Global Index Performance

 

 

Fixed Income 

In September, the Bank of Canada (BoC) lowered its key policy rate for the third consecutive meeting, bringing it down to 4.25% from 5% at the beginning of the year. This decision follows a decline in inflation, as measured by the Consumer Price Index (CPI), which fell to the BoC’s target of 2.0% year-over-year in August from 2.5% during the prior month. Energy prices contributed to the relatively rapid decline in inflation, which weakened amid softening economic data in the United States and declining crude oil demand by China. Excluding energy, the CPI would have measured 2.2%⁶.

As anticipated, the Federal Reserve (Fed) initiated its first key policy rate cut of 0.5% as part of its dual mandate to return inflation to target while maintaining low unemployment. U.S. inflation has been consistently declining month to month, which measured at 2.5% year-over-year in August, down from 2.9% in July. Labor market data has presented a more mixed picture in recent months, with signs of a weakening labor market being reported prior to the Fed’s policy rate cut decision. Following the Fed’s September monetary policy meeting, investor sentiment suggested further rate cuts were likely; however, this outlook is shifting after a robust employment report revealed that the U.S. added 254,000 jobs in September, surpassing the anticipated 145,000. As data continues to evolve, the Fed maintains its patient and data-driven approach to future policy rate cuts. 

Equities

After an initial period of turbulence, North American stocks rebounded to new highs. The Fed’s introduction of the first policy rate cut since 2020 has positively impacted equity performance, as lower interest rates typically stimulate business investment. Both Canada and U.S. indices saw losses in the energy sector throughout September as crude oil prices declined on weaking U.S. economic data as well as reduced supply from China. As tension increases in the Middle East, we anticipate that oil prices could increase with any widening conflict.

Emerging market equities were buoyed by strong performance in China. China’s stock market rally resulted from renewed investor optimism that followed a stimulus package meant to revitalize the economy. The over-leveraged housing market, weak consumer demand and soft labor market have all contributed to weakness within China’s economy.

Current Positioning

While recent market fluctuations present both challenges and opportunities, we remain focused on the long-term success of our portfolios. September’s strength in North American stocks—supported by the Fed’s rate cuts—indicates potential for growth, although volatility may persist, particularly in sectors like energy. In addition, we anticipate volatility to remain present as the geopolitical landscape evolves and we approach the U.S. presidential election.

Source: FactSet. Data as of October 8, 2024. 

 

 

 

1. As measured by the FTSE Canada Bond Universe Index at September 27th, 2024. Bond market closed September 30th, 2024. 

2. As measured by the S&P/TSX Composite Total Return Index

3. As measured by the S&P 500 Total Return Index in CAD

4. As measured by the MSCI EAFE Total Return Index in CAD

5. As measured by the MSCI EM Total Return Index in CAD

6. The Daily — Consumer Price Index, August 2024 (statcan.gc.ca)