July 27-31, 2020

What happened last week

Technology sector buoyed equity markets through choppy week

Investors tracked events in the U.S. closely, as COVID-19 infections continued to rise across the country and lawmakers became deadlocked over the details of a pending relief bill to spur economic recovery. With emergency unemployment benefits set to expire on Friday, the uncertainty over further fiscal stimulus for the world’s largest economy weighed on markets through the week.

Technology stocks continued as a bright spot for investors. Shopify reported strong earnings for Q2, helping the TSX gain nearly 200 points on Wednesday. Amazon, Apple and Facebook released earnings reports late Thursday that exceeded sky-high investor expectations and lifted U.S. stock markets heading into Friday’s trading sessions.

U.S. Federal Reserve held rates near zero to support economic recovery

The U.S. Federal Reserve (the Fed) announced Wednesday that it would leave interest rates near zero and committed to use all tools to support economic recovery. The statement explaining the policy decision noted: “The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term…The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” Market reaction to the Fed’s announcement was positive, with North American stock markets closing in positive territory on Wednesday.

U.S. economic output and employment plunged in Q2

Markets dropped early Thursday as data released by the U.S. Commerce Department showed the U.S. economy suffered its sharpest downturn in decades during Q2, as pandemic lockdowns took their toll on businesses. Gross domestic product (GDP) dropped 9.5% from Q1, an annualized pace of 32.9%, as personal spending dried up. A separate report from the U.S. Labor Department showed the number of Americans filing for unemployment benefits increased for a second straight week.

Canadian economy grew in May and June

On Friday, Statistics Canada released data showing the economy grew by 4.5% in May, better than economists expected, as retail business picked up significantly following economic lockdowns in March and April. The government agency’s early estimates indicate the economy continued to grow at a rate of 5% in June, but contracted by 12% for the quarter overall. Data for June, and all of Q2, will be available late August.

The stock and bond market*
S&P/TSX Composite 16,169.21 1.08% -5.24%
Dow Jones Industrial Avg. 26,428.32 -0.16% -7.39%
S&P 500 Index 3,271.12 1.73% 1.25%
NASDAQ Composite 10,745.27 3.69% 19.76%
10-yr GoC Yield 0.46% -0.04% -1.24%
10-yr U.S. Treasury Yield 0.55% -0.04% -1.37%
WTI Crude Oil (US$/bbl) 40.27 -2.47% -34.20%
Canadian Dollar US$0.7460 0.12% -3.10%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending July 31, 2020. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.

What’s ahead

Economic reports: Markets are likely to react to various reports that will be released this week covering manufacturing, housing, oil production, trade and employment, as investors gain deeper insight into the state of economic recovery in Canada and the U.S.

Circle these dates

  • Sept. 9: Bank of Canada interest-rate announcement
  • Sept. 15-16: U.S. Federal Reserve meetings and statement
  • Nov. 3: U.S. presidential election

Key take-away

Having professionally managed investments as part of your roadmap is both comforting and valuable in reaching your long-term financial goals. The investment fund managers we partner with have been through market uncertainty before. They understand the market, are equipped with sound strategies and take an approach that’s designed and proven to outlast market volatility.

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