March 8 to 12, 2021

What happened last week

North American stock markets reached record highs

Throughout the week – which saw the one-year anniversary of the COVID-19 pandemic come to pass – the benchmark equity indexes were at or near record highs. Investor concern over a potential flare up in inflation, as economies emerge from lockdowns, weighed on North American markets in recent weeks; however, this concern gave way to optimism, as the Bank of Canada reiterated its commitment to low interest-rates and as the Biden administration passed its US$1.9-trillion economic-relief package.

As the week began, it appeared that benchmarks would be weighed down by their technology listings – especially with investors shifting assets out of high-flying pandemic stocks and towards market sectors that stand to gain the most from economies re-opening. By Monday’s close, the Nasdaq 100 index – a gauge of the top 100 technology companies by market capitalization – was down 2.9%, its biggest drop since November and 11% off its all-time high. But Tuesday’s trading saw investment in equities pick up across the board, as news broke that the Biden administration’s proposed fiscal-stimulus package was close to approval. The U.S. benchmarks were all in positive territory by Tuesday’s closing bells, with the Nasdaq Composite up more than 4% on the day and with Canada’s TSX in sight of a new record.

On Wednesday, a lower-than-expected U.S. inflation reading helped to offset concerns that prices will suddenly rise as the economy recovers. According to the U.S. Department of Labor, U.S. consumer prices rose less than expected in February; the cost of used vehicles, clothing and transportation services declined from January, suggesting that inflation remains under control for the time being. This news, coupled with the anticipated release of fiscal stimulus by the U.S. government, sparked a late-week rally for equities. A rally that had the TSX, S&P 500 and Dow in record territory at Friday’s close.

The Bank of Canada held interest rates near zero

On Wednesday, the Bank of Canada announced that it would hold its overnight rate at 0.25% – and keep it there until the economy has fully recovered from the effects of the pandemic, which it expects will take until 2023. The bank also said it would continue buying Canadian government bonds, at least $4 billion worth a week, but indicated that it could slow its pace as the economy recovers. According to Bloomberg, economists were anticipating that the bank would send a stronger signal around a reduction of its asset purchases. The bank’s statement noted that, “while economic prospects have improved, the Governing Council judges that the recovery continues to require extraordinary monetary policy support.” The Canadian dollar and government-bond yields dipped immediately following the announcement, but strengthened through the rest of the week, bolstered by a better-than-expected employment update from Statistics Canada on Friday that showed the Canadian economy added over 259,000 jobs in February.

President Biden signed a historic pandemic-relief bill for the U.S. economy

After months of hyper partisan debate among U.S. lawmakers, President Joe Biden signed the US$1.9-trillion pandemic-relief bill into law on Thursday, unleashing aid for tens of millions of individuals, businesses and local governments, and providing the anticipated fiscal stimulus for the U.S. economy. Once the bill passed through Congress on Wednesday, the signing ceremony was expedited to Thursday, allowing President Biden to reinforce the potential benefits of the package during a prime-time address to the nation, which observed the one-year anniversary of the World Health Organization declaring a pandemic.


The stock and bond market*
INDEX CLOSE WEEK YTD
S&P/TSX Composite 18,851.32 2.56% 8.13%
Dow Jones Industrial Avg. 32,778.64 4.07% 7.10%
S&P 500 Index 3,943.34 2.64% 4.99%
NASDAQ Composite 13,319.86 3.09% 3.35%
10-yr GoC Yield 1.58% 0.08% 0.91%
10-yr U.S. Treasury Yield 1.64% 0.08% 0.71%
WTI Crude Oil (US$/bbl) 65.61 -0.73% 35.22%
Canadian Dollar US$0.8004 1.39% 1.91%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending March 12, 2021. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.


What’s ahead

U.S. Federal Reserve statement: With concern recently mounting over the prospect of inflation and the potential impact to interest rates, investors will be paying close attention to the U.S. central bank’s update on Wednesday.

Circle these dates

  • April 2: North American markets closed for Good Friday
  • April 30: 2020 income tax filing deadline

Key take-away

History shows that markets recover and trend upwards. Understanding how market cycles work can help you maintain perspective during times of uncertainty – and remain focused on an investment plan that’s geared towards your personal goals.


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