Insights & Resources

Monthly market developments

It was a case of “all’s well that ends well” for investors in July, as despite a mid-month sell-off, stocks rebounded to end the month in the green. Here’s a summary of the main events that steered the markets.

• Stocks rallied and bond yields fell on the final day of July after the Fed left rates unchanged again but hinted it might cut rates at its September meeting. U.S., Canadian and global stocks all posted gains with the S&P/TSX Composite in particular hitting 23,000 points for the first time. This was quite a recovery from mid-month, where investor concerns over the outlook for the U.S. economy in the second half of the year led to a dip in market sentiment and a stock sell-off, in which technology sector stocks took the brunt.
• U.S. economic data presented a mixed bag. Retail sales came in above expectations as did housing starts and building permits data. However, jobless claims rose, adding to other recent data suggesting the labour market is cooling, which would be welcome by the Fed in its inflationary fight.
• Canadian consumer price index (CPI) stayed within the Bank of Canada’s 1-3% range and close to its 2% inflation target. The Bank of Canada reduced its overnight policy rate for the second consecutive month, by 25 basis points to 4.50%. Governor Macklem indicated further rate cuts are likely but emphasized decisions will be made on a meeting-by-meeting basis without committing to a fixed trajectory. The Bank of Canada also published results from its Q2 Business Outlook Survey and Canadian Survey of Consumer Expectations. Both surveys showed inflationary pressures were diminishing.
• U.S. CPI revealed inflationary pressures continued to ease. The Fed’s preferred inflation metric, core services excluding housing, showed deflation for the second month in a row. Moreover, housing inflation, which had been trending sideways for several months, also decelerated. As expected, the Fed left rates unchanged in the 5.25-5.5% range. Fed chair Powell suggested the Fed might cut rates at its next scheduled meeting in September if both inflation and the labour market continued cooling.
• U.K. headline inflation was unchanged at 2% while services inflation remained elevated at 5.7%, driven by price increases at hotels and restaurants. However, headline wage data revealed a moderation in wage growth.
• The European Central Bank (ECB) kept its policy rate unchanged. ECB president Lagarde stated its September decision is “wide open” and the ECB was “not pre-committing to a particular rate path”.

How does this affect my investments?

Inflation and anticipated rate cuts continue to drive markets. Market performance also continues to broaden from tech to other sectors. Although the U.S. economy is performing well, growing concerns over the outlook for the second half of the year did lead to a classic risk-off environment mid- month. There might be additional volatility as the U.S presidential election looms in November, but there is little reason to expect a severe slowdown. Volatility and pullbacks are a normal part of investing and present strategic buying and rebalancing opportunities for asset managers. Regardless of where we are in the market cycle, it’s important to take a disciplined approach to investing and stay focused on your long-term goals. This strategy helps you keep your emotions out of investing, typically buying high and selling low like many investors do. Ongoing monitoring and reviewing of your portfolio also ensures it remains on track. Diversifying investments reduces risk as well.

Disclaimer

The information in this letter is derived from various sources, including CI Global Asset Management, Statistics Canada, U.S. Bureau of Labor Statistics, Bloomberg, National Post, Wall Street Journal, Toronto Sun, and Morningstar as at various dates. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources and reasonable steps have been taken to ensure their accuracy. Market conditions may change which may impact the information contained in this document. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document. Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.