|  | | | | | Your weekly commentary – For the week ended September 22 | | Global equity markets fell over the week ended September 22. Expectations that the U.S. Federal Reserve Board (“Fed”) would keep interest rates high for longer weighed on investor sentiment. In Canada, the S&P/TSX Composite Index dropped, dragged down by the Information Technology sector. U.S. equities, as measured by the MSCI USA Index, also declined. Oil and gold prices finished largely unchanged over the week. Yields on 10‑year government bonds in Canada and the U.S. rose over the week. | Canadian inflation edges higher- Canada’s inflation continued to move higher in August, reaching 4.0%. August’s rate was above economists’ expectations.
- Driving inflation higher was a rise in gasoline prices, which rose by 0.8% year‑over‑year. Another key contributor was increasing shelter costs, in particular rental expenses.
- Core inflation, which excludes more volatile items, also edged higher in August.
- The Bank of Canada (“BoC”) released its Summary of Deliberations from its last meeting, which showed officials wanted to avoid generating any expectation among markets that the central bank would look to reduce rates. Instead, the BoC will monitor economic data and could raise rates again should higher inflation persist.
- Canadian consumers again showed relative resilience in July, pushing retail sales higher by 0.3%. However, tight financial conditions may catch up with Canadians, as Statistics Canada estimated retail sales dropped by 0.3% in August.
| Fed holds steady- The Fed held its September meeting last week and concluded it by announcing it was holding its federal funds rate steady at a target range of 5.25%–5.50%.
- The pause may be temporary. The Fed’s statements showed most officials believe another rate increase this year is warranted to help bring down inflation to its target.
- he U.S. central bank will monitor economic data ahead of future decisions.
- Another rate hike from the Fed seems likely this year, which could impact many households and businesses struggling amid tight financial conditions.
| BoE maintains status quo on rates- The Bank of England (“BoE”) defied economists’ expectations, electing to hold its policy interest rate steady at 5.25%.
- September’s rate hold by the BoE marks its first meeting without an interest rate increase since 2021, showing just how aggressive the BoE has been in its battle against decades-high inflation.
- The U.K. central bank believes its rate hikes over the past year have helped pull down inflation, which allowed it to pause at this meeting and monitor incoming data.
- Despite the rate hold, the BoE noted it would be willing to raise rates again if inflation does not keep coming down.
| Muted demand weighs on global manufacturing- Manufacturing activity has struggled to gain traction across the world this year. Weighing heavily on the sector has been a drop in new orders, suggesting tight financial conditions are affecting demand. Manufacturing is a critical sector in the strength of the global economy.
- The U.S. manufacturing sector contracted for a fifth straight month, weighing on the U.S. economy.
- Manufacturing activity continues to stumble in Europe. Its largest economy, Germany, saw manufacturing shrink again in September, which has weighed heavily on economic activity.
- In Japan, manufacturing activity contracted faster in September compared to August, hindered by a drop in new orders.
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| | | | Equity markets | Level | YTD | 1 Yr | | S&P/TSX Composite Index C$ | 19,779.97 | 2.04% | 4.09% | | MSCI USA Index US$ | 4,109.04 | 12.88% | 16.96% | | MSCI EAFE Index US$ | 2,064.70 | 6.21% | 22.32% | | MSCI Emerging Markets Index US$ | 964.24 | 0.82% | 6.45% | | MSCI Europe Index US$ | 1,849.81 | 6.83% | 23.26% | | MSCI AC Asia Pacific Index US$ | 160.07 | 2.78% | 10.32% | | Fixed income market | Level | YTD | 1 Yr | | FTSE Canada Universe Bond Index C$ | 1,041.95 | -0.88% | -1.46% | | FTSE World Broad Investment Grade Bond Index US$ | 200.80 | -0.70% | 2.76% | | Currency | Level | YTD | 1 Yr | | CAD/USD | 0.7417 | 0.52% | 0.03% | | Commodities | Level | YTD | 1 Yr | | West Texas Intermediate (US$/bbl) | 90.03 | 12.17% | 7.83% | | Gold (US$/oz) | 1,925.24 | 5.55% | 15.20% | | Silver (US$/oz) | 23.56 | -1.64% | 20.00% |
| | Market performance – as at September 22, 2023 | | | | | |
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This commentary represents Canada Life Investment Management Ltd.'s views at the date of publication, which are subject to change without notice. Furthermore, there can be no assurance that any trends described in this material will continue or that forecasts will occur; economic and market conditions change frequently. This commentary is intended as a general source of information and is not intended to be a solicitation to buy or sell specific investments, nor tax or legal advice. Before making any investment decision, prospective investors should carefully review the relevant offering documents and seek input from their advisor. You may not reproduce, distribute, or otherwise use any of this article without the prior written consent of Canada Life Investment Management Ltd. Privacy, legal, copyright and trademark information
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