2021: The First Half

Both Wall street and Bay street wrapped up the first half of 2021 at record highs as investors push past fears of a broader pullback and rising inflationary concerns. The North American major indexes are up by double-digit percentages, with the Nasdaq advancing 12.5 percent, the Dow adding 12.7 percent, the S&P 500 surging 14.4 percent, and the S&P/TSX up a whopping 15.67 percent since Dec. 31, 2020.
 
This should not be a surprise when one considers the impact of the vaccines, which began in late 2020, and the amount of pent up demand and increased cash balances amongst individuals and businesses. For the first half this year, investors appeared to be less worried about rising inflation. This sentiment damped a month ago when central bankers signaled rate hikes in 2023. This comes much sooner than previously projected as growth estimates for the U.S. have jumped to 7 percent this year, making 2021 the fastest calendar-year expansion since 1984.
 
In addition to the market strength in North America, there has been a dramatic increase in individual wealth. To extract a comment from our Chief Economist, Douglas Porter “households built up a tremendous cache of extra savings during the pandemic, estimated at $220 billion in Canada, but that figure only scratches the surface on the extent to which the overall household financial positions has strengthened since the start of 2020…Canadian household net worth rose by an astonishing $2 trillion during the pandemic.” Douglas adds that U.S. household wealth has also seen a big boost in the face of the past year’s very tough economic backdrop but comparing the wealth-to-income ratio of the two Nations, Canada’s increase is more overwhelming. Funny, it doesn’t feel that way.

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