January 15, A recap of last week s top economic news and what s to come

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1 A recap of last week s top economic news and what s to come U.S. headline inflation slips while core prices rise U.S. inflation moderated to 2.1% year over year after prices rose only 0.1% in December. Higher costs for prescription drugs, vehicles and housing lifted inflation levels. Importantly, core inflation rose to an annualized pace of 1.8% after recording its largest monthly advance since January 2017, as core prices rose 0.3% in December. The move higher in core prices is supportive of further restrictive monetary policy, with the market pricing in an 88% chance of a March rate hike following the CPI print, compared to an 82% chance the day before. The market is not pricing in any chance of a rate hike for January. Canadian housing pauses Canadian housing starts decelerated to 217,000 annualized starts in December, though medium- and longerterm trends remain healthy. Regionally, Ontario suffered the largest setback, while Alberta and PEI also recorded notable weakness during the month. December s disappointing results did not disrupt activity, as 2017 recorded the largest number of housing starts in a decade, up 11% from the prior year, backed by underlying demographic support and strengthening labour markets. Building permits also fell a worse-than-expected 7.7% in November. Fewer plans for commercial and industrial buildings more than offset an increase in single-family home permits. Eurozone employment and retail sales strengthen Eurozone unemployment fell to 8.7% in November, matching 2009 lows. Labour conditions across the region pose a challenge for the European Central Bank in its move towards policy normalization, however. Germany continues to drive growth with unemployment at 3.6% levels, while other member nations struggle, with Greece reporting unemployment over 20% and Spain over 15%. Also reported, eurozone retail sales advanced 1.5% in November, the strongest month in over a year. The sharp increase improved retail sales to a 2.8% annualized pace. Other economic news U.S. retail sales rose for the fourth consecutive month as activity advanced 0.4% in December, closing out the busiest holiday shopping season for retailers since 2014 and second busiest in the past decade. The strong finish to the year resulted in core sales spiking 8.9% in the fourth quarter, the largest quarterly advance in the post-recession era. On a calendar year basis, U.S. retail sales rose 4.2% in 2017, as compared to 3.2% growth in 2016.

2 Eurozone industrial production rose 1.0% in November, improving year-over-year growth to 3.2%. Capital goods production led activity, more than offsetting declines in energy production and non-durable goods. What s to come Bank of Canada s rate decision The Bank of Canada will decide if current conditions warrant higher interest rates on Wednesday. Despite the conflicting environment of strong economic data and trade uncertainty, markets are almost fully pricing in a 25 basis point hike. Elsewhere, the U.S. reports housing data on Thursday and the eurozone is scheduled to update inflation levels on Wednesday. Source: BMO Economics, TD Economics, Ned Davis Research, Financial Times as of January 12,

3 Return (CAD, %) Annualized Return (CAD, %) CANADIAN EQUITY INDEXES Close Week YTD 1 YR 3YR 5 YR 10 YR 52 wk high 52 wk low S&P/TSX Composite PR Index 16, ,106 14,482 S&P/TSX Composite TR Index 54, ,697 47,500 Energy TR 3, ,875 3,685 Materials TR 2, ,664 2,587 Industrials TR 3, ,375 3,239 Consumer Disc. TR 3, ,789 2,687 Consumer Staples TR 5, ,727 5,524 Health Care TR Financials TR 5, ,397 4,254 Information Technology T Telecom Serv ices TR 2, ,659 2,591 Utilities TR 4, ,096 3,958 S&P/TSX 60 TR Index 2, ,324 2,266 MSCI Canadian Small Cap PR Index Return (CAD, %) Annualized Return (CAD, %) WORLD EQUITY INDEXES Close Week YTD 1 YR 3YR 5 YR 10 YR 52 wk high 52 wk low CAC 40 PR Index 5, ,536 4,345 DAX 30 PR Index 13, ,505 10,175 DJIA PR Index 25, ,557 17,884 DJIA TR Index 55, ,571 37,469 FTSE 100 PR Index 7, ,599 6,677 FTSE 100 TR Index 6, ,396 5,418 FTSE/Xinhua A200 11, ,467 8,275 Hang Seng PR Index 31, ,799 21,489 Hang Seng TR Index 84, ,390 56,043 MSCI EAFE TR Index 8, ,966 6,199 MSCI Emerging Markets TR 2, ,455 1,774 MSCI Europe TR Index 10, ,946 7,486 MSCI Far East Free (ex-japan) TR 1, ,444 1,016 MSCI World TR Index 8, ,206 6,599 MSCI World AC TR Index 1, NASDAQ Composite PR 7, ,765 5,034 Nikkei 225 PR 23, ,645 16,112 Russell 2000 TR 7, ,739 5,632 Russell 2000 Growth TR 6, ,620 4,801 Russell 2000 Value TR 11, ,505 9,136 S&P 500 PR Index 2, ,588 2,084 S&P 500 TR Index 5, ,414 4,305 Shanghai Comp PR 3, ,421 3,017 ECO_RELEASE_DT Interest Rates Current Next Meeting Bank of Canada Ov ernight Lending Rate Bank of England Repo Rate European Central Bank Min bid rate at refi tende Federal Funds Target Rate 1.00% 0.50% 0.00% 1.50% 1/17/2018 2/8/2018 1/25/2018 1/31/2018 3

4 Total Ret (%) Historical Prices 52 wk 52 wk Commodities ($US) Close Week YTD 1 YR 3YR 5 YR 10 YR high low Copper Corn Crude Oil Gold 1, ,195 1,233 1, ,358 1,121 Natural Gas Nickel 12, ,225 15,034 17,525 28,385 12,730 8,700 Platinum ,242 1,632 1,565 1, Soybeans ,032 1,014 1,425 1,286 1, Silv er Wheat Zinc 3, ,710 2,128 1,992 2,382 3,342 2,419 CPN MATURITY Bond Yields Coupon Maturity Date Canada 2 Year Treasuries /1/ Year Treasuries /1/ Year Treasuries /1/2048 ECB 2 Year Treasuries /13/ Year Treasuries /15/ Year Treasuries /15/2048 Japan 2 Year Treasuries /15/ Year Treasuries /20/ Year Treasuries /20/2047 US 2 Year Treasuries /31/ Year Treasuries /15/ Year Treasuries /15/2047 Current Price Yield to Maturity Total Ret (%) Historical Prices Currencies Close Week YTD 1 YR 3YR 5 YR 10 YR high low CAD / EURO CAD / USD CAD / UK POUND USD / AUSTRALIAN $ USD / BRAZIL REAL USD / EURO USD / MEXICAN PESO USD / UK POUND USD / YEN Source: Bloomberg, as of January 12,

5 Commentaries contained herein are provided as a general source of information based on information available as of January 12, 2018 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Published Date: 5