July 2022 - The global stock markets win a respite

MARKET
REVIEWS

July 2022 - After a tumultuous first half of the year, the global stock markets won a respite in July and recorded a significant rebound. Even though fears of a global economic recession are still present, investors responded with short-lived optimism to a number of second-quarter earnings announcements that exceeded expectations, particularly those of U.S. big-tech companies. The central banks’ fight against inflation continued. The European Central Bank raised its key rate for the first time since 2011, the U.S. Federal Reserve (Fed) again increased its rate by 0.75% and the Bank of Canada opted for a 1.00% rate hike at the start of the month. Pressures on the oil price eased slightly in July, causing it to fall below US$100.

	Closing 31-07-2022	Variation vs 30-06-2022	Variation vs 31-12-2021
Interest rate in Canada (%)
Key rate	2.50	1.00	2.25
Commodities ($ US)
Oil (WTI)	$98.62	-6.9 %▼	30.9%▲
Gold	$1,753.40	-3.5%▼	-2.9%▼
Currencies		CAD Variation	CAD Variation
EUR / CAD	0.76	3.0%▲	9.6%▲
JPY / CAD	104.17	-1.2%▼	13.7%▲
USD / CAD	0.78	0.5%▲	-1.1%▼

Sources: Bank of Canada, Fundata, US Energy Information Administration.

Canadian Market 4.3%▲(MSCI Canada 31-07-22)
After recording its worst performance of the year in June, the Canadian stock market rebounded in July, returning 4.3% on the month, as measured by the MSCI Canada Index. Most of the sectors ended the period with positive returns, led by Industrials, Information Technology and Consumer Discretionary. Only Health Care, Materials and Communications Services recorded negative results.

The bond market also experienced some respite during the month, posting a positive return, despite the significant rate hikes by the Bank of Canada and the Fed, as they were already largely priced into the market.

American Market 8.6%▲(MSCI USA 31-07-22 in CAD)
The U.S. market significantly outperformed during the month as some of the worst recession fears abated temporarily. The market posted its best monthly return since November 2020, returning 9.3% in U.S. dollars, as measured by the MSCI USA Index. The currency effect had only a small impact on the return in Canadian dollars, which was 8.6% for the period. Without exception, all sectors recorded a positive performance in July, for the first time since the start of 2022. In absolute terms, the Consumer Discretionary and Information Technology sectors had the largest gains.

European Market 4.3%▲ (MSCI Europe 31-07-22 in CAD)
The rebound was also felt on the other side of the Atlantic. The oil price slump and the agreement between Ukraine and Russia enabling grain exports to resume had positive effects. The European market returned 6.1% in local currencies during the period, as measured by the MSCI Europe Index. However, exchange rate effects between our currency and the main European currencies, such as the euro and the pound sterling, reduced the return to 4.3% in Canadian dollars. Information Technology ended the month with the largest gains, followed closely by Real Estate and Industrials. Only Communications Services had a negative return.

Asian Market 1.1%▲(MSCI Asia-Pacific 31-07-22 in CAD)
After several difficult months, the Asian markets also rebounded. As measured by the benchmark MSCI Asia Pacific Index, the return was 1.3% in local currencies. Currency fluctuations did not affect the return in Canadian dollars, which was 1.1% for the period. Information Technology, Health Care and Industrials contributed the most to the return, while Consumer Discretionary, Communications Services and Real Estate were the worst performers in this region of the world.

Emerging Markets -0.8%▼ (MSCI Emerging Markets 31-07-22 in CAD)
The rebound was less convincing in emerging markets, especially in China. The MSCI Emerging Markets Index ended the month with a return of 0.2% in local currencies and -0.8% in Canadian dollars. The economic recovery since China’s reopening has been affected by new restrictions in some regions. In addition, the crisis in China’s highly indebted Real Estate sector put pressure on the Chinese real estate market as well as on those in other emerging markets regions. The Real Estate sector ended the month with the largest loss. In contrast, the Information Technology sector outperformed, as it did in other global markets, recording its best performance since the start of the year.