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Stocks ended higher on the week, as a positive U.S. jobs report signalled continuing momentum in economic growth, but not at a rate that analysts believe would trigger the U.S. Federal Reserve to begin removing monetary stimulus ahead of their mid-2022 target date. U.S. non-farm employment rose 559,000 jobs in May, less than economists had predicted, but roughly twice the gain posted in April. The U.S. unemployment rate notched down to 5.8% in May from 6.1% in April, while the labor force participation rate remained largely unchanged at 61.6%, owing to continuing enhanced government unemployment benefits, which have the consequence of suppressing employment growth.
In Canada, the labour market lost 68,000 jobs in May as a resurgence in Covid-19 infections resulted in tighter government lockdowns, business closures, and resulting unemployment. Canada’s unemployment rate notched up to 8.2% from 8.1% in April, with the 64.6% participation rate mostly unchanged from April’s 64.9%, as provincial economies remained pretty much shut down over the month. In a sign that the economy is stirring, Canadian real gross domestic product grew 5.6% in the first quarter, for an overall 0.3% year-over-year growth rate. Flash estimates for April, however, show some deterioration in the growth rate, with a contraction of 0.8% estimated for the month.
Generally, the econmic data held no surprises, and investors took the information in stride, boosting the major stocks indexes for the week. The S&P/TSX Composite Index was the top performer in percentage terms, posting a record high close above the 20,000 mark, for a 1% advance on the week, adding to a 3.3% gain in May overall. The S&P 500 Composite Index posted a 0.6% gain for the week, not adding much to its 0.6% gain for May. And the Nasdaq Composite Index proved to be the laggard, advancing 0.5% on the week, while posting a 1.5% decline in May, as rate-sensitive technology issues continued to come under selling pressure.
In commodities, crude oil continued its price momentum, with a 4.1% advance on the week, adding to a 4.5% monthly gain for May, as demand rises with economic growth. Gold, meanwhile, slipped 0.6% on the week, but advanced 4.5% in May as inflation concerns trickled into the market.
* Vanguard switches indexes on two ETFs. Vanguard Investments Canada on June 1 announced changes to the underlying indexes tracked by two of its exchange-traded funds.
Vanguard U.S. Dividend Appreciation Index ETF (TSX: VGG) will change its index to the S&P U.S. Dividend Growers Index from the NASDAQ US Dividend Achievers Select Index.
Vanguard U.S. Dividend Appreciation Index ETF (CAD-hedged) (TSX: VGH) will change its index to the S&P U.S. Dividend Growers Index (CAD-hedged) from the NASDAQ US Dividend Achievers Select Index (CAD-hedged).
The change to each index aligns with the investment objectives and strategies of the ETFs, and the ETFs will provide unitholders with substantially the same exposure to the asset class to which the ETFs were exposed prior to the change. In a release, Vanguard said it believes S&P’s approach to dividend investing in these new indexes will provide unitholders with greater transparency, free-float adjustments to ensure each index will count only shares that are available to investors, a three-day rebalance window to help manage transaction costs and minimize tracking error, and buffered yield screens intended to minimize excessive turnover.
The changes will take effect on or about Sept. 17, 2021.
* Franklin Templeton launches new real asset fund. Franklin Templeton Canada on May 31 launched its new Franklin Global Real Assets Fund II for accredited investors. The fund aims for stable current income and attractive total return through investment in a globally diversified portfolio of real assets, which includes private and public structures. The fund's investment strategy is similar to that of Franklin Global Real Assets Fund, which has served institutional investors since 2017.
* Purposes launches pension-like retirement income fund. Purpose Investments on June 1 debuted its new Purpose Longevity Pension Fund, an income-for-life mutual fund designed for Canadians in retirement. Similar to a defined-benefit pension, the fund incorporates longevity risk pooling in order to provide lifetime income to Canadian retirees, while also providing investors with the flexibility to redeem or invest more into the fund at any time. Purpose CEO and founder Som said there aim is to provide a real solution to support people in retirement and give them the financial security and confidence to know they will be okay by “offering everyone a defined-benefit-like product, so they know a paycheque is coming for as long as they live.”
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