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As yields on the benchmark US. 10-year Treasury notes climbed to 1.63% this past week, investors began rotating out of growth stocks, like technology companies, which benefited from the pandemic-induced lockdown environment, into cyclical and value issues, which are expected to benefit from broader economic recovery as the pandemic fades. For example, the S&P 500 Value Index has advanced 5.3% month-to-date to Thursday’s close, compared with 1.6% for the S&P 500 Growth Index. Meanwhile, the broader S&P 500 Composite Index closed at a record high on Friday, posting a 2.6% advance on the week, for a 5.0% gain year to date. The technology-weighted Nasdaq Composite Index advanced 3.1% on the week, for a year-to-date gain of 3.4%.
Against a backdrop of surging economic growth and rising bond yields, the Bank of Canada remained dovish in Wednesday’s rate announcement, holding its target overnight rate at 0.25%. With GDP growing 9.6% in the fourth quarter of 2020, the Bank’s statement said “recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s January projection, this does not happen until into 2023.”
With strong economic recovery expected this year, and the prospect of continuing monetary accommodation and low rates until at least the end of 2022, investors had reason to be optimistic about the Canadian market. Boosting sentiment even more was gain of 259,000 new jobs in February, as the unemployment rate dropped to 8.2% from 9.4% in January. A weaker U.S. dollar also added to gains, as a 9.2% weekly advance in the S&P/TSX Health Care Index led broad gains in the S&P/TSX Composite Index, which ended the week up 2.6% from the previous Friday’s close, and ahead 8.1% for the year to date. Crude oil, meanwhile, retreated 1.1% on the week, but remains ahead 35% for the year to date. An ounce of gold gained 1.6% for the week, but remained down 8.9% for the year to date.
Monitor the main stock and commodity indexes daily with the Fund Library’s interactive Markets Page.
* IG merges funds. IG Wealth Management on March 12 announced a number of fund mergers, effective June 18:
* Mackenzie launches private credit fund. Mackenzie Investments on March 11 debuted its Mackenzie Northleaf Private Credit Fund, available only to accredited investors. Managed by Mackenzie's Fixed Income Team and Northleaf Capital Partners the fund will invest mostly in Northleaf's senior secured private lending program for institutional investors. In a press release, Mackenzie says that this will enable the fund “to provide accredited retail investors with the opportunity to achieve higher income with enhanced lender protections as compared to investments in the public debt markets.”
* Desjardins RI emerging markets ETF debuts on TSX. Desjardins Global Asset Management Inc.’s new Desjardins RI Emerging Markets – Low CO2 Index ETF (TSX: DRME) began trading on the TSX on March 12. The fund tracks the Scientific Beta Desjardins Emerging Markets RI Low Carbon Index.
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