January 2022 - The growth outlook continued to be positive, as shown by the oil price, which maintained its December momentum and recovered fully from the decline caused by the arrival of the Omicron variant. Even so, heightened expectations of tighter monetary conditions led to revaluation of many assets. The Financial sector reaped the benefits of a possible rise in interest rates, while the Information Technology and Real Estate sectors suffered. As a result, the world’s stock and bond markets declined during the month.
|Closing 31-01-2022||Variation vs 31-12-2021||Variation vs 31-01-2021|
|Interest rate in Canada (%)|
|Commodities ($ US)|
|Currencies||CAD Variation||CAD Variation|
|EUR / CAD||0.70||0.9%▲||8.4%▲|
|JPY / CAD||90.58||0.3%▼||10.1%▲|
|USD / CAD||0.79||0.3%▼||0.5%▲|
Sources: Bank of Canada, Fundata, US Energy Information Administration.
Canadian Market 0.1%▼ (MSCI Canada 31-01-22)
With significant exposure to Energy and Financials, which were January’s best-performing sectors, the domestic market fared better than foreign markets. As measured by the MSCI Canada Index, it returned -0.1%. The sectors with the most impact on the return were Information Technology, Real Estate and Health Care. With a general rise in yields across the sovereign curve and a slight widening of credit spreads, the bond market also ended the month with a loss.
American Market 5.0%▼ (MSCI USA 31-01-22 in CAD)
After benefiting greatly from accommodative monetary conditions in 2021, the U.S. market suffered from the shift back to a more restrictive policy. As a result, as measured by the MSCI USA Index, its return in local currency was -5.7%. Only the Energy sector posted a gain. The sectors hit hardest were Consumer Discretionary, Real Estate and Information Technology. A slight decline in our currency against the U.S. dollar offset some of the loss, bringing the return to -5.0% in Canadian dollars.
European Market 3.9%▼ (MSCI Europe 31-01-22 in CAD)
An excellent year-end on the European market reversed itself partially, with the region returning -3.1% in local currencies in January, as measured by the MSCI Europe Index. Moreover, the appreciation of our currency amplified the loss, which was -3.9% in Canadian dollars. The sectors that suffered the most were Information Technology, Industrials and Health Care. Conversely, Energy, Financials and Communication Services limited the damage.
Asian Market 3.8%▼ (MSCI Asia-Pacific 31-01-22 in CAD)
The result was similar in Asia: in Canadian dollars, the return on the benchmark MSCI Asia Pacific Index was -3.7%. Here, too, Energy and Financials fared well, while Health Care, Information Technology and Industrials pushed the return into negative territory. In contrast to Europe, the exchange rate fluctuations were almost nil, as evidenced by the return of -3.8% in local currencies.
Emerging Markets 1.2%▼ (MSCI Emerging Markets 31-01-22 in CAD)
After the Chinese real estate market’s setbacks in 2021, unlike the Real Estate sector in the rest of the world, this sector was not at the bottom of the pack in emerging markets. Given that its valuations were already quite depressed, the Real Estate sector ended the month as the top contributor, just ahead of Financials and Energy. The sectors that subtracted value were essentially the same as elsewhere: Health Care, Information Technology and Consumer Discretionary. As measured by the MSCI Emerging Markets Index, the return was -1.8% in local currencies and -1.2% in Canadian dollars.
Sources: Bank of Canada and MSCI Inc.
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