Investment update
Weekly insight into the marketplace.
April 29 to May 3, 2024
Stock markets struggled to recover early-week losses
It was a quiet start to the week as investors awaited a slew of corporate-earnings reports and an interest-rate decision from the U.S. Federal Reserve (the Fed) due later in the week. Canada’s resource-heavy TSX closed Monday with a small gain of 0.19%, helped by strong base metal prices. The Wall Street benchmarks also rose, with the Dow’s 0.38% gain leading the way. Tuesday saw the TSX fall 1.5%, largely due to declines in the energy sector. The major U.S. stock markets also dropped, as American economic data continued to suggest that the Fed will need to keep interest rates elevated for longer than forecast. The S&P 500 closed the month down 1.6% and the Dow lost 1.5%, while the tech-heavy and interest-rate sensitive Nasdaq shed 2%. On Wednesday, investors focused on the Fed’s decision to hold its policy interest rate steady (details below), which led to mixed results. The Dow closed with a modest gain of 0.23%, but the S&P 500 and Nasdaq lost 0.34% and 0.33% respectively. The TSX eked out a gain of 0.06% despite oil prices falling. Sentiment turned positive on Thursday, as big-tech stocks drove a rebound across the major U.S. stock markets. The Nasdaq outpaced the other American indexes to climb 1.40% on the day. The TSX also rose with a 0.44% gain. On Friday, all the major North American stock markets rallied after the latest U.S. jobs report came in cooler than expected.
The Fed held interest-rates steady
On Wednesday, the Fed announced that policy-makers had decided to keep the U.S. central bank's policy target rate in the range of 5.25% to 5.50% – where they have held it since the last rate-hike in July 2023. Following the decision, Fed Chair Jerome Powell said that rates will stay high for "as long as it is appropriate," given the recent data showing a re-acceleration in inflation. While inflation has eased since peaking in mid-2022, it remains above the Fed's 2% target. At the same time, U.S. economic activity has continued to grow at a steady rate. The economy continues to add jobs and the unemployment rate has remained historically low. This has strengthened market expectations that the Fed will push interest-rate cuts to later in the year. Investors had hoped that cuts would start sooner (as they had priced into markets at the start of this year). Powell noted: “It’s likely to take longer for us to gain confidence that we’re on a sustainable path to 2% inflation.” According to the Co-operators Investment Analyst team: “For the time being, the Fed clearly seems to expect that its next move will be to cut rates. But with inflation moving sideways, the Fed won’t be doing that anytime soon.” Investors will learn more when updated forecasts are released after Fed officials meet again June.
Data showed Canada’s economy is slowing down
According to a Statistics Canada report released on Tuesday, Canada’s real gross domestic product (GDP) rose 0.2% in February, following a 0.5% gain in January. The report also provided an advance estimate for March which showed real GDP remained flat for the month. Central bank policy-makers are looking for sustained evidence that the economy and inflation are responding to higher interest rates before they will start cutting. The report of the decline in economic growth reinforced investor hopes that the Bank of Canada will be ready to cut interest rates soon.
The stock and bond market*
| Index | Close | Week | YTD |
|---|---|---|---|
| S&P/TSX Composite | 21,947.41 | -0.10% | 4.72% |
| Dow Jones Industrial Average | 38,675.68 | 1.14% | 2.62% |
| S&P 500 Index | 5,127.79 | 0.55% | 7.50% |
| NASDAQ Composite | 16,156.33 | 1.43% | 7.63% |
| 10-year Canadian Bond Yield | 3.76% | -0.06% | 0.66% |
| 10-year U.S. Treasury Yield | 4.50% | -0.17% | 0.62% |
| WTI Crude Oil (US$/barrel) | $78.11 | -6.85% | 9.02% |
| Canadian Dollar | US$0.7307 | -0.11% | -3.23% |
| Bank of Canada Prime Rate 7.20% | |||
*Weekly performance ending May 3, 2024. Source: Bloomberg.
Focus on the long-term: If your investment goals, risk tolerance and time horizon haven’t changed, your current investing plan is likely on the right track. It’s important to look past short-term ups and downs, and focus on long-term prospects. Staying invested – and continuing to invest – throughout market fluctuations is the best way to capitalize on probable market recoveries. If you have questions, a Co-operators financial representativeis always ready to help.
Canadian employment data (May 10): Investors will comb through the latest employment data from Statistics Canada on Friday, as they continue to watch for signals that might compel the Bank of Canada to start lowering interest rates.
Circle these dates
May 20: Canadian stock markets closed for Victoria Day
May 27: U.S. stock markets closed for Memorial Day
The commentary in this report is based on current market conditions and market media sources available to the public and may change without prior warning at any time. The forecasts provided herein are not guarantees of future performance and include risks, uncertainty and assumptions. While Co-operators Life Insurance Company (“Co-operators”) believes these assumptions are reasonable, there is no guarantee they will be confirmed. This report is not a guarantee of future investment performance, nor should undue reliance be placed on this report. This report is provided as a general source of information for a specific point in time and should not be considered solicitation to buy or sell any investment. Nothing contained in this report constitutes investment, legal, tax or other advice. The content in this report should not be relied upon in making an investment or other decision, and individuals should obtain relevant and specific professional advice and read the terms and conditions contained in the relevant offering documents carefully before any investment decision is made. Co-operators is not responsible for any loss or damage as a result of reliance on the information contained in this report. Co-operators makes no representations or warranties as to the information contained herein and does not guarantee its accuracy, timeliness, completeness or usefulness. Co-operators is committed to protecting the privacy, confidentiality, accuracy and security of the personal information it collects, uses, retains and discloses in the course of conducting business. Please visit cooperators.ca/privacy for more information. Co-operators® is a registered trademark of Co-operators Group Limited and is used with permission. Investing in your future. Together.TM is a trademark of Co-operators Group Limited. If you are a client who has received this, and you have questions or want to discuss your investments, please contact your Financial Advisor.
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