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U.S. stock indexes lost ground on the week as sentiment soured on rising inflation, U.S. Federal Reserve Board hawkishness, and the ratcheting up of geopolitical tension as an invasion of Ukraine by Russia seemed imminent. The U.S. all-items consumer price index rose to an annual 7.5% rate in January, while the core index came in at 6.0%, the highest rates since 1982. That removed any doubt that may have been floating over markets that the Fed needs to move quickly and aggressively to raise its policy rate to try to stem the inflationary acceleration.
In the meantime, Russian military forces continue to threaten Ukraine’s borders with buildups in both Russia and Belarus. On Friday, the White House warned U.S. citizens to evacuate Ukraine as soon as possible within the next 48 hours, while Defense Secretary Lloyd Austin has ordered an additional 3,000 troops to Poland to bolster the 1,700 already in place.
Investors consequently went into risk-off mode, selling telecom services, information technology, and utilities, leading to a 1.8% week-over-week loss for the S&P 500 Composite Index. The technology-weighted Nasdaq Composite Index felt the effects of the slide in overvalued growth companies with a 2.2% weekly loss.
In Canada, Toronto’s S&P/TSX Composite Index bucked the trend and gained 1.3% on the week, as financials, with a heavy weighting in the index, gained ground on rising Treasury yields and the expectation of even more to come in the next month or two. A 1.4% weekly increase in the energy sector (another large component of the index) supported the gain, as crude oil jumped 2.2% on the week. In addition, after a long hiatus, gold began to display its characteristics as a crisis hedge, gaining 2.9% on the week, as traders began switching to haven assets, resulting in a weekly gain of 14.0% for the S&P/TSX Equal Weight Global Gold Index.
* Fundata A+ Awards for 2021 announced. Financial data provider Fundata Canada announced the winners of the 2021 A+ Awards on Jan. 26. The Award is given annually to investment funds and managers who have shown consistent, outstanding, risk-adjusted performance incorporating up to 10 years of history. Winners will be posted on the Fundata A+ Awards website.
* BMO debuts bank income ETF. BMO Asset Management Inc. on Feb. 10 launched its BMO Canadian Bank Income Index ETF (TSX: ZBI), which tracks the Solactive Canadian Bank Income Index, a portfolio of traditional and non-traditional Canadian bank debt instruments including LRCNs and preferred shares.
* Horizons launches carbon credit ETF. Horizons ETFs Management (Canada) Inc. on Feb. 10 debuted its Horizons Carbon Credits ETF (TSX: CARB) aiming for exposure solely to carbon credits through the ownership of carbon credit futures. The fund tracks the Horizons Carbon Credits Rolling Futures Index (Excess Return) with exposure to investments in cap-and-trade carbon allowances. The fund also aims to hedge any non-Canadian dollar portfolio exposure back to the Canadian dollar at all times.
* NBI introduces sustainable short-term bond ETF. National Bank Investments Inc. on Feb. 10 launched its NBI Sustainable Canadian Short Term Bond ETF (TSX: NSSB) focuses on debt instruments designed to raise funds that promote a positive environmental and/or social impact and/or contribute to sustainable development. It invests, directly or indirectly through investments in securities of other mutual funds, in a portfolio comprised primarily of high-quality Canadian corporate fixed-income securities with relatively shorter terms to maturity. It may also invest in short-term fixed income securities issued by federal, provincial or municipal governments in Canada.
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