The period just concluded can be summed up as a convergence of elements that, each in their own way, contributed to shorter-term unpredictability. The health data continued to deteriorate alarmingly in countries around the world. The approaching U.S. election in a context of extreme polarization also created uncertainty, especially as regards deployment of a second coronavirus stimulus package. In these circumstances, a number of markets continued to decline.
The Canadian market’s performance placed it in the middle of the pack. As measured by the MSCI Canada Index, it returned -3.4% in October. Only the Health Care sector was positive. In contrast, Information Technology and Consumer Staples suffered the most. Changes in interest rates adversely affected fixed income returns. With the yields for maturities of 10 years or more rising about 15 basis points, the bond market recorded a slight loss.
Despite a clearly unfavourable environment, our neighbour to the south did a little better, returning -2.6% in local currency, as measured by the MSCI USA Index. Utilities and Communications were the only sectors to contribute positively, while Information Technology, Energy and Health Care subtracted the most value. The exchange-rate effect between the loonie and the greenback was minimal, such that the return for the month was -2.8% in Canadian dollars.
Europe saw a second wave of coronavirus infections even larger than the first. Not surprisingly, the market declined. According to the benchmark MSCI Europe Index, the return was -5.3% in local currencies. The loonie’s appreciation against the euro brought the loss to -5.8% in Canadian currency. All sectors made a negative contribution to the return, especially Information Technology, Health Care and Energy.
Spared from the sharp upsurge in cases that occurred elsewhere in the world, the Asian market was able to advance during the period. As measured by the benchmark MSCI Asia Pacific Index, the return was 0.5% in local currencies. Communications, Consumer Discretionary and Financials were the best-performing sectors. Even so, some of the gains were offset by losses in Energy, Health Care and Real Estate. The Canadian dollar’s depreciation against the basket of Asian currencies in the index increased the return to 0.9% in Canadian dollars.
Like Asia, emerging markets also fared better. With positive contributions from Communications, Consumer Discretionary and Information Technology, the MSCI Emerging Markets Index gained 1.5% in local currencies. A favourable exchange-rate effect increased the return to 1.9% in Canadian dollars. Energy, Real Estate and Consumer Staples detracted from the performance the most.