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December 2022 - Markets end the year on a drop


marchésDecember 2022 - Even though December was quieter than the preceding months and November saw a strong rebound, the global equity markets lost ground in the last month of 2022. It was a tumultuous year featuring an unprecedented combination of events, including the end of the pandemic, unprecedented monetary measures in response to record inflation, supply-chain challenges and the war in Ukraine. These events caused a sharp market correction and are weighing heavily on investors’ outlook for the coming year.

Closing 31-12-2022 Variation vs 30-11-2022 Variation vs 31-12-2021
Interest rate in Canada (%)
Key rate 4.25 0.50 4.00
Commodities ($ US)
Oil (WTI) $80.45 -0.1% +6.8%
Gold $1,812.35 +3.4% +0.4%
Currencies CAD Variation CAD Variation
EUR / CAD 1.45 +3.3%
JPY / CAD 0.01 +5.5%
USD / CAD 1.35 +0.3%

Sources: Bank of Canada, Fundata.

(MSCI Canada 31-12-2022)
Early in December, the Bank of Canada raised its key rate yet again. Even though the hike was expected, a widespread sense of uncertainty prevented the Canadian market from rebounding. The benchmark MSCI Canada Index returned -4.9%, with all sectors except Communication Services recording a loss. Energy and Information Technology detracted the most from the return. 

(MSCI USA 31-12-2022 in CAD)
The possibility of a recession and the labour market’s resilience despite the U.S. Federal Reserve’s aggressive interest rate hikes, which raised the prospect of further tightening, caused the U.S. market to decline. The return on the benchmark MSCI USA Index was -5.9% in U.S. and Canadian dollars alike. All sectors, without exception, were down on the month, with Information Technology and Consumer Discretionary recording the weakest performances.

(MSCI Europe 31-12-2022 in CAD)
The European market was especially mixed this month, with half of the sectors advancing and the other half retreating. Financials and Health Care were the main contributors to the return while Energy and Information Technology detracted the most. The benchmark MSCI Europe Index ended December with a return of -2.7% in local currencies. Even so, the appreciation of the main European currencies helped limit the losses, such that the return was nil in Canadian dollars.

(MSCI Asia-Pacific 31-12-2022 in CAD)
Even though the Asian market posted a negative return for December, China’s efforts to reopen its economy quickly by removing the vast majority of the restrictions related to its zero-Covid policy were welcomed by investors. In local currencies, the return was -2.5% as measured by the benchmark MSCI All Country Asia Pacific Index, while it was -0.3% in Canadian dollars. Most of the sectors ended the month with a negative return, led by Energy, Industrials and Information Technology. Communication Services and Financials recorded the largest gains during the period.

(MSCI Emerging Markets 31-12-2022 in CAD)
Like the Asian market, emerging markets also benefited from the start of China’s reopening, even though the overall return was negative. The benchmark MSCI Emerging Markets Index ended the month with a return of -1.9% in local currencies and -1.4% in Canadian dollars. At the regional level, the Eastern European countries ended the month with a positive return whereas most of the Asian countries were down, with the notable exception of China.

Sources: Bank of Canada and MSCI Inc.
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