Sept. 28 – Oct. 2, 2020

What happened last week

Markets bounced back, overcoming late-week turbulence

Friday’s news that U.S. President Donald Trump and First Lady Melania Trump had tested positive for COVID-19, sent pre-market trading into a tailspin, but the S&P 500 and the Dow Jones Industrial Average both managed to hang on and snap a four-week slide. The S&P/TSX Composite and the Nasdaq also closed in positive territory after registering losses in three of the four previous weeks.

Wednesday marked the end of September and the close of the third quarter. The month brought drops across the board: the Nasdaq by 5.2%, the S&P 500 by 3.9%, the Dow by 2.3% and Canada’s TSX by 2.4%. However, on a quarterly basis, the Nasdaq was up 11%, the S&P 500 was up 8.5%, the Dow was up 7.6% and the TSX was up 3.9%.

Investors shrugged off presidential debate, focusing hope on further stimulus

U.S. and Canadian equity markets closed with significant gains on Monday. But, on Tuesday, activity was muted; investors chose to sit on the sidelines ahead of the first presidential debate between incumbent Donald Trump and Democratic nominee Joe Biden. That debate, which was marred by interruptions and insults, had no immediate impact on the markets, though it did raise concerns about the outcome of the Nov. 3 election – and what effect a contentious, drawn-out transfer of power could do to the economy.

Instead, it was news from Capitol Hill that drove gains through Wednesday and Thursday, as lawmakers in Congress resumed discussions on a new stimulus package. On Monday, the House Democrats tabled a revised US$2.2-trillion stimulus package, with the White House countering in the form of a US$1.6-trillion proposal on Thursday. As cases of COVID-19 continue to rise, and with growing fear that economic recovery will slow, investors are hoping that a fresh round of stimulus will help to stabilize the markets and the economy ahead of the November election.

Economic data provided insight on U.S. and Canadian economies

o An ADP National Employment Report showed that the U.S. added 481,000 private-sector jobs in August and 749,000 in September. In a separate report, the Labor Department said that non-farm payrolls were up in September, adding 661,000 jobs. Compared to the 1.49 million jobs added in August, however, this report suggests that the growth rate is slowing.

Highlighting the pandemic’s ongoing impact on some industries, Walt Disney Co. announced that it is laying off 28,000 workers from its U.S. resort business. Meanwhile, Goldman Sachs Group Inc. joined several other big American banks in resuming layoffs that had been frozen in the early stages of the pandemic.

In Canada, citing the economic downturn and the emergency fiscal aid tied to the pandemic, the Federal finance department reported a $148.58-billion deficit through the first four months of the 2020-21 fiscal year. During the same period last year, Canada posted a $1.56-billion deficit.

The Canadian Gross Domestic Product (GDP) was up 3% in July, beating economists’ expectations. Compared to June, which saw a 6.5% spike, growth has slowed. The latest reading from Statistics Canada, however, shows that the economy is slowly bouncing back.


The stock and bond market*
INDEX CLOSE WEEK YTD
S&P/TSX Composite 16,199.25 0.83% -5.06%
Dow Jones Industrial Avg. 27,682.81 1.87% -3.00%
S&P 500 Index 3,348.44 1.52% 3.64%
NASDAQ Composite 11,075.02 1.48% 23.43%
10-yr GoC Yield 0.56% 0.02% -1.14%
10-yr U.S. Treasury Yield 0.70% 0.04% -1.22%
WTI Crude Oil (US$/bbl) 37.05 -7.95% -39.46%
Canadian Dollar US$0.7513 0.64% -2.42%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending October 2, 2020. Sources: www.bloomberg.com, www.bankofcanada.ca and www.treasury.gov.


What’s ahead

Balance of trade update: In July, Canada’s trade deficit grew to $2.45 billion, up from a downwardly revised $1.59 billion in June. A new report from Statistics Canada this week will help shine light on the pace of economic recovery in the country.

Circle these dates

  • Oct. 12: Canadian markets closed for Thanksgiving holiday
  • Oct. 19: Bank of Canada “business and consumer” survey results released
  • Oct. 28: Bank of Canada interest-rate announcement and monetary-policy report
  • Nov. 3: U.S. presidential election

Key take-away

Successfully achieving your financial goals requires a solid understanding of your own instincts and behaviours. Keep these basics in mind when you’re feeling anxious about your investments: Stay focused on your goals, review your time horizon and your risk tolerance, and be informed (not influenced) by the news.


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