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Stock markets and the economy

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May 2024 - Geopolitical tensions fuel volatility

The month of May saw contrasting performances on the global financial markets as persistent inflation and geopolitical tensions continued to fuel volatility. 


Tensions between Israel and Iran reached new heights, increasing risks in the Middle East and adding to oil-price volatility. In the United States, the economy continued to grow modestly, but persistent inflationary pressures and mixed economic data raised concerns that the Federal Reserve would keep interest rates high. In Europe, the parliamentary election sparked debate about strategic autonomy and disconnection from China, while internal conflicts over migration and energy security persisted. Emerging markets were supported by central bank rate cuts and resilience in developed economies but remained vulnerable to geopolitical and economic shocks, especially because of challenges faced by China and increased supply-chain fragmentation. That being said, China has introduced a package of measures to stabilize its property market, boosting hopes for economic recovery despite significant structural challenges. 

Variation vs
Variation vs
Interest rate in Canada (%)
Key rate
Key rate 5.00 0.00 0.00
Commodities ($US)
Oil (WTI)
Oil (WTI) $78.04 -6.5% 8.6%
EUR/CAD 1.48 0.7% 1.2%
JPY/CAD 0.01 -0.6% -7.4%
USD/CAD 1.36 -0.8% 3.1%

Sources: Bank of Canada, U.S. Energy Information Administration.


2.8% (S&P/TSX Composite 31-05-2024)

Against this backdrop, the Canadian market posted a positive performance, with the S&P/TSX Index returning 2.8% on the month. The gain was due mainly to strong performances by the energy and materials sectors, although the information technology and health care sectors came under pressure. This dynamic was influenced by expectations of an interest rate cut by the Bank of Canada, which materialized early in June. 

The Canadian bond market reacted positively, with the FTSE Canada Universe Bond Index returning 1.8%. Investors reacted favourably to the interest rate environment, despite global economic uncertainty.


2.8% (S&P 500 31-05-2024 in CAD)

The U.S. market recorded a solid performance in May. The S&P 500 Index gained 5% in U.S. dollars, corresponding to 2.8% in Canadian dollars, staging a significant recovery on strong results in the information technology and consumer discretionary sectors. Early in June, the index set its 25th record of the year, when Nvidia joined the club of companies with a market capitalization exceeding $3 trillion. Investor optimism was boosted by unexpectedly strong economic data and, at certain points during the month, short-lived signs that inflation was stabilizing. 


4.2% (MSCI Europe 31-05-2024 in CAD)

Like the North American markets, the European market performed well. The MSCI Europe Index returned 3.2% in local currencies and 4.2% in Canadian dollars. Its positive performance was driven mainly by financials and industrials. In contrast, the energy sector posted negative returns because of oil-price volatility and geopolitical uncertainty. The European markets benefited from economic stabilization and expectations of lower interest rates.


0.9% (MSCI AC Asia-Pacific 31-05-2024 in CAD)

Asia performed positively in May but less so than Europe and North America. The MSCI All Country Asia Pacific Index returned 1.3% in local currencies, supported by Japan, Taiwan and China. Signs of economic recovery were seen in China, including an increase in exports and imports, while the Japanese market was stimulated by strong domestic demand. As for Taiwan, it recorded a solid performance on the strength of its technology exports. Expressed in Canadian dollars, the return for the period was 0.9%.


-0.2% (MSCI Emerging Markets 31-05-2024 in CAD)

Emerging markets performed more modestly than developed markets amid ongoing economic and political challenges in a number of countries, with the MSCI Emerging Markets Index returning 0.5% in local currencies and -0,2% in Canadian dollars. Economic growth in China was a key driver of performance, but a massive wave of investors who pulled out of the markets, high valuations and geopolitical instability weighed on other markets, such as Saudi Arabia, Indonesia, the Philippines, and South Korea. From a sector perspective, information technology was one of the main positive contributors. Semiconductor and technology companies in China and Taiwan made significant gains on robust demand for their products and innovations in artificial intelligence.

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