[ad_1] Kyle Prevost, editor of Million Dollar Journey and founder of the Canadian Financial Summit, shares financial headlines and offers context for Canadian investors. U.S. retailers: People are spending differently, but they’re still spending Readers of “Making sense of the markets” might remember that, back in May, earnings reports from Walmart and other major retailers were the catalyst for a widespread market sell-off. Consequently, many market watchers eagerly awaited this weeks’ earnings calls. While the news wasn’t all bullish, it was more good than bad, considering the fear-inspired markets of the previous quarter. Our main takeaway was that these large retailers—in most cases, Target excepted—are finding ways to push through excess-inventory issues and keep costs down relative to general inflation. All earnings numbers are in U.S. dollars, unless otherwise stated. Walmart (WMT/NYSE): Earnings per share came in at $1.77 (versus $1.62 predicted) and revenues totaled $152.86 billion (versus 150.81 predicted). Spending patterns are still changing to reflect a more discerning consumer. The stock was up 5% to close the day on Tuesday. Target (TGT/NYSE): After Walmart’s surprise to the upside on Tuesday, Target’s numbers were a shock in the other direction on Wednesday. After rising 4.5% on Tuesday, shares were down nearly 3% at the Wednesday close. Citing steep discounts to clear out excess inventory, Target revealed that its quarterly profit was down 90% on a year-over-year basis. Earnings per share were $0.39 (versus $0.72 predicted) and revenue came in exactly as expected by analysts at $26.04 billion. Home Depot (HD/NYSE): Earnings per share topped expectations at $5.05 (versus $4.94 predicted) and revenues at $43.79 billion (versus $43.36 billion reported). Share prices were up 4% at the close on Tuesday. Lowe’s (LOW/NYSE): Earnings per share posted an expectation beat at $4.67 (versus $4.58 predicted) and revenues slightly below analysts’ prediction of $28.12 billion. The stock moved up about 3% on Tuesday after Walmart’s and Home Depot’s favourable earnings report. And it held its ground, closing up slightly on Wednesday. All in all, if these numbers continue to trend in a slightly positive or neutral direction for the rest of the year, I think most investors (and definitely the central bank’s decision makers) will breathe a sigh of relief. Canada’s turn to disinflate Following last week’s big news about U.S. inflation rates coming down from its recent peaks, it didn’t come as a big surprise when the Bank of Canada (BoC) reported July’s annualized inflation rate was 7.6%, down from 8.1% in June. This marked the first time in a year that the inflation rate trended downwards. Some key takeaways from the full report were: Gasoline prices were down 9.2% Food prices were up nearly 10% National home prices fell 1.7% (Desjardins Group predicts a 25% decrease by the end of the year) Rent increased by 4.1% Airline flight prices increased 25.5% Hotel prices increased 10% Natural gas prices increased 12.4% Wages increased 5.2% (this means the real spending power of Canadians went down) As always, it’s important to remember that these numbers are “annualized”—meaning they are calculated on a year over year basis—and do not represent an increase or decrease from one month to the next. Source: CBC Bullish investors immediately pounced on the report, with several positing that the next interest rate increase could be dialed back from 0.75% to 0.50%. BoC Governor Tiff Macklem threw cold water on these positive assumptions by stating, “Inflation in Canada has come down a little, but it remains far too high,” as well as, “The good news is that it looks like inflation may have peaked. […] The bad news is that inflation will likely remain too high for some time.” Macklem went on to sum up the BoC’s position in the National Post: “To tame inflation, we need to bring overall demand in the economy into better balance with supply. Our goal is to cool the economy enough to get inflation back to the 2% target. We don’t want to choke off demand—we want to slow its growth. That’s what we call a soft landing. By acting forcefully in raising interest rates now, we are trying to avoid the need for even higher interest rates and a sharper slowing down the road. “The best way to protect people from high inflation is to eliminate it. That’s our job, and we are determined to do it. Tuesday’s inflation number offers a bit of relief, but unfortunately, it will take some time before inflation is back to normal. We know our job is not done yet—it won’t be done until inflation gets back to the two per cent target.” Currency traders appeared to take the Governor at his word, as the Canadian dollar was up significantly throughout the day—ultimately trading 0.5% higher at $0.776 on August 16. So far, the article I wrote almost a year ago on the best Canadian stocks for inflation hedging has fared pretty well. As predicted, the companies with strong market power have been able to raise prices at a rate that allows for sustainable long-term profit margins to hold up. Liquid gold might be more profitable than physical gold Saudi Arabia’s national gas company, Saudi Aramco (SAR/TADAWUL) posted a quarterly profit of $48.4 billion, making it the most profitable company in the world over the past three months. On a related note, it’s a great time to be a pro golfer. The numbers are kind of staggering: Profit is up 90% on a year-over-year basis Profit significantly topped analyst estimates of $46.2 billion Saudi Arabia still owns 94% of the company after publicly listing shares in 2019 Saudi’s government reported a $21 billion budget surplus for the second quarter alone Shares of Saudi Aramco are up 22.37% on the year The company’s market cap is now roughly $2.4 trillion Management went on to say it believed oil demand would continue to increase for the rest of the decade, and that they were planning on boosting capacity, from the current 12 million barrels per day, to 13