Insights & Resources

After a tough April, equity markets got back on track in May. Here’s a summary of the main events that steered the markets.

Monthly market developments

• Equities rose and bond yields fell on better U.S. inflation news, clawing back some of the losses from April. Market performance continued to broaden beyond tech to other sectors and corporate earnings continued to come in strong. YTD U.S., Canadian and global stocks remain in positive territory.
• Canada’s labour market recorded a strong gain of 90,000 jobs, underpinned by population growth. However, the unemployment rate was unchanged at 6.1% and wage growth decelerated to 4.7%, the slowest pace since June 2023. While the job numbers were positive, the overall data remains consistent with an easing labour market. In the U.S., the labour market finally showed signs of becoming more balanced. Employment growth slowed, the unemployment rate ticked up, and wage growth moderated, easing fears about a reacceleration in activity and pick-up in inflation.
• China announced a 1 trillion yuan bond issuance (approximately C$190 billion). Additionally, the government unveiled a plan to bolster the Chinese real estate market. This plan includes lowering the minimum down payment and removing the mortgage rate floor. It also provides 300 billion yuan (approximately C$57 billion) of central bank funding to assist government-backed firms in purchasing inventory from developers to create affordable housing.
• U.S. inflation fell for the first time this year, a welcome relief to investors and the Fed. CPI was 3.4%, down from 3.5% at the end of Q1 2024. While promising, core inflation, which includes food and energy, continues to be sticky and not low enough for the Fed to consider rate cuts. As expected, the Fed left rates unchanged in the 5.25-5.5% range. Fed chair Powell said current policy would be needed for longer than initially thought but would prove sufficiently restrictive over time.
• Canadian CPI cooled from 2.9% to 2.7%, remaining within the Bank of Canada’s 1-3% range and close to its 2% inflation target. Falling prices for food, services and durable goods led the way, although gasoline prices remained high. The Bank of Canada’s next rate announcement is on June 5.
• Japanese inflation also continued to decelerate although it remains above the Bank of Japan’s 2% target meaning it may consider further policy measures.
• Inflation data was released in the U.K too, with overall CPI coming in at 2.3%, just shy of the Bank of England’s (BoE) 2% goal. However, services inflation, a key metric for the BoE remains elevated at 5.9%. U.K. GDP data was also released showing the economy has rebounded after falling into a recession during the second half of 2023. Q1 2024 GDP was 0.6%, the strongest pace of growth since Q1 2021. The BoE kept its bank rate at 5.25%. Governor Bailey said it was likely the BoE will need to cut rates in the coming quarters and make policy less restrictive than current market rates.
• The People’s Bank of China also kept it benchmark rate unchanged.

How does this affect my investments?

Inflation and anticipated rate cuts continue to drive markets. Central banks are monitoring inflation and underlying economic indicators to assess the timing of rate cuts. Market performance has been broadening beyond tech to other sectors which along with strong corporate earnings reflects a resilient economy. Investors have also been consolidating Q1 gains and shifting to a slightly more defensive position. Volatility is a normal part of investing but there is little reason to expect a severe slowdown.

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.

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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, Reuters, Investment Executive, Financial Times, Marketwatch, Barron’s, and Canadian Press 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.