Market week: Investors sweat it out in August

Markets wrung out over trade tensions, economic uncertainty

The trade tensions that dominated August and caused so much volatility in equity and bond markets appeared to ease in the last week of the month, as China’s central government appeared to take a more conciliatory tone on tariffs and said it would not immediately impose counter-tariffs in response to U.S. President Donald Trump’s tariff increases earlier in the month.

As a result, the major North American stock market indices posted strong gains on the week, but mostly stayed in the red for the month overall. Against a backdrop of strong second-quarter GDP growth (up 3.7% annualized), Toronto’s S&P/TSX Composite Index advanced 2.5% on the week, but edged up only 0.2% for the month, as declining crude oil prices (down 6% in the month) weighed on the energy sector. As the ultimate safe-haven asset, gold perked up considerably in the month, gaining 6.6%, although it pulled back 0.4% on the week as tensions eased somewhat. The index’s other major sector, financials, gained 2.1% on the week, as the S&P/TSX Capped Financial Index was buoyed by strong quarterly bank earnings reports, but posted a 2.7% loss for the month overall.

In the U.S., the blue-chip S&P 500 Composite Index rose 2.8% on the week, but posted its second losing month of 2019, retreating 1.8% in August. The technology-weighted Nasdaq Composite Index gained 2.7% on the week, but retreated 2.6% in the month overall, held back by uncertainty over the trade and tariff dispute with China and calls by President Trump for American companies to stop doing business in China. Investors also fretted over the economic outlook through August, which ended with a flight to safety as investors flooded into longer-term U.S. Treasury bonds, pushing 10-year yields down below 2-year yields, a condition known as an “inverted yield curve,” which has historically signalled a recession in 12 to 15 months’ time.

* Pender acquires five Vertex funds. Vertex One Asset Management announced on Aug. 26 that PenderFund Capital Management Ltd. will acquire the investment fund management contracts for five investment funds managed by Vertex One: Vertex Value Fund, Vertex Enhanced Income Fund, Vertex Growth Fund, Vertex Fund, and Vertex Managed Value Portfolio. The transaction is expected to close in the fourth quarter of 2019.

Pender will become the investment fund manager and portfolio manager of the Vertex Funds. The companies are also considering merging the Vertex Fund, Vertex Growth Fund, and the Vertex Enhanced Income Fund into the Pender Strategic Growth & Income Fund as part of the takeover, but no final decision has yet been made.

David Barr, President and Portfolio Manager of Pender, said in a release, “Moving forward, we will be applying the Pender investment process to the funds and look forward to protecting and growing unitholder wealth over the long term.”

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