Even though the uncertainty surrounding the global economic outlook persisted, most stock markets maintained their pace in October. Unfortunately, the Canadian market was an exception. Whereas investors abroad remained optimistic, Canada’s recent performance suggests that the situation is different at home. The missing ingredient could be monetary policy, with the Bank of Canada (BoC) continuing to go against the tide.
As measured by the MSCI Canada Index, the Canadian market was the only one in negative territory, with a loss of 0.9% during the month. Most of the sectors contributed to this result, with only materials, financials and industrials able to record gains. The Canadian bond market ended the period with a slight loss owing to higher yields for medium- and long-term maturities.
The market shrugged off the rather chaotic political environment in the United States, focusing instead on the key interest rate cut announced by the Federal Reserve (Fed) and the potential for further easing. The U.S. stock market’s 2.2% return in local currency, as measured by the MSCI USA Index, was generated by quite a few sectors, including information technology and health care. In contrast, energy, consumer staples and utilities recorded negative performances. Even so, the slight appreciation of the loonie against the greenback offset some of this gain, such that the return was 1.4% in Canadian dollars.
The European market also rose in October, albeit modestly. As measured by the MSCI Europe Index, it advanced 0.5% in local currencies. European currency fluctuations boosted this result, however. With the appreciation of the pound sterling and the euro, the return for the period rose to 2.5% in Canadian dollars. Several sectors contributed, including industrials and financials, but consumer staples lagged.
Fortune smiled on Asia as fall began. No sector ended the month with a negative return in local currencies. The overall market, as measured by its benchmark the MSCI Asia Pacific Index, advanced 3.7%. Information technology, consumer discretionary, health care and industrials added the most value. With a foreign exchange effect that was almost nil, the region’s return in Canadian currency was 3.6%.
Emerging markets stayed the course, returning 3.0% in local currencies, as measured by the MSCI Emerging Markets Index. The performance was again propelled by most sectors and led by much the same ones, with information technology, financials and energy standing out. In contrast, communication services was the only sector to contribute negatively. Currency fluctuations had a slight impact on performance, increasing the return to 3.5% in Canadian dollars.
Sources: Bank of Canada and MSCI Inc.
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