After a tumultuous August, investors responded favourably to the latest stimulus measures and regained their appetite for riskier assets. Their expectations of monetary and fiscal policies that will support the economy propelled the world’s stock exchanges to attractive gains during the period and eased the downward pressure on longer-term yields.
The performance of the Canadian market as a whole was strong, but the sectors showed significant disparities. Financials and energy contributed substantially to the total return, but information technology, materials and industrials detracted from it. In the end, the market managed a 2.0% gain for September, as measured by the MSCI Canada Index. The Canadian bond market ended the period with a slight loss as a result of higher yields across the curve.
South of the border, the performance was much more even. The U.S. stock market’s performance of 1.8% in local currency, as measured by the MSCI USA Index, was generated by almost all sectors; only health care had a negative return. As in Canada, the financial sector advanced the most. A slight appreciation of the loonie against the greenback cancelled out some of the gain, however; expressed in Canadian dollars, the return was 1.4%.
Europe enthusiastically welcomed the latest accommodative measures by the European Central Bank (ECB). Moreover, the monetary authorities’ call for governments to join the effort by providing fiscal stimulus was also well received. As represented by the MSCI Europe Index, the market returned 3.1% in local currencies and 2.4% in Canadian dollars. All the sectors except consumer staples contributed positively to the performance. Among the most noteworthy were financials and energy.
Optimism also prevailed in Asia. Expressed in local currencies, only the communication services sector was negative. The performance for the overall market, as measured by the benchmark MSCI Asia Pacific Index, was 3.1%. Information technology, financials, industrials and materials were the sectors that added the most value in September. Even so, the strength of the Canadian dollar against the Asian currency basket resulted in a Canadian-dollar return of 2.3%.
Emerging markets also benefited from renewed investor hopes. Their return in local currencies, as measured by the MSCI Emerging Markets Index, was 1.5%. This performance was driven by most of the sectors, especially information technology, energy and financials. Consumer discretionary and health care contributed negatively, however. Currency fluctuations did not affect the performance; expressed in Canadian dollars, it was unchanged at 1.5%.
Sources: Bank of Canada and MSCI Inc.
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