The wise investor |  What if inflation was the key?

The wise investor | What if inflation was the key?

Every Sunday, we highlight financial and stock news that may be useful to the investor, but may have gone unnoticed.

Posted at 8:00 am

John Gagnon
special collaboration

When asked what will allow stocks to return to a sustainable upward trend, it seems that inflation is one of the inescapable factors. With the announcement of the latest data on the consumer price index (CPI) in the United States on Wednesday, futures contracts on the Dow Jones index immediately jumped more than 500 points. After rising 1.3% in June, the change in the index was practically zero in July. The annual variation went from 9.1% to 8.5%, a drop slightly greater than the expectations of the experts who predicted 8.7%.

But beware, because the game is not yet won. “Not only is there a long way to go for inflation to return to a satisfactory level, but the risks remain to the upside,” warns Benoit P. Durocher, senior economist at Desjardins. So it should come as no surprise that stock market volatility continues for quite some time.

The share price of New However, it seemed to be in recovery mode, falling from $40 to $54 since July 26. But lukewarm comments from company management during the release of second-quarter financial results last Wednesday shook investor confidence once again in the payment solutions provider, whose shares were roughly $170 lower than a year ago. one year. Management mentions, among other things, that higher inflation, rising interest rates and a further slowdown in activity in terms of digital assets and cryptocurrencies will affect the results of the coming quarters. Several analysts took the opportunity to slaughter their price target, including National Bank Financial’s Richard Tse, who cut his from $100 to $75.

the leaders of FALLS OFF painted a rather optimistic picture during the Investor’s Day they held in early June. But the most recent quarter results released last week surprised investors, when they included an unfavorable adjustment of about $28.9 million to earnings from two of its defense sector contracts. The share price has fallen more than 23% since then. Midway through Friday’s session, the title was trying to regain some composure. In addition, this drop puts the stock in a favorable situation from a risk/return point of view, according to Fadi Chamoun, an analyst at BMO Capital Markets. However, he lowered his price target from $42 to $36.

Though BRP been the subject of a cyberattack that has paralyzed its operations for a few days, the situation of the Québec maker of recreational vehicles does not seem to worry investors too much, as the share price even rose this week. On August 7 and 8, the firm held its Club BRP 2023 in Salt Lake City, Utah, where it presented its new products. The reaction of the participants to the event was enthusiastic and shows that management has certainly not been idle during the pandemic, says Benoit Poirier, an analyst at Desjardins. He sees significant growth opportunities in the short, medium and long term.

savaria it released quarterly results last Wednesday showing solid performance and good earnings before interest, taxes and amortization, according to Frederic Tremblay, an analyst at Desjardins. This accessibility industry leader’s stock reacted well to the earnings announcement as he attempts to continue a recovery that started last month from a 52-week low.

The strong words from central bankers and the resulting decisions, as well as the perception that the inflation rate had peaked, allowed stocks to close higher for the fourth week in a row. These issues are sure to be on the agenda when the Kansas City Federal Reserve holds its renowned annual symposium in Jackson Hole, Wyoming, August 25-27, bringing together numerous economic and financial personalities. To follow.

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