Diversifying globally provides a range of benefits for Canadian investors (read more here). However, venturing abroad introduces currency risk. Intuition leads us
to believe that because currencies are volatile, exposure to foreign
exchange swings in a portfolio can only be detrimental. This isn’t always
the case, as we find that the impact of foreign currency exposure on risk
hinges on the investor’s home currency. In our view, Canadian investors
should embrace currency exposure in equities, as global equity returns have
tended to be less volatile when measured in Canadian dollars.
Markets shrugged off trade tensions swirling around this week’s G7 meeting
in Quebec, as the main North American market indices advanced on the week.
Except for a net 7,500 job loss for the Canadian economy in May, the week
was light on significant economic data. Despite the decline, Toronto’s
benchmark equity index, the
S&P/TSX Composite, managed a gain of 1% on the week overall. Similarly, U.S. investors gave
little weight to trade hostilities between the U.S. and its main allies
Canada and Mexico, arising from President Trump’s imposition of tariffs on
steel and aluminum, as well as fractious NAFTA negotiations. Instead,
investors marked time ahead of next week’s rate announcement as the U.S.
Federal Reserve is widely expected to raise its federal funds rate a notch.
S&P 500 Composite Index advanced 1.6% on the week, while the tech-weighted
Nasdaq Composite Index gained 1.2%.
Crude oil edged back 0.2% on the week, while
gold ticked up 0.4%.
A better-than-expected May U.S. jobs report helped spur the big U.S.
indices to weekly gains. The 223,000 jobs created in May combined with a
monthly 3.8% unemployment rate and accelerating wage growth (up 0.3% on the
month) to raise expectations of a rate hike by the Federal Reserve Board
when its rate-setting Open Market Committee meets on June 11-12. Fears of a
eurozone crisis also receded on news that a coalition government had been
formed in Italy, while traders shrugged off the threat of a growing global
trade war as President Trump imposed stiff tariffs on steel and aluminum
from Canada and Mexico, which had been temporarily exempt. The
S&P 500 Composite Index gained 0.5% on the week, while closing the month with a 2.2% overall
Nasdaq Composite Index grew 1.6% on the week, with a 5.3% monthly gain. And with
crude oil dropping 2.8% on the week (down 2.2% in May), Toronto’s
S&P/TSX Composite Index posted a weekly 0.2% loss, but managed to gain 2.9% in the month.
If you’re a regular visitor to our site, you’ll have come across the name
of my colleague Joe Davis, who
serves as Vanguard’s global chief economist. He’s got a mind for figures
and economic theory like few others I’ve encountered. Joe is fond of saying
we should “treat the future with the deference it deserves.” I happen to
think that’s excellent advice. Let me explain.
The April Monetary Policy Report (MPR) from the Bank of Canada is
a stark reminder of just how much the environment has changed in 2018.
While on the one hand the MPR presents an economy evolving pretty much as
expected, it also underscores the key risks to the macro outlook and the
uncertainty about their evolution.
A 5.3% slide in the price of
crude oil this past week hit energy stocks, and contributed to lackluster performance
by the major North American stock indices. With no major economic data
points making an appearance last week and the geopolitical situation at
somewhere near a status quo, markets marked time trading in a narrow range
through the week. Toronto’s main benchmark, the
S&P/TSX Composite Index, lost 0.5% on a shortened week of trading, mostly a result of crude oil’s
price slide reverberating through the market’s heavily weighted energy
sector. The big U.S. blue-chip
S&P 500 Composite Index scarcely did any better, gaining only 0.3% on the week, as the price of
crude oil reacted to reports that the Organization of Petroleum Exporting
Countries (Opec) and Russia were planning to increase crude production
after a period of cutbacks. In addition, trading volumes declined ahead of
the U.S. Memorial Day long weekend. The outlier was the
Nasdaq Composite Index, which gained 1.1% on the week, propelled by strength in the Internet and
S&P/TSX Composite Index gained 1.1% on the week, as
crude oil advanced 1.2%, buoying the energy sector, while April’s inflation rate grew
at an annual 2.2%, down slightly from March, easing concerns that the Bank
of Canada might raise rates later this month. The main U.S. stock gauges
edged back slightly on the week, as trade negotiations between U.S. and
China remain murky, and bond yields rose, with the benchmark 10-year U.S.
Treasury note crossing the 3% barrier to end the week at 3.067% on
continuing concerns that accelerating economic growth and rising inflation
will lead to more rate hikes from the Federal Reserve Board. The
S&P 500 Composite Index posted a 0.5% weekly loss, while the
Nasdaq Composite Index was off 0.7%.
Canadian and U.S. stock markets closed Friday with gains on the week after
U.S. consumer prices remained docile in April, with the headline consumer
price index edging up only 0.2% in the month, for an annual rate of 2.5%.
The core rate, which excludes food and energy prices, expanded a minuscule
0.1% in April, for an annual rate of 2.1%, well within the Federal Reserve
Board’s target range. In addition, the benchmark U.S. government 10-year
Treasury note closed the week below the psychologically important 3% yield
threshold at 2.97%, easing immediate concerns of another Fed rate hike. The
S&P 500 Composite Index gained 2.4% on the week, while the
Nasdaq Composite Index advanced 2.7%. Canada’s April job creation numbers showed a loss of 1,000
jobs (as part-time job losses offset stronger full-time gains), helping the
S&P/TSX Composite Index rally 1.6% on the week as pressure for another rate increase by the Bank of
Crude oil gained another 1.0% on the week, giving additional impetus to Canada’s
A rally in technology stocks on Friday, led by a surge in shares of
Apple Inc. (NASDAQ: AAPL), boosted the tech-weighted
Nasdaq Composite Index to a 1.3% gain on the week. And while the blue-chip
S&P 500 Composite Index advanced 1.3% on Friday, the index failed to gain on the week, closing just
a hair below breakeven, as traders reacted to disappointing job creation
numbers in April, with 164,000 new non-farm jobs created, while the U.S.
unemployment rate dropped to 3.9% from 4.1%, the lowest in about 18 years.
The yield on the U.S. 10-year Treasury note, meanwhile, retreated 1.3 basis
points, ending the week at 2.946%. Toronto’s benchmark
S&P/TSX Composite Index closed slightly above breakeven on the week, against a backdrop of economic
growth as February’s GDP posted a 0.4% monthly increase (3.0% annual rate),
while the price of
crude oil gained 2.6% on the week, lending support to Canada’s energy sector.
Recently asked questions from the field: Does the recent drop of
Facebook Inc. (NASDAQ: FB) offer us an opportunity to add a megacap name (generally, stocks with a
market capitalization of more than $300 billion) to our portfolios? If
Washington decides to increase regulations on technology companies, would
that impact megatech stocks enough to provide entry points? Here are some
thoughts on Pender’s investment strategy as it relates to our analysis of
“What do you think about Bitcoin?” Over the past few months, I’ve gotten
this question more than any other. In 2017 the value of Bitcoin, the
world’s first cryptocurrency, rose by almost 1,200%, prompting excitement
By Fund Library News Wire | Friday, April 20, 2018
By Mike Keerma
The major North American stock indices held their own on the week, with
S&P/TSX Composite Index advancing 1.4%, as
crude oil gained 1.3%, despite some softness on Friday. With first-quarter earnings
expectations still high, the U.S. blue chip
S&P 500 Composite Index edged up 0.5% week over week, despite headwinds from interest rates as the
yield on the benchmark U.S. 10-year Treasury note rose to near 3.0%, its
highest level since 2014. Yields were fueled by inflationary pressures as
the March all-items consumer price index rose to an annual 2.4%, with the
core rate at 2.1%. A retreat on Friday in both the energy and technology
sectors weighed on stock indices at week’s end, but the
Nasdaq Composite Index
still managed 0.6% uptick on the week, even as
Apple Corp. (NASDAQ: AAPL) slipped, mainly on growing concerns over its flagging iPhone X sales.
We expect the Canadian economy to cool throughout 2018 at a time when trade
risks could further complicate the global outlook. Canada’s economy can
take some reassurance from the relatively firm growth in the U.S., but
indebted households, weak domestic oil prices, still sluggish business
investment and subdued exports all pose challenges.
By Fund Library News Wire | Friday, April 13, 2018
By Mike Keerma
The major North American stock market indices closed higher on the week, as
expectations of strong first-quarter earnings shifted investors’ focus from
growing geopolitical tensions, at least temporarily. President Trump,
meanwhile, scaled back his rhetoric about initiating military action in
Syria, calming investor anxiety over rising Mideast tensions with Russia.
Moreover, he floated the possibility of rejoining the Trans-Pacific
Partnership, even as he imposed fresh tariffs on Chinese technology
investments in the U.S. The U.S. blue-chip
S&P 500 Composite Index advanced 2% on the week, while the
Nasdaq Composite Index rallied 2.8% after it became apparent that social media giant
Facebook Inc. (NASDAQ: FB) wouldn’t crash and burn after CEO Mark Zuckerberg’s testimony before
Congress this past week. Toronto’s benchmark
S&P/TSX Composite Index rose 0.4% on the week, powered by gains in the energy and materials groups,
crude oil advanced 8.7% on the week.
By Fund Library News Wire | Friday, April 06, 2018
By Mike Keerma
Stock market indices closed a volatile week of trading on Friday with
weekly losses, as trade tensions increased, and a weaker-than-expected U.S.
job creation report soured investor sentiment. Toronto’s benchmark
S&P/TSX Composite Index fell 1.0% on the week as investors sold off energy and financial issues in
reaction to renewed trade tensions. Against a backdrop of rising stock
market volatility, with the CBOE Volatility Index (VIX) closing the week at
21.49, the U.S. blue-chip
S&P 500 Composite Index dropped 1.4% week over week. With headwinds from the tech
sector, including continuing concerns over data security at
Facebook Inc. (NASDAQ: FB), the
Nasdaq Composite Index fell 2.1% on unrelenting selling pressure. Short seller Citron Research issued a bearish view of
Nvidia Corp. (NASDAQ: NVDA) and
Apple Inc. (NASDAQ: AAPL) extended its retreat with a loss for the week, marking an 8% drop from its
52-week high of early March.
Gold edged up 0.6% on the week bolstered by its safe haven status, while
crude oil dropped 4.6%.
By Fund Library News Wire | Thursday, March 29, 2018
By Mike Keerma
The major North American stock market indices rallied on Friday, the last
day of the month and the quarter, boosting weekly returns into positive
territory. The S&P 500 Composite Index posted a strong 2.0% weekly
return with the help of investment managers’ “window dressing” portfolios
to goose quarterly return numbers. Even the tech-weighted
Nasdaq Composite Index, which had seen a steady slide through March arising from security and
privacy concerns at social media giant
Facebook Inc. (NASDAQ: FB), gained 1.0% on the week. The
S&P 500 Composite Index doubled that gain, advancing 2.0% on the week. And Toronto’s benchmark
S&P/TSX Composite Index
benefitted from a rally in energy and materials stocks, rallying 1.0% on
the week. Both
crude oil and
gold posted weekly losses, but remained ahead for both the month and the year to
By Fund Library News Wire | Friday, March 23, 2018
By Mike Keerma
Shrugging off some positive U.S. economic data and President Trump’s
signing of a US$1.3 trillion spending bill that headed off a government
shutdown, investors focused instead on the imposition of tariffs on US$50
billion of Chinese goods, and the threat of retaliatory trade measures by
China. In addition, the U.S. Federal Reserve raised its federal funds rate
by 25 basis points on Wednesday, to a target range between 1.5% and 1.75%.
As a result, the main North American benchmarks all lost ground over the
week, with the
Nasdaq Composite Index posting the steepest weekly loss at 6.5%. The
S&P 500 Composite Index dropped 6%, while Toronto’s
S&P/TSX Composite Index slid 3%, cushioned somewhat by a 5.6% weekly gain in the price of
crude oil and a 3% advance for
By Fund Library News Wire | Friday, March 23, 2018
By Mike Keerma
Fundata Canada Inc., a provider of Canadian investment fund data, announced on March 21 that
it has partnered with Barchart, a global leader
in market data and technology services, to provide premium Canadian data on
mutual funds and exchange-traded funds (ETFs) to The Globe and Mail’s Globe Investor website.
“Since 1871, the market has spent 40% of all years either rising or
falling more than 20%. Roaring booms and crushing busts are perfectly
normal.” – Morgan Housel
Last year was a banner year in the US markets. Following the election of
Trump, the S&P500 bolted out of the gates on initial optimism for
deregulation across many sectors and ended the year with investors cheering
huge U.S. corporate tax cuts. In what has become a familiar refrain, a
handful of mega-cap Internet and technology stocks continued their