Johnson & Johnson, which will publish on Tuesday, followed by Morgan Stanley and United Airlines on Wednesday.
Although indices are reaching new highs, investors remain cautious in the face of interest-rate uncertainties. The yield on 10-year Treasuries rose above 4.1% last week, and economic data expected this week, notably on retail sales, will influence the Fed's next decision. Analysts continue to debate the possibility of an interest rate cut in November.
Titles in brief
- Nvidia (NVDA) (+3%): New peak thanks to demand for AI-related products.
- McDonald's (MCD) (+1.5%): Strong performance supporting the Dow Jones.
- Bitcoin (BTC-USD) (+5%): Up to US$65,700, fueled by renewed interest in cryptocurrencies.
- SoFi Technologies (SOFI) (+11.4%): Growth following a US$2 billion loan agreement with Fortress Investment Group.
- Longboard Pharmaceuticals (LBPH) (+51.6%): Soaring sales after acquisition by H. Lundbeck.
- Freeport-McMoRan (FCX) (-2.4%): Falling commodity prices, impacted by declining Chinese demand.
- Boeing (BA) (-1.3%): Losses after announcing a 10% reduction in its workforce.
Tuesday
- Dow Jones: The index lost 0.75%, or 324.80 points, to close at 42,740.42.
- NASDAQ: The index fell by 1.01% to close at 18,315.59 points.
- S&P 500: The broad index lost 0.76%, closing at 5,815.26 points.
- S&P/TSX: The Toronto Composite Index fell by 0.13%, or 32.09 points, to close at 24,439.08 points, mainly due to lower energy prices.
- The Canadian dollar was trading at 72.44 US cents, down slightly from 72.67 US cents on Friday.
- Crude oil fell US$3.25 to US$70.58 a barrel on concerns about demand in China.
- Natural gas edged up by less than one US cent, to US$2.50 per million BTU.
- Gold rose US$13.30 to US$2,678.90 an ounce, while copper fell seven cents to US$4.34 a pound.
The New York Stock Exchange ended lower on Tuesday, marked by a decline in technology and semiconductor stocks. ASML's warning of weaker-than-expected demand for microprocessors weighed heavily on the market. ASML tumbled 16.26% to US$730.43, dragging other stocks such as Nvidia (-4.69%) and AMD (-5.22%) down with it.
Geopolitical concerns have exacerbated the downturn in the technology sector. Reports suggest that the US government is considering restricting sophisticated chip exports to the Middle East, which could affect giants such as Nvidia and AMD. This has raised further concerns for the entire semiconductor sector.
Titles in brief
- ASML (ASML) (-16.26%): Collapse after annual forecasts were revised downwards.
- Nvidia (NVDA) (-4.69%): Impacted by potential restrictions on chip exports.
- AMD (AMD) (-5.22%): Similar fall to Nvidia due to the same geopolitical fears.
- Citigroup (C) (-5.11%): Decline due to increase in bad debts.
- UnitedHealth (UNH) (-8.11%): Sharp fall after reducing its annual profit forecasts.
- Walgreens Boots Alliance (WBA) (+15.78%): Up after the announcement of the closure of 1,200 pharmacies despite heavy losses.
Inflation in Canada falls to 1.6% in September 2024
In September 2024, Canada's inflation rate fell to 1.6%, marking its lowest level in two years. This slowdown in inflation reflects a continued decline in the prices of energy and durable goods, particularly motor vehicles and electronics. However, food costs remain high, exerting persistent pressure on households.
This lower-than-expected figure suggests that the aggressive measures taken by the Bank of Canada to contain inflation - notably successive interest rate hikes - are beginning to bear fruit. Indeed, consumer price increases are slowing, a trend the Bank had hoped to observe after raising its key rate several times during 2023.
Sectors most affected by falling prices
- Energy: Lower oil and gasoline prices contributed significantly to the overall reduction in inflation. Crude oil prices fell by around 2% in September due to concerns about global demand, particularly in China, the world's second largest economy, where expectations of economic recovery failed to materialize.
- Durable goods: Prices of vehicles and electronic products have fallen due to reduced consumer demand and the normalization of supply chains that were disrupted during the pandemic.
However, despite these decreases, Canadian consumers continue to feel strong pressure in grocery stores. Food prices continued to rise in September, with particularly marked increases for dairy products, fruit and vegetables.
Impact on interest rates and economic policy
With inflation down to 1.6%, many analysts believe that the Bank of Canada could decide to keep its key rate unchanged at its next meeting. Monetary policy seems to be having a moderating impact on inflation, which could justify a pause in interest rate hikes.
The Canadian bond market was closed on Monday due to the Thanksgiving holiday, but interest rates remain under scrutiny. Yields on 10-year bonds fell slightly last week, reflecting expectations of a more stable monetary policy in the short term.
Future prospects
The month of October will be crucial in assessing whether the downward trend in inflation continues. The Bank of Canada, like consumers, will continue to monitor high-volatility sectors such as food and energy prices. Data on retail sales and the job market, to be released in the coming weeks, will also provide important indications of the country's overall economic health.
Wednesday
- Dow Jones: The index gained 0.79%, or 337.28 points, to close at 43,077.70 points, a new closing record.
- NASDAQ: The index gained 0.28% to close at 18,367.08 points.
- S&P 500: The broad index gained 0.47% to close at 5,842.47 points.
- S&P/TSX: The Toronto Composite Index rose 0.50%, or 122.12 points, to close at 24,561.20 points, supported by gains in base metals and utilities stocks.
- The Canadian dollar was trading at 72.62 US cents, up from 72.44 US cents on Tuesday.
- Crude oil edged down 19 cents to US$70.39 a barrel in New York.
- Natural gas was down 13 cents at US$2.37 per million BTU.
- Gold rose by US$12.40 to US$2,691.30 an ounce, while copper gained three cents to US$4.37 a pound.
US stock markets rebounded strongly on Wednesday, once again hitting all-time highs. Shares in chipmakers rebounded after concerns over sales forecasts, with major gains for Nvidia (+3.13%), Micron (+4.72%), and Marvell Technology (+2.86%). These stocks were particularly sought-after after their decline the previous day.
Morgan Stanley shares climbed 6.5% following the publication of solid quarterly results, buoyed by strong financial markets. Other banks such as Goldman Sachs (+1.43%), Bank of America (+1.57%), and Citigroup (+2.57%) also posted gains, confirming the health of the financial sector.
The New York Stock Exchange also benefited from renewed interest in the nuclear energy sector after Amazon announced three partnerships in next-generation modular reactors. Shares in Cameco (+7.87%), Constellation (+5.13%), NuScale (+40.01%), and Oklo (+41.97%) rose spectacularly following the announcement.
Titles in brief
- Morgan Stanley (+6.50%): Solid results thanks to a recovery in investment banking.
- United Airlines (+12.44%): Up sharply on record profits.
- Cameco (+7.87%) and Constellation (+5.13%): Both companies benefit from Amazon's investments in nuclear power.
- Nvidia (+3.13%): Rebound after semiconductor worries.
- Novavax (-19.44%): Sharp decline following FDA suspension of clinical trial.
- Intel (-1.54%): Fall after Chinese cybersecurity warning.
- ExxonMobil (-2.4%) and Chevron (-1.8%): Fall due to lower oil prices against a backdrop of weak demand.
Thursday
- Dow Jones: The index gained 0.37%, or 161 points, to close at 43,239.05 points, a new closing record.
- NASDAQ: The index edged up 0.04% to 18,373.61 points.
- S&P 500: The broad index fell by 0.02% to close at 5,841.47 points.
- S&P/TSX: The Toronto Composite Index rose by 0.53%, or 129.28 points, to close at 24,690.48.
- The Canadian dollar was trading slightly lower at 72.52 US cents.
- Crude oil rose 27 cents to US$70.09 a barrel in New York.
- Natural gas fell by two cents to US$2.35 per million BTU.
- Gold advanced US$16.20 to US$2,707.50 an ounce, while copper fell four cents to US$4.33 a pound.
The semiconductor sector was boosted by outstanding results from TSMC (+9.79%), which reported a 39% year-on-year increase in sales. Nvidia followed suit with a 0.89% rise, reaching a new session high of US$140.89 before closing at US$136.93. Other industry giants benefited from this momentum, such as Broadcom (+2.66%), Intel (+0.58%), and Micron (+2.57%).
US retail sales rose by 0.4% in September, exceeding analysts' expectations. New jobless claims also fell, boosting confidence in the US economic recovery. These data helped to underpin overall market performance, despite a slight rise in bond yields.
Titles in brief
- TSMC (+9.79%) and Nvidia (+0.89%): Strong performance following TSMC's good results.
- Travelers (+9%): Contributes to new Dow record thanks to solid quarterly results.
- Blackstone (+6.27%): Increase due to better-than-expected results.
- Expedia (+4.75%) and Uber (-2.44%): Variation after rumors of Uber's takeover of Expedia.
Friday
- NASDAQ: The index gained 0.5% at the opening, supported by a sharp rise in Netflix after its third-quarter results.
- S&P 500: The index advanced by 0.2%, continuing a week of gains.
- Dow Jones: The index lost 0.2%, or 73 points, despite the records set the previous day by Travelers.
Netflix climbed 8% after beating Wall Street forecasts, thanks in particular to a 35% increase in ad-supported subscriptions.
The week ended on a positive note in key sectors, notably technology, with strong performances from companies such as Netflix and Nvidia. Financial results and strong retail data bolstered investor confidence, particularly in the recovery of the US economy. The semiconductor sector was buoyed by TSMC's outstanding results, underlining the continued strength of the technology sector. However, concerns over inflation and interest rates persist, creating mixed sentiment for the weeks ahead.
