AUGUST 2021 - Given the possible negative repercussions of a fourth wave of infections, consumer optimism crumbled during the summer and contributed to the markets’ decline in the first half of August. Even so, the corporate earnings announced during the period continued to delight investors and reversed the trend, enabling the markets to end the month on a positive note. In contrast, the oil price could not completely reverse its slide and ended lower, dragging the Canadian dollar down slightly against a number of foreign currencies. As for gold, it was neutral, as was the Canadian bond market.
|Closing 31-08-2021||Variation vs 31-07-2021||Variation vs 31-12-2020|
|Interest rate in Canada (%)|
|Commodities ($ US)|
|Currencies||CAD Variation||CAD Variation|
|EUR / CAD||0.67||▼0.8%||▲4.6%|
|JPY / CAD||87.11||▼1.1%||▲7.3%|
|USD / CAD||0.79||▼1.2%||▲0.9%|
Sources: Bank of Canada, Federal Reserve Bank of St-Louis, US Energy Information Administration.
Canadian Market ▲1.5 % (MSCI Canada 31-08-21)
The Canadian stock market’s performance in August was driven by the information technology, industrials and communication services sectors. Even though five out of 11 sectors had a negative return, the Canadian market managed a gain of 1.5%, as measured by the MSCI Canada Index. Notable sectors that undermined the result were materials, health care and consumer discretionary. As for bonds, current yields were not enough to offset the negative effect of a slight rise in medium- and long-term interest rates; as a result, the market treaded water during the month.
American Market ▲4.2 % (MSCI USA 31-08-21 in CAD)
For the second month in a row, the U.S. market continued to dominate our universe. Led by financials, communications and utilities sectors, it returned 3.0% in local currency, as measured by the MSCI USA Index. And the greenback’s strength against the loonie improved this result, increasing it to 4.2% in Canadian dollars. Once again, only the energy sector ended the month in negative territory.
European Market ▲2.8 % (MSCI Europe 31-08-21 in CAD)
Europe also performed well. As with the U.S. market, only one sector ended in the red, namely consumer discretionary. The sectors that contributed the most to the return included information technology, utilities and health care. As measured by the MSCI Europe Index, the European market returned 2.2% in local currencies and 2.8% in Canadian dollars.
Asian Market ▲3.8 % (MSCI Asia-Pacific 31-08-21 in CAD)
After a difficult July, the Asian market rebounded nicely in August, returning 2.4% in local currencies as measured by the benchmark MSCI Asia Pacific Index. As elsewhere, currency fluctuations increased the return in Canadian dollars, bringing it to 3.8% for the month. While the energy, utilities and industrials sectors led the return to positive territory in this region of the world, materials and consumer discretionary underperformed the most.
Emerging Markets ▲3.9 % (MSCI Emerging Markets 31-08-21 in CAD)
Emerging markets also turned the corner. With positive contributions from utilities, financials and energy sectors, they advanced 2.3% in local currencies as measured by the MSCI Emerging Markets Index. In Canadian dollars, the return was 3.9% owing to the weak loonie. Consumer discretionary, health care and materials sectors detracted the most from the return.
Sources: Bank of Canada and MSCI Inc.
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