Canada Surprises as Global Markets Climb

Amid macro political themes and growing momentum in global equity markets, Canada’s economy and dollar served up a summer surprise.

04.14.2017 - Ian Riach, Chief Investment Officer

Canada Surprises as Global Markets Climb

Despite low trading volumes and geopolitical sabre rattling between the United States and North Korea, global equity markets continued their upward momentum (in local currency terms) during the summer months. Since the end of the second quarter, the S&P/TSX Composite Index is up 2.8% and the S&P 500 Index 3.5%.1 Having led equity markets for the first half of the year, the MSCI EAFE Index lagged its developed market counterparts, rising 0.7%.2

However, Canada’s strengthening economy and rising dollar proved to be one of the season’s most surprising stories. Given the loonie’s near 4% increase in the quarter, the S&P 500 Index actually declined when translated into Canadian dollars.3 Likewise, in Canadian dollar terms, the MSCI EAFE Index dropped 0.8%.4

The loonie began gaining strength as it became clear the Bank of Canada was changing its view of the domestic economy from moribund growth to acceleration. As a result of this changing outlook, the Bank raised its overnight lending rate twice last summer. The rate increases helped propel the loonie to over US$0.82 before pulling back a bit in the last two weeks. Longer-term bonds also reacted to the change in the Bank of Canada’s stance, as the yield on the 10-year Government of Canada bond rose above 2% for the first time since 2013.


1. As of September 27, 2017; Source Bloomberg Finance L.P.
2. As of September 27, 2017; Source Bloomberg Finance L.P.
3. As of September 27, 2017; Source Bloomberg Finance L.P.


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