Oct 2020 Market Update

Global markets continued their recovery during the summer, followed by a slight pullback in September.

In Canada, the S&P/TSX Composite Total Return Index carried on with its strong rebound before stumbling in September, finishing with a return of 4.7%, including dividends in the third quarter. Following the sharpest quarterly contraction in GDP on record, U.S. equity markets continued their strongest rally from a bear market in history. The S&P 500, Dow Jones and Nasdaq all surpassed their pre-COVID highs, respectively jumping 8.9%, 8.2% and 11.2% in U.S. dollar terms, on a total return basis during the third quarter. In overseas markets, international equities rallied 4.9 % in U.S. dollar terms as measured by the MSCI EAFE Index, including dividends during the same period.

Here’s a look at some of the issues that made their mark this quarter:

  • Coronavirus. Worldwide markets reacted to improvements in COVID-19 cases for much of the quarter, looking to better days ahead. The U.S. economy has started to reopen and recover and is likely no longer in a recession. We’re starting to see a second wave of COVID-19 cases in Canada, Europe and other regions while the U.S. is still deep in its first wave. Uncertainty over what the economic consequences will be, and the potential for a vaccine and its global distribution will likely lead to increased volatility.
  • Seasonality. September is typically the worst month in terms of performance, and this year was no exception. Since 1950, September has recorded the worst monthly return on average for the S&P 500 Index. International equities also wavered during September.
  • Oil. The price of oil was essentially flat for the quarter, at approximately US$40 a barrel as measured by West Texas Intermediate (WTI). A lower demand for crude is likely to keep prices below their 2020 highs and may be a drag on the energy sector.
  • Interest rates. Global central banks continued their monetary policy support, maintaining short-term interest rates near historical lows.
  • Geopolitical issues. Renewed fears surrounding the Brexit deal hampered returns across Europe, while better than expected economic data out of China during the third quarter, buoyed equity markets in Asia. Renewed trade tensions between China and the United States, and the upcoming U.S. election contributed to volatility.

The next couple of months may be particularly unstable with the U.S. election coming in November. In presidential election years since 1952, October holds the worst monthly average return for the S&P 500. But in years following an election, the S&P 500 has averaged 11.4%, regardless of the election outcome. We need to remember to put political emotions aside when making investment decisions.

The great pause has given way to a recovery, but we believe this recovery has three stages: alarm, resistance, and exhaustion. If we’ve entered the exhaustion phase, as we believe, then we should expect market returns to be average over the next twelve months. 

A bright light may be in emerging markets, as earnings momentum seems to be stronger in China, Korea, and Taiwan than elsewhere in the world.

Selectivity and a long-term outlook may be the keys to successful investing globally and here at home. While trying not to sound too optimistic, we believe we will be well on the path to recovery by the end of 2021.

As always, if you have questions about the markets or your investments, we're here to talk.

Aug 6, 2020 Market Update

Three stages of the global recovery — an outlook from Manulife Investment Management’s chief economist Frances Donald, Managing Director, Global Chief Economist, and Global Head of Macroeconomic Strategy explains why she believes the pandemic will play out in three stages and will accelerate macrotrends already at work.

Read the article from Manulife Investment Management’s chief economist:

The three stages of the global economic recovery

*Manulife Securities related companies are 100% owned by The Manufacturers Life Insurance Company (MLI) which is 100% owned by the Manulife Financial Corporation, a publicly traded company. Details regarding all affiliated companies of MLI can be found on the Manulife Securities website at www.manulifesecurities.ca.

Manulife Securities Incorporated and Manulife Securities Investment Services Inc. do not make any representation that the information provided in third party articles is accurate and will not accept any responsibility or liability for any inaccuracies in the information or content of any third-party articles. Any opinion or advice expressed in the third-party article, including the opinion of a Manulife Securities Advisor, should not be construed as, and may not reflect the opinion or advice of Manulife Securities. The third-party articles are provided for information purposes only and are not meant to provide legal, accounting or account advice.

 

July 8, 2020 Market Update

July 8, 2020

The stock markets in 2020 have resembled riding a wild roller coaster for investors. Despite a very weak economic outlook earlier in the year due to uncertainty surrounding the coronavirus, major global stock markets have recovered most of their losses for the year. Investor sentiment seems to have improved due to several reasons:

  • Government support: Interest rates have been cut to nearly zero in many developed economies. As well, governments have created many programs that have deployed billions of dollars of support for individuals, corporations and municipalities.  
  • End of lockdown: Many countries, initially led by China and Germany and later joined by the United States, have begun to slowly reopen their economies. 
  • Health care: There have been positive developments on the health care front. Reports indicate there’s a possibility the average length of time to develop a vaccine has been shortened along with encouraging news surrounding drug therapies.

The market recovery has been broad-based and not limited to any one country. In Canada, the S&P/TSX Composite Price Index has rallied 16.0% in the past 3 months for a year-to-date return of -9.1%. In the United States, the S&P 500, Dow Jones, and Nasdaq Price Indices have rallied 20.0%, 17.8% and 30.6% for a year-to-date return of -4.0%, -9.6%, and 12.1% in U.S. dollar terms. In overseas markets, international equities were up 14.2% in the last 3 months, in U.S. dollars as measured by the MSCI EAFE Price Index, for a year-to-date return of -12.6%. 

  1. March, the Canadian mutual fund industry had its worst month ever, in dollar terms, as it saw more than $14.1 billion in net selling. Investors who followed a disciplined approach and stuck with their investment plan have seen their portfolios regain most of the losses. In times of uncertainty, it’s crucial to remain focused on your long-term goals and avoid costly mistakes that are often dictated by emotion.

The potential good news is that the worst is likely behind us. Social distancing measures, travel restrictions and a better resourced health care network mean we’re better prepared for potential future outbreaks of COVID-19. But the economic recovery will be gradual as we reemerge slowly and adapt to the new normal.

Historically, the bottoming period during a recession lasts for several quarters, rather than several months, and we believe this time is no different. Recovery may look like a two step forward, one step back process as economies slowly reopen, which will likely lead to market ups and downs over the coming months.

And so, the message remains the same: Remove emotion from decision making, focus on your long-term goals, and take the opportunity to rebalance your portfolio. Avoid selling investments when markets are low–instead, commit to investing smaller amounts on a regular basis over the next 6-12 months, to take advantage of potential market upswings while mitigating any downside risks.

As always, if you have questions about the markets or your investments, we’re here to talk.

April 23, 2020

Protecting yourself and loved ones from fraud during these extraordinary times.

Times of crisis can bring out the best in people, unfortunately, it can also bring out the worst.

According to the Canadian Anti-Fraud Centre, there have been a number of COVID-19 related scams aimed at the most vulnerable by taking advantage of fear and misinformation. It’s important to keep yourself and your loved ones, especially those who may be more susceptible to fraud, armed with the facts.

Here are some scams that are being used to take advantage of people during the COVID-19 crisis:

  • Emails, phone calls and text messages encouraging seniors to apply for COVID-related government benefits.
  • A version of the CRA scam where fraudsters threaten that your provincial medical benefits have run out, or are running out, and you need to send money to reinstate them or to buy private medical insurance.
  • A phone call from someone posing as a representative from a provincial or municipal health authority saying you have been found to either have COVID-19 or have been exposed to it. The caller then asks for your credit card to pay for testing or results.
  • A phone call from someone posing as a Canada Post or UPS representative saying you have a package (often international) that they’ve attempted to deliver but you need to pay duty or shipping first.
  • Fake financial planners calling about opportunities to boost your investment portfolio after losses due to COVID-19.
  • Fake bank messages asking for a social insurance number and banking information to set up direct deposit for government funds due to COVID-19.
  • Websites asking for credit card donations to help purchase personal protective equipment for front line health care workers.
  • A phone call from a fake community organization claiming they’re trying to help socially isolated seniors. In some cases, these callers are trying to identify vulnerable seniors to gain access to their home to sell them things or steal their personal information.
  • Romance scams through social media and online dating sites targeting seniors who may feel lonely due to isolation during the crisis.

There are also legitimate organizations reaching out to vulnerable seniors during the crisis. It’s important to verify that the organization you're dealing with is legitimate before you take any other action. And never give out your financial information.

If you think you or a loved one may have fallen prey to a scam or want to learn more about how to protect against fraud, I encourage you to visit trusted sources of information, including the Canadian Anti-Fraud Centre.

As always, if you have questions about the markets or your investments, we’re here to talk.

Canadian Equities

Philip Petursson, Chief Investment Strategist provides his views on Canadian Equities

 

U.S. Equities

Philip Petursson, Chief Investment Strategist provides his views on U.S. equities.

 

International Equities

Philip Petursson, Chief Investment Strategist provides his views on International Equities

Dollar Update

Philip Petursson, Chief Investment Strategist provides his views on the Dollar Update

 

Fixed Income Update

Philip Petursson, Chief Investment Strategist provides his views on Fixed Income