Global markets surged in October setting a series of records throughout the month. For many investors, the question now is whether the current valuations are stretched or if there is still room to go. While there is no shortage of black swan events that could derail the current rally (i.e. North Korea and Washington), market fundamentals support the current valuations.
North American equity markets showed resilience to significant geo-political tensions and natural disasters in September. On one hand, the North Korean threat to the world escalated significantly with the latest nuclear test, while on the other hand hurricanes Harvey and Irma caused devastation in various parts of the US and the Caribbean.
In Canadian dollar terms, global developed markets evened out in August. While the month was relatively tumultuous from a geopolitical standpoint, economic news has remained much the same. The Canadian dollar has kept its relative strength versus the US dollar, driven partially on expectations of rising Canadian yields but, more importantly, on weaker demand for USD.
With seemingly endless surprises coming out of Washington this past month, the lack of confidence in US politics has put pressure on the US dollar. In Canadian dollar terms, that pressure has manifested in weak returns across global developed markets.
In their local currencies, global equity markets were relatively flat in June (see Canada below). However, a devaluing US dollar and a stronger Canadian dollar were reflected in negative returns for Canadian portfolios. In this market update, we'll look at the cause of the devaluing US dollar, and what it could mean going forward.
Markets have continued to tread along, not disrupting the pace set over the past few months with the UK, Japan, and emerging markets showing the strongest returns. While fundamental data continues to support the rise, the real surprise is that this positive move has done so with little volatility.
Over the past 3 months, global markets have lifted thanks to solid fundamental indicators and positive sentiment. In this economic update, we’ll look at the news driving the returns, and discuss what Trump’s first 100 days in office can tell us about what to expect going forward.
At first glance, it appears to many that the “Trump bump” finally subsided in March after shares in the US rose by 12% from the election to March 1st.
Global Indices in February
Global markets were relatively flat with investors still undecided on whether to embrace growth in major markets or worry about state impact. Political uncertainty has marred the potential boost from positive global corporate earnings.
*Equity Indices - FTSE Global Indices in CAD, Bonds - Barclays Global Aggregate Canadian Float Adjusted Board Index
It seems as though the first thing on everyone's mind when thinking about January 2017 is the inauguration of Donald Trump and the effect his first few weeks in office have already made globally. Trump's 17 executive orders have stirred reactions which have lifted the Dow Jones Index past 20,000 for the first time, and have simultaneously launched more protests in two weeks than it seems possible to count. Where will this new source of volatility lead us, and what does the resulting unpredictability really mean for your portfolio?