| Your weekly commentary – For the week ended March 31 | | Global equity markets gained as volatility in the Financials sector on both sides of the Atlantic eased. The S&P/TSX Composite Index ticked higher, led by the Consumer Staples sector. In the U.S., the core personal consumption expenditures (PCE) price index rose less than expected, indicating that inflation may be moderating. The S&P 500 Index gained over the week, led by the Energy sector. Oil prices increased and gold prices declined. Yields on 10‑year government bonds in Canada and the U.S. rose. | Canada’s GDP expands- Gross domestic product (GDP) in Canada increased 0.3% in February 2023 on a monthly basis versus the 0.5% increase in January and 0.1% decline in December.
- A gain in manufacturing was offset by a decrease in construction. The results follow zero growth in the fourth quarter of 2022.
- Meanwhile in the U.S., final quarterly estimates revealed the economy expanded 2.6% in the fourth quarter of 2022, fractionally below estimates of 2.7%.
- U.S. consumer spending rose by 1%. However, this was less than the expected 1.4% due to weaker spending on goods and services.
- Net trade contribution was revised lower, with exports and imports falling more than expected.
| Fed’s preferred inflation measure eases- The PCE index, a key data point to assess inflation, rose by 4.6% year-on-year in February, the lowest for 15 months.
- This matched the rise in January and exceeded economists’ expectations of 4.3%.
- The data might signal that U.S. Federal Reserve Board (Fed) policymakers would consider pausing interest-rate increases.
- However, the Fed could keep interest rates higher for longer to manage inflation as price growth remains well above its 2% target, especially in the services segment.
| Lower energy costs in Europe- Consumer prices rose 6.9% on an annual basis in March 2023, the lowest level in 11 months.
- The rise came in below economists’ forecast of 7.1% and below the 8.5% increase in February 2023, mainly due to lower energy prices.
- Although energy costs in Europe declined for the first time in roughly two years, the pace of food and beverage price increases picked up.
- The continued volatility in food prices might pressure policymakers to maintain or increase high interest rates.
- The European Central Bank raised interest rates by 50 basis points in March but did not clearly signal the path of future rates.
| Key points from Canada’s budget- As announced by Finance Minister Chrystia Freeland, the deficit for the fiscal year ending March 31 grew to $43 billion, exceeding the $36.4 billion forecast in November’s budget update.
- New spending is set to target the health-care system, clean-technology incentives, and inflation relief for low-income Canadians.
- Federal debt as a portion of gross domestic product is expected to rise to 43.5% in the fiscal year beginning April 1.
- For a deeper analysis of the budget and what matters most to you as an advisor, see our Canada Life Federal Budget 2023 analysis.
| | Equity markets | Level | YTD | 1 Yr | | S&P/TSX Composite Index C$ | 20,099.89 | 3.69% | -8.18% | | S&P 500 Index US$ | 4,109.31 | 7.03% | -9.29% | | Dow Jones Industrial Average US$ | 33,274.15 | 0.38% | -4.05% | | MSCI EAFE Index US$ | 2,092.60 | 7.65% | -4.08% | | MSCI Emerging Markets Index US$ | 990.28 | 3.54% | -13.27% | | MSCI Europe Index US$ | 1,902.85 | 9.89% | -1.27% | | MSCI AC Asia Pacific Index US$ | 162.10 | 4.08% | -10.17% | | Fixed income market | Level | YTD | 1 Yr | | FTSE Canada Universe Bond Index C$ | 1,084.98 | 3.22% | -2.01% | | FTSE World Broad Investment Grade Bond Index US$ | 208.94 | 3.33% | -7.77% | | Currency | Level | YTD | 1 Yr | | CAD/USD | 0.7398 | 0.23% | -7.53% | | Commodities | Level | YTD | 1 Yr | | West Texas Intermediate (US$/bbl) | 75.67 | -5.72% | -24.54% | | Gold (US$/oz) | 1,969.28 | 7.96% | 1.64% |
| | Market performance – as at March 31, 2023 | |
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