Stocks Bounce Back After Volatile Month as Attention Shifts to Trade
Wall Street and global stocks extended their bearish streak in November, as plunging oil prices, trade-war risks and global growth downgrades weighed on investors’ sentiment. November price action was so severe that the Dow Jones Industrial Average and S&P 500 Index briefly entered into negative territory for the year – something that would have seemed inconceivable just two months earlier when the benchmarks were trading in record territory. The global growth outlook hasn’t improved very much, but details around free trade have given investors room for optimism.
U.S. Stocks Round Out Worst Month in Seven Years; China Turmoil Intensifies
After a record-setting September, Wall Street and global stocks experienced a dramatic retreat in October as the escalation of trade-war threats and emerging-market weakness rattled investors’ sentiment. When the dust settled, U.S. equity markets had recorded their worst monthly performance since 2011 while Chinese stocks sunk deeper into bear-market territory. Although the worst of the selloff appears to have passed, underlying risks continue to threaten the short-term outlook.
A brief update of our portfolios given the recent sell off in the global stock markets.
Prior to October, all of the major markets including Canada, Europe, China and the Emerging Markets have been negative for 2018. The US markets have been a usual standout posting positive returns year to date. October has seen all markets globally correct significantly and very quickly. As a result, all of our portfolios have been negatively impacted these past few weeks. There are a number of possible reasons for this sell off, but we believe one of the primary catalysts has been rising interest rates around the world. Relative to the U.S., the Canadian stock market has been particularly weak. Fortunately, our portfolios have been more heavily invested in the U.S.
U.S. Stocks Post Best Quarter Since 2013; NAFTA 2.0 Crosses Finish Line
U.S. stocks rounded out a stellar third quarter on a softer note, as trade tensions and political turmoil in Washington weighed on investor sentiment in the final week of September. Nevertheless, the S&P 500 Index rounded out its best quarter in five years thanks to pro-growth optimism and upbeat quarterly earnings. After a stellar first half of the month, Canadian stocks declined sharply in the final week of trading. Toronto’s benchmark TSX Composite Index pared its monthly gain all the way down to 0.5% after setting fresh highs on Sept. 21. Reprieve for the TSX is likely on the way after Canada and the United States struck a last-minute deal to replace the North American Free Trade Agreement (NAFTA).
Wall Street Clinches Best August Since 2014; NAFTA Rattles Canadian Stocks
U.S. stocks soared to record highs in August, defying a historical downtrend that typically sees the market fall at the end of summer. Strong corporate earnings, pro-growth optimism and the easing of trade tensions with China all contributed to a stellar month for Wall Street. North of the border, Canadian stocks finished the month in negative territory after strained NAFTA negotiations rattled investors’ confidence.
Earnings Season Propels Wall Street Forward as TSX Lags Behind
July was another record-breaking month for Wall Street, with the Nasdaq Composite Index setting multiple all-time highs on the strength of surging technology stocks. The S&P 500 Index and Dow Jones Industrial Average also put up firm gains as volatility fell to its lowest level in six months. Wall Street's tailwind failed to spur commensurate gains in Canada, where the benchmark TSX Index returned less than 1% during the month.
Trade Tensions on the Rise
June was an active month for Wall Street and global equity markets, as the threat of an all-out trade war between the United States and its global allies weighed heavily on investors. On the monetary policy front, the Federal Reserve voted to raise interest rates for a second time this year while the European Central Bank (ECB) signaled for the end of crisis-era policies.
Stocks Rally with Geopolitics in Focus
North American stock markets advanced briskly in May, as rebounding oil prices and the easing of geopolitical tensions boosted appetite for riskier assets. On the trade front, the Trump administration announced it will impose tariffs on steel and aluminum products from Europe, Mexico and Canada in a move that drew an immediate response. In terms of monetary policy, the Bank of Canada (BOC) kept its benchmark interest rate on hold last month but gave a strong signal that rates could rise as early as July.
Rising Bond Yields Present New Challenges for Investors
Global equity markets diverged sharply in April, with Wall Street lagging its peers in Europe and Asia as investors grappled with the reality of rising interest rates in the world’s largest economy. On the earnings front, Corporate America is poised for its best quarter of growth in nearly eight years thanks to a synchronized global recovery and generous tax cuts on the domestic front.
Wall Street’s Retreat Marks Worst Month in Two Years for Stocks
Investors made a hasty retreat from the equity markets last month, with Wall Street experiencing one of its most turbulent periods since the 2008 financial crisis. Major indexes from New York to Tokyo sold off between 1.5% and 7.5% during the month, as investors grew weary of central bank intervention on interest rates. The massive retreat was accompanied by an unprecedented surge in volatility, which led to the termination of one of Wall Street’s most popular inverse-volatility products.
Pro-Growth Optimism Lifts U.S. Stocks to Best Yearly Start Since 2003, but Canada Lag Far Behind
January was a month of record gains for U.S. equities, as pro-growth optimism and strong corporate earnings continued to drive the Trump reflation trade. In Canada, the picture was much more subdued, as volatile NAFTA negotiations prolonged the TSX’s underperformance relative to its U.S. and global peers.
2017 Fourth Quarter and Year End Summary
2017 was one of the least volatile stock markets results in history. In fact, during the past year the S&P 500 did not experience a correction of 3% even once. With the US market moving steadily upwards, it is easy for investors to forget that markets are normally volatile, and sometimes violently so. The great financial crisis of 2008 is now a distant memory for most investors as the global stock markets have now enjoyed one of the longest bull markets since 1900. The current bull market which began in March 2009 is now 104 months in duration, while the average since 1900 is approximately 41 months. Given this extended bull market it is easy to forget the peak to trough 50% market declines during 2000-2003 and 2007-2009. The average bear market decline is approximately 30%. Can we expect another nine years of this current bull market?