The unexpectedly pronounced slowing of the global economy and downward revisions to its outlook caused longer-term interest rates to ease and contributed to an inversion of the yield curves, especially in Canada. But cautious monetary policy around the world reassured investors and kept volatility under control.
In Canada, the highlight was undoubtedly the bond market’s performance. At the start of the month, the Bank of Canada’s downward revision of the economic outlook caused the yield curve to fall, which was beneficial for bonds. The central bank’s gloomier forecasts did not, however, prevent the Canadian stock market from continuing to rise, with a return of 0.8% on the month, as measured by the MSCI Canada Index. The Industrials, Materials and Information Technology sectors were the main contributors. Financials and Energy were the only sectors to subtract value.
Like its northern neighbour, the U.S. stock market also responded well to the cautious stance adopted by the Federal Reserve, its central bank. The MSCI USA Index returned 1.9% in local currency. The slight weakening of the loonie against the greenback enhanced this performance, such that the result was a gain of 3.3% when expressed in Canadian currency. Information Technology, Consumer Discretionary and Consumer Staples were the main contributors to the result. Only Financials and Industrials had a negative return in March.
The European bourses delivered a performance quite similar to that of the Canadian and U.S. markets. As measured by the MSCI Europe Index, the market was up 2.1% in local currencies. Europe’s main currencies fluctuated very little against our currency, so the return expressed in Canadian dollars was almost unchanged at 2.2% for the month. The performance of the Consumer Staples and Health Care sectors stood out, and Financials was the only negative sector during the period.
Asia’s performance continued to be aligned with the rest of the world in March. As measured by the benchmark MSCI Asia Pacific Index, the region returned 1.0% in local currencies. The weakness of the Canadian dollar against most of the Asian currencies enhanced this result. Expressed in Canadian dollars, the gain was 2.7%. The Real Estate sector, along with Information Technology and Communication Services, contributed the most to the performance.
Unlike the previous month, when emerging markets had a more-modest performance than the other regions of the world, their gains in March were comparable to those of the developed markets. As measured by the MSCI Emerging Markets Index, they returned 1.4% in local currencies and 2.3% in Canadian currency during the period. The best contributors included Communication Services, Consumer Discretionary and Information Technology.
Source: Bank of Canada and MSCI Inc.
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