June 2022 - The month of June saw a further significant decline as fears of recession intensified. The reopening of economies in the wake of the pandemic, coupled with supply-chain bottlenecks, global geopolitical tensions and economic sanctions, has created an unprecedented environment. The central banks are trying to curb the highest rate of inflation in 40 years in a previously unseen context. In Canada, according to the latest available data, the Consumer Price Index (CPI) was up 7.7 % in May on a year-over-year basis, the fastest pace since 1983, while the United States recorded the sharpest increase since 1981. Even so, U.S. Federal Reserve Chair Jerome Powell hopes economic growth will remain positive. The price of oil recorded its first monthly decline since November.
|Closing 30-06-2022||Variation vs 31-05-2022||Variation vs 31-12-2021|
|Interest rate in Canada (%)|
|Commodities ($ US)|
|Oil (WTI)||$105.96||-7.6 %▼||40.7%▲|
|Currencies||CAD Variation||CAD Variation|
|EUR / CAD||0.74||-0.7%▼||5.9%▲|
|JPY / CAD||101.63||-3.6%▼||11.2%▲|
|USD / CAD||0.79||1.9%▲||0.2%▲|
Sources: Bank of Canada, Fundata, US Energy Information Administration.
Canadian Market -8.6%▼ (MSCI Canada 30-06-22)
The Canadian market was no exception this month posting its worst monthly return since the start of the year, with the MSCI Canada Index returning -8.6% in June. All sectors except industrials ended the month lower. The Energy sector, which until then had been one of the sectors contributing positively to the return, had one of the worst performances in June as a result of the lower oil price. Financials and Materials also detracted from the return. As noted, only the Industrials sector limited the losses. Record inflationary pressures and expectations of interest rate hikes by the Bank of Canada again weighed on the Canadian bond market.
American Market -6.5%▼ (MSCI USA 30-06-22 in CAD)
The U.S. market was also hit hard in June amid increasing fears of recession and the Federal Reserve’s major rate hikes to curb the highest rate of inflation of the past 40 years. Our neighbours to the south ended the month with a return of -8.3% in U.S. dollars, as measured by the MSCI USA Index. The U.S. dollar’s strength against our currency limited the loss somewhat, such that the return was -6.5% in Canadian dollars. This time, all sectors, without exception, ended the month down. Information technology and Financials were the weakest sectors. As with the Canadian market, the Energy sector recorded a significant decline. Consumer staples and health care made the most positive contributions.
European Market -8.1%▼ (MSCI Europe 30-06-22 in CAD)
The decline was also pronounced in Europe. In addition to the many geopolitical challenges and the supply-chain disruptions caused by the conflict in Ukraine, the European Central Bank’s announcements of imminent rate hikes were poorly received by investors. As a result, the MSCI Europe Index returned -7.7% in local currencies for the month. The currency effect had little impact on the return in Canadian dollars, which was -8.1% for the period. Here as well, all the sector recorded a negative performance. The Real estate, Materials and Information technology sectors being the ones with the largest losses in absolute terms.
Asian Market -4.5%▼ (MSCI Asia-Pacific 30-06-22 in CAD)
The stock market situation in Asia was very similar to the rest of the world, although the decline was relatively smaller. The MSCI All Country Asia Pacific Index returned -3.4% in local currencies. The strength of the Canadian dollar, especially against the Japanese yen, accentuated the loss, increasing it to -4.5% in Canadian dollars. The Consumer staples and Consumer discretionary sectors performed positively in June while the information technology sector ended the month with the largest loss.
Emerging Markets -4.7%▼ (MSCI Emerging Markets 30-06-22 in CAD)
Emerging markets were no exception, also ending the month in negative territory. In local currencies, the return was -4.5%, as measured by the MSCI Emerging Markets Index. The return was -4.7% in Canadian dollars. The reduced pace of regulatory change in China and announcements of an easing of government control over the Information technology sector, which has been the one most affected by Chinese government actions, had an encouraging effect on investors, enabling China to end the month with a positive return. In fact, it was the country that made the greatest positive contribution to the return, in contrast to South Korea and Taiwan, the countries with the greatest negative impact.
Sources: Bank of Canada and MSCI Inc.
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