December 2021 - The return of lockdown measures may have detracted from the holiday spirit, but the markets changed their minds about the threat of the Omicron variant and resumed rising. Amid renewed enthusiasm over the growth outlook, the price of oil recovered slightly more than half of its loss during the previous month. The Bank of Canada’s announcement of a new, more flexible monetary policy framework was perceived as a sign that it would be more patient than the U.S. Federal Reserve when it came to tightening. As a result, the yield curve declined during the month in Canada while it rose in the United States.
|Closing 30-11-2021||Variation vs 31-10-2021||Variation vs 31-12-2020|
|Interest rate in Canada (%)|
|Commodities ($ US)|
|Currencies||CAD Variation||CAD Variation|
|EUR / CAD||0.69||▲0.7%||▲8.1%|
|JPY / CAD||90.83||▲2.8%||▲11.5%|
|USD / CAD||0.79||▲0.9%||▲0.4%|
Sources: Bank of Canada, Federal Reserve Bank of St-Louis, US Energy Information Administration.
Canadian Market ▲3.2% (MSCI Canada 31-12-21)
The domestic market ended the year in fine form, with only two sectors recording a loss. The worst-performing sector was Information Technology, followed by Industrials, which recorded a slightly negative return. Conversely, the best-performing sectors were Consumer Staples, Consumer Discretionary and Utilities. The broad stock market returned 3.2%, as measured by the MSCI Canada Index. As for the bond market, the downward movement of the yield curve enabled it to post a gain on the month.
American Market ▲2.4% (MSCI USA 31-12-21 in CAD)
South of the border, only the Consumer Discretionary sector ended in the red. As measured by the MSCI USA Index, the total return of 4.0% in local currency slightly exceeded that of the Canadian market. Even so, the loonie’s strength against the U.S. dollar during the month reduced the return to 2.4% for Canadian investors. The best-performing sectors were Real Estate, Consumer Staples and utilities.
European Market ▲5.0% (MSCI Europe 31-12-21 in CAD)
With positive contributions from all sectors, the European market had the best performance in December. As measured by the MSCI Europe Index, its return of 5.1% in local currencies was the highest in our universe1. The currency effect was negligible, as evidenced by the 5.0% return in Canadian dollars. The sectors that contributed the most were Industrials, Materials and Consumer Staples.
Asian Market ▲0.3% (MSCI Asia-Pacific 31-12-21 in CAD)
After several months in the red, Asia managed a turnaround. As measured by the benchmark MSCI Asia Pacific Index, the return was 1.9% in local currencies. Utilities, Information Technology and Materials contributed the most to the market’s rebound. That being said, the loonie’s strength against the major Asian currencies reduced the month’s return in Canadian currency to only 0.3%.
Emerging Markets ▲0.3% (MSCI Emerging Markets 31-12-21 in CAD)
Like the Asian market, emerging markets broke a losing run. Positive contributions by Utilities, Information Technology and Energy contributed significantly. Conversely, Health Care, Consumer Discretionary, Real Estate and Communication Services all subtracted value. The return in local currencies was 1.4%, as measured by the MSCI Emerging Markets Index, while the result in Canadian dollars was 0.3%.
1 Canada, United States, Europe, Asia and Emerging Markets.
Sources: Bank of Canada and MSCI Inc.
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