Equity markets fell rapidly at the end of the month and have flirted with a technical correction. From time to time markets will take sharp swings, and the process is usually amplified by irrationally putting more stake in negative news rather than looking at the holistic fundamentals that prices are rooted in. And behind all the fear driving this volatility, fundamentals remain healthy (especially at these prices) and investors will be well-served by keeping cool and sticking to their plan.
The year is off to a busy start; January was a volatile month fueled by geopolitical developments and a world health emergency. While we expect geopolitical events to continue to drive short-term volatility, our outlook remains positive for stocks fueled by accommodative central banks and positive fundamentals.
2019 has produced some remarkable results in terms of financial market performance. Markets were led by the U.S S&P 500 which experienced a calendar year return of 24.45% in Canadian dollars. The TSX in Canada rose 19.2%; developed markets and emerging markets faired similarly, closing the decade off with stellar returns. The Canadian aggregate bond market also had a great year returning just over 6.5%.
In this update, we will discuss important developments, lessons learned throughout the year and ways that we can apply those learnings moving forward.
Equity markets have continued to break records during November advancing quietly due to less trade news relative to the rest of the year. The S&P TSX Composite (YTD gain 18.5%) is on track to finish the year at its highest calendar year return in a decade, and the S&P 500 (YTD gain 24.2%) is on track to record its highest calendar year return since 2013. No discussion of market performance would be complete without a discussion of risk, which we’ll get into as we continue.
Equity markets fared well throughout the month with the S&P 500 rising to new heights to lead the way. The positive performance can be largely attributed to improving trade sentiment globally while central banks continue to reiterate their accommodative stance.
Political uncertainty dominated the news cycle this month with major developments out of the US, the middle east, the UK, and China to name a few. Despite the noise present in equity markets, their advance continued.
While the trade war between the US and China continued to be in the spotlight during a volatile August, tensions between Hong Kong and mainland China, along with Brexit uncertainty, garnered negative sentiment. Despite these narratives that are contributing to the volatility we have seen, markets still managed to close slightly in the green by month’s end.
The bull market in equities continued its march forward in July and hit new record highs. Developments in global trade and monetary policy dominated market movements throughout the month.
Global equities markets sharply recovered from the losses incurred during May, resulting in one of the best Junes in equity market history. This change was fueled by positive outlooks towards global monetary policy and increased optimism surrounding global trade policies.
Global equities closed the month lower due to continued trade tensions and concerns of a global slowdown in growth. Although volatility has picked up, there hasn’t been any significant deterioration of fundamental conditions. Volatility in a market cycle is normal and expected; while we ideally don’t want too much volatility as markets advance, our minds can be eased knowing that markets have climbed over different walls of worry at different periods in time.