Positive News Drives Market Highs

The “reopening trade” pushed global equity prices to record highs in the second quarter. See the story behind the gains and why we believe now is no time to be complacent.

08.03.2021 - Ian Riach, Chief Investment Officer

The so-called “reopening trade” pushed global equity markets to record highs in the second quarter. Progress on the vaccination front, ongoing support from central banks, and governments and improving growth forecasts combined to fuel positive investor sentiment for equities. Canada once again led the charge, outperforming other major markets in which we invest.

Despite the slow start, Canada’s vaccination pace has improved significantly. Our World in Data reports that, as of June 30, over 68% of those eligible to be vaccinated had received their first dose and 31% their second. This compares to 13% and less than 2%, respectively, by the end of March.[1] With hopes of easing restrictions, investors gravitated to equities anticipating recovering economic growth. Positive news outside of Canada also helped increase commodity prices, with West Texas Intermediate crude oil prices rising from just under US$60 per barrel to over US$73, making Energy the best performing sector in the S&P/TSX Composite Index.[2]

Gains in US equities were broad based with only the Utilities sector losing ground. At the same time, performance was quite divergent. The Energy sector, often characterized as a “value play,” led returns; however, Information Technology, a “growth play,” followed closely behind. Inflation concerns arose early in the quarter but seemed to abate after US Federal Reserve Chair Jerome Powell called the recent inflation spike transitory and noted he expects levels to fall back into line over the next few months, thereby negating a sudden move in interest rates.

European equity markets performed well as vaccination rates rose. As importantly, during the quarter, the European Commission announced that all national parliaments had endorsed a pandemic recovery plan enabling the issuance of short- and long-term bonds to provide support to member countries.[3] Europe had lagged North America in terms of fiscal support due to the large task of coordinating so many countries. This commitment, combined with significant monetary stimulus provided by the European Central Bank, should set the stage for higher growth in equity prices.

With all the good news and the continuing rise in equity prices, it is easy to become complacent. We are fighting this urge by acknowledging risks remain. These include a surprise spike in inflation; return to lockdowns due to the new COVID-19 variants; escalating geopolitical tensions and cybersecurity threats. In our view, maintaining a well-diversified portfolio with high-quality holdings is the best way to address the risks we see and those we don’t.


Market Performance chart



1. Our World in Data,, accessed July 8, 2021.

2. Bloomberg L.P., July 2021.

3. “NextGenerationEU: European Commission to issue around €80 billion in long-term bonds as part of funding plan for 2021,” European Commission,, June 1, 2021.


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