A Bumpy Ride to the Finish Line

By Ian M. Riach Equities worldwide experienced meaningful declines in the last quarter of 2018.1 All major developed market indices fell by at least 10% (in local currency terms). Measured against the cyclical peaks reached a few months earlier, equity declines were even more significant and technically signalled a “market correction.”2 Concerns about trade relations with China, tightening US financial conditions and eurozone issues—including Brexit, Italy’s budget deficit and “Yellow Vest” protests in France—combined to undermine investor confidence. In the face of this environment, bond prices rallied, sending yields down. The Government of Canada 10-year bond yield dropped from over 2.6% in October to under 2% at the quarter’s end and the 10-year US Treasury yield fell to approximately 2.7% after rising above 3.2% during the period.

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