After several months of adjusting to the new way of life needed to contain the pandemic, we are now at the point where we must learn to function more normally again, while maintaining measures that will prevent us from undermining the progress we have made. The gradual reopening is boosting our morale – after all, we are social beings – but is also pleasing the markets with a glimmer of hope that more sustained economic activity will follow. The big winner in this new scenario was undoubtedly the price of crude oil, which in May recorded its highest monthly increase ever!
After April’s rebound, due to the introduction of numerous support programs, uncertainty remained over what would allow the upward movement to continue in May. Improvements in the COVID-related statistics provided the authorities with the necessary leeway to proceed with a gradual reopening, however. The Canadian stock market responded well, with a 2.8% return on the month, as measured by the MSCI Canada Index. The best-performing sectors were Information Technology, Consumer Discretionary and Health Care. In contrast, Real Estate, Utilities and Materials recorded losses. With interest rates almost unchanged over the period, bonds generated a slightly positive return as a result of their current yield.
A positive attitude also prevailed south of the border. According to the MSCI USA Index, the U.S. market was up 5.2% in local currency. Supported by the increase in oil prices, our loonie appreciated against the greenback; as a result, the return in Canadian dollars was slightly lower at 4.7%. The market saw positive contributions by all sectors, notably Information Technology, Materials and Communication Services.
As in the United States, a large number of sectors made positive contributions in Europe. With the exception of the Energy sector, which recorded a loss of 1.1%, all the others added value. As measured by the MSCI Europe Index, performance in local currencies was 4.0% during the period. The exchange-rate effect was negligible in May, for a return of 4.1% in Canadian dollars. The most buoyant sectors were Industrials, Information Technology and Materials.
The upward momentum also continued in Asia, albeit to a lesser extent. Thanks in part to contributions from the Health Care, Consumer Discretionary and Industrials sectors, Asian markets advanced 2.3% in local currencies according to the benchmark MSCI Asia Pacific Index. Even so, the return was slightly lower in Canadian currency at 1.5%, as a result of the appreciation of our loonie against several Asia-Pacific currencies. The sectors that detracted from the return during the period were Real Estate, Utilities and Finance.
Unlike the developed markets, emerging markets struggled to remain in positive territory. Their return, as measured by the MSCI Emerging Markets Index, was 0.7% in local currencies. Exchange-rate fluctuations affected the return slightly, reducing it to 0.3% in Canadian dollars. A notable difference was the loss recorded by the Information Technology sector, which was one of the top contributors in developed countries. Health Care was the best-performing sector in May, while the Real Estate sector was the worst.