6 mins
Stock markets and the economy

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July 2023 - Market optimism continues

The global equity markets continued the momentum that began at the end of June, recording further gains in July. Despite new rate hikes from the Bank of Canada (BoC) and the U.S. Federal Reserve (Fed), among others, the markets were increasingly optimistic that the Fed had completed its monetary tightening cycle and that the United States might even experience a rare soft landing. The latest economic data were encouraging, and inflation continued to stabilize in the United States. Second-quarter corporate earnings also buoyed the markets.

Variation vs
Variation vs
Interest rate in Canada (%)
Key rate
Key rate 5.00 0.25 0.75
Commodities ($ US)
Oil (WTI)
Oil (WTI) $80.58 15.8% 0.2%
Gold $1,960.40 2.0% 8.2%
EUR/CAD 1.45 0.5% 0.4%
JPY/CAD 0.01 1.1% -10.2%
USD/CAD 1.32 -0.5% -2.7%

Sources: Bank of Canada, Fundata


2.6% (S&P/TSX Composite 31-07-2023)

The BoC raised its key rate again by 25 basis points in mid-July, bringing it to 5.0%, its highest level in more than 20 years. The market was expecting this decision owing to the resilience of the Canadian economy and persistent inflationary pressures in some key sectors, including services. The S&P/TSX Composite Index ended the month with a return of 2.6%. Most sectors posted gains, with Financials, Materials and Energy contributing the most to the return. Conversely, Communication Services, Consumer Staples and Utilities ended the month lower. 

On the bond market, the FTSE Canada Universal Bond Index ended the month with a return of -1.1% owing to rising yields for various maturities on the yield curve. 


2.7% (S&P 500 31-07-2023 in CAD)

The U.S. market recorded another positive month in July, the fifth in a row for the S&P 500 Index, which returned 3.2% in U.S. dollars and 2.7% in Canadian dollars. As already noted, the  return was due mainly to expectations that the Fed may have finished its battle against inflation and completed its rate hikes. All sectors, without exception, recorded gains for the period, led by Energy and Communication Services. 


2.5% (MSCI Europe 31-07-2023 in CAD)

Like the North American markets, the European market saw another month of gains despite a further rate hike from the European Central Bank. The MSCI Europe Index returned 1.5% in local currencies and 2.5% in Canadian dollars. Financials, Materials and Health Care were the main contributors, while Information Technology and Utilities reduced the gains.


4.3% (MSCI Asia-Pacific 31-07-2023 in CAD)

The Asian market benefited from China’s strong rebound in July. Expectations that the government may announce measures to stimulate domestic consumption gave impetus to the market. The Bank of Japan’s announcement of greater flexibility in its monetary policy, especially its interest rates, was also supportive. As a result, the MSCI All Country Asia Pacific Index returned 3.7% in local currencies and 4.3% in Canadian dollars. China, Japan and South Korea were the main contributors from the regional standpoint. From the sector standpoint, gains were recorded across all sectors, with Consumer Discretionary, Financials and Industrials contributing the most .


5.7% (MSCI Emerging Markets 31-07-2023 in CAD)

Emerging markets outperformed the major developed markets in July, with the MSCI Emerging Markets Index returning 5.4% in local currencies and 5.7% in Canadian dollars. This result is due mainly to China’s solid performance, as noted above. South Korea and South Africa also contributed to the return. From the sector standpoint, the largest gains were recorded by Consumer Discretionary, Materials and Industrials.  

Reading in progress:July 2023 - Market optimism continues


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