Market Commentary – Second Quarter 2024

The following market commentary is courtesy of the Plan’s Canadian Equity investment manager, Connor, Clark & Lunn Investment Management.

During the quarter, economic releases pointed to a generally resilient pace of activity in the US economy, although there was clear evidence of slowing momentum. Some economic data was weaker with downside surprises relative to market expectations. Importantly, reassuring inflation releases helped alleviate concern of a more sustained reacceleration in inflation. Economic releases in Canada highlighted broad disinflationary pressures, sluggish economic growth and softening employment figures. Central bank activity indicated a bias toward monetary easing, and the Bank of Canada (BoC) became the first G7 central bank to lower its target interest rate this economic cycle. The European Central Bank followed suit shortly after, which was a timely move, given that France called a snap election and caused heightened uncertainty in the eurozone. Global equity markets fared well during the quarter, while the Canadian equity market underperformed. Crude oil prices trended lower throughout most of the quarter in response to easing geopolitical tensions and supply adjustments. That said, oil prices rebounded from their lows in June and ended the quarter nearly unchanged.

Global equity market gains over the quarter were largely driven by continued information technology sector outperformance (mostly from mega-capitalization companies in that sector) and weaker economic data, which drove expectations of accommodative monetary policies from central banks. The MSCI All Country World Index rose 3.5% in local-currency terms (4.2% in C$) over the quarter. Emerging markets equities also posted positive returns, with the MSCI Emerging Markets Index rising 6.3% in local-currency terms (6.2% in C$). Contrary to global equities, the Canadian equity market – as measured by the S&P/TSX Composite Index – posted a 0.5% decline over the second quarter.

The BoC lowered its overnight rate by 25 basis points (bps) during the second quarter, while the US Federal Reserve (Fed) held its policy interest rate steady. Two-year yields fell 17 bps in Canada and rose nine bps in the US, while 10-year yields rose six bps in Canada and 16 bps in the US. Corporate credit spreads ended the period modestly wider, while provincial credit spreads were nearly unchanged. The FTSE Canada Universe Bond Index posted a gain of 0.86% over the quarter.

Disclaimer

Unless stated otherwise, all data is as at June 30, 2024 and stated in Canadian dollars. Source: Connor, Clark & Lunn Financial Group Ltd., Merrill Lynch, Pierce, Fenner & Smith Incorporated, S&P Global Ratings, and MSCI.