Spring Ushers in Market Advances

During the second quarter, European equity prices surged, fuelled by the fastest Eurozone economic growth rate in years. US equity valuations also rose, led by the Information Technology sector. Canadian equities faced headwinds as Energy stocks declined significantly and the Financials sector delivered mixed results. These are some of the themes investors witnessed during the spring period. Looking ahead, we believe:

• Canadian bond yields will likely remain range-bound, given mixed economic signals on the one hand and pressure for further US interest rate hikes on the other.
• The US Federal Reserve, which raised their policy rate in Q2, will do so again in coming quarters, if wage growth follows better employment numbers.
• Despite OPEC output cuts, oil prices may trend lower as global supply moves higher on the back of US production.
• The European Central Bank will maintain its accommodative policy despite recent economic and financial market advances.
• Emerging markets, offering lower valuations and attractive yields relative to developed markets, will continue to attract investors.

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