This week was filled with relief on Monday from the G20 meeting and then went pretty negative most of the week. At the time of writing the US S&P 500 was down around 4% for the week. Year to date the S&P 500 is down around 2% while the TSX is down around 9%.

We believe that we are beginning to see the turn around economically however once the China/US trade spates start to wrap up they will likely move on to trade disputes with Europe and Japan.

Bond yields have also come down, so where do you go if there are small returns in fixed income and equities are selling off? Don’t worry, we’ll answer that question below.


Although not originally a distraction, China and the US had said that the leaders’ dinner over the weekend had created a verbal agreement to move forward with talks, post-pone an increase to Chinese imports and China will resume purchasing some US goods like farming, energy and industrial commodities. They agreed to try to have a process wrapped up in 90 days.

Alberta ordered a production cut to oil. This may come with repercussions from the US as it increases their oil prices given that the US is Alberta’s largest buyer. We will see if there is a reaction from south of the border.

France is having protests against it’s president Macron saying that his policies favor the rich and he has considered declaring a state of emergency which would allow authorities to prevent protests and other public gatherings.

Turkish annual consumer inflation slowed to 21.6%. Could you imaging this in Canada? How about the 60,324% annual inflation rate in Venezuela that would cause a 94% increase in what you buy to occur every month. High inflation is one thing, hyperinflation is another.

The Facts:


  • Canada: RBC Manufacturing PMI 54.9 from 53.9
  • US Markit Manufacturing PMI Final 55.3 from 55.7
  • US ISM Manufacturing New Orders 62.1 from 57.4
  • Germany: Markit Manufacturing PMI Final 51.8 from 52.2
  • China Caixin Manufacturing PMI 50.2 from 50.1


  • US Redbook YoY retail sales 7% from 7.9%
  • UK Construction PMI 53.4 from 53.2


  • Bank of Canada held rates steady at 1.75%
  • US Mortgage applications 2% from 5.5% but could be some seasonality here
  • Germany Markit Composite PMI Final 52.3 from 53.4
  • China Caixin Composite PMI 51.9 from 50.5
  • UK New Car Sales YoY -3% from -2.9%


  • Canada: Exports and Imports both decreased
  • Canada Balance of Trade C$-1.17B from C$-0.89B
  • US Initial Jobless Claims 231k from 235k
  • US Factory Order ex Transportation 0.3% from 0.1%
  • Germany Construction PMI 51.3 form 49.8
  • Germany Factory Orders MoM 0.3% from 0.1%


  • Canada Full Time Employment Change 89.9k from 33.9k (huge number)
  • Canada Participation Rate 65.4% from 65.2%
  • US Participation Rate 62.9% from 62.9%
  • US Unemployment Rate 3.7% from 3.7%
  • US Average hourly earnings YoY 3.1% from 3.1%
  • Germany Industrial Production MoM -0.5% from 0.1%


Canada had good job growth and manufacturing PMI however we think the runway for the economy overall is still negative as the high debt levels and government mortgage rules create limited upside return in our opinion over the long term. At least until some of these provide some more opportunity for growth.

Germany posted a negative GDP growth last quarter however we saw positives in the German Construction PMI, factory orders and PMI is still above 50. We think this may be the beginning of a turn around however there are many headwinds including confidence regarding our perceived upcoming trade battles with the US and German elections which voted in a candidate perceived to be similar to the existing Chancellor. Merkel was Chancellor for 13 years and party chief for 18.

The US is still having strong consumer spending and although the employment data is less impressive it is still impressive. The US has relatively low debt to income ratios, a positive business environment and capital market that is the most efficient in the world. It has a massive population and has some of the best education institutions in the world. There is much growth to be had out of the US even with the overshadowing trade disputes and Trump knows this. He is the biggest kid on the playground that can’t be matched economically or militarily and is using these advantages to push back. Even with the arrest and possible extradition from Canada to the US of the CFO of Huawei, on of the biggest tech companies in China, this will likely be used as a political bargaining chip.

China has arrested people of other countries including citizens of the US. However I heard it put very well that imagine China arresting the CFO of Apple. Further imagine that the CFO is also the child of Steve Jobs.

It’s not exactly tit for tat and I can’t help but feel that the trade wars are escalating. On the bright side, China PMI’s are starting to pick up just a little.

For the time being we remain focused on the US, but not “all-in”. We are holding some back until we see the economics pick back up as trade tensions and oil are weighing on asset values. This could continue in our opinion for another 3-6 months but the data will tell when it is time to shift allocations. We are holding for the time being.

Weekly Wealth Tip:

For all you small or medium size business owners I recommend that you read the book Profit First by Mike Michalowicz. It’s an easy and fun read but also quick.

It argues that the traditional accounting formula of Revenue – Expenses = Profit is wrong. In the traditional many business owners end up working crazy amounts of hours, earning huge revenues and taking home very little pay.

Mike proposes that the formula should be Revenue – Profit = Expenses. Looking at it this way you become acutely aware of how much you have for expenses and are forced to be very lean. Now we can all usually trim the fat a little on our spending and this forces business owners to operate within confines. 

This pressure often forces thinking on efficiency and impactful spending. It’s about being deliberate on things that generate revenues.

For example paying yourself is important. Paying taxes are important. Spending money on marketing is important because without customers revenue will dry up. Paying for a new office chair can perhaps wait unless it’s an eyesore. 

I would posit that under this formula and having a commitment to marketing that business owners will focus on the most effective methods of marketing that generate the highest return.

After all, the most positive ROI investments should be maxed out until you need to hire more people to cope with the added business. Then continue increasing that ROI and support the channels that work.

If you have a bookkeeper then have them prepare a weekly report with your key performance indicators for you to review. Look at how effective your marketing is and increase spending on the ones that work really well and trim the ones that aren’t working. Are you engaging with your customer? Is there a dialogue?

Until next week,

Trevor Dale, CFA