Investors continued to grapple with sticky inflation, tightening central bank policy, high oil prices and geopolitical tensions throughout April. Here’s a summary of the notable events that steered the markets.
COVID-19 and market developments
- U.S., Canadian and global equities swung back and forth on market volatility, one moment bullishly coping and the next turning bearish, resulting in overall not going anywhere for the month.
- Tech stocks dominated headlines. Tesla posted record earnings but shares slid after Musk’s takeover of Twitter. All the big tech names sold-off after disappointing Q1 results. Shopify fell as well.
- In bond markets, U.S. and Canadian yields rose on expectations of more, larger rate hikes. The yield curve remained flat, reflecting tighter Fed policy and forecasts for slower economic growth.
- The price of oil dipped from its recent high last month of US$110 a barrel, but still hovered around the US$105 mark. As s result the loonie, considered a petro dollar, weakened against the greenback.
- The U.S. temporarily dropped its COVID-19 mask rules for travellers with several major airlines announcing masking was now optional. Canada opted to keep its federal travel mask mandate.
- The Canadian government released its 2022 annual budget which included increased military spending, home affordability measures, green initiatives and a tax hike on large banks and insurers.
- Pro-EU centrist Macron won a second term as French president, the first French leader to be reelected in 20 years, beating right wing challenger Le Pen, which was welcomed by European markets.
- U.S. inflation climbed again, to 8.5%, another 40 year-high, as energy, food and housing costs continued rising due to lingering pandemic effects, compounded by the Russia-Ukraine conflict. To help get inflation under control, Fed chair Powell indicated the Fed was ready to hike rates by 0.50%, double the typical 25 basis points, at its next meeting in early May. That meeting is also likely to provide clarity on when the Fed will begin shrinking its balance sheet by reducing bond holdings.
- In Canada, inflation surged to 6.7%, a new 30-year high, mainly off the back of gasoline and food prices. According to Statistics Canada, inflation would’ve fallen to 5.5% if gasoline was excluded from calculations. The Bank of Canada was the first G7 central bank to raise rates by 50 basis points, from 0.50% to 1%, its largest increase in two decades, and is considering another 0.5% hike for June.
How does this affect my investments?
It has been a bumpy ride so far this year but the global economy and markets are capable of coping. The Russia-Ukraine conflict is concerning and continues to affect investor sentiment in the short-term. More rate hikes are coming to combat inflation, which will likely stay high in Q2, but should cool later in the year as the effects of the pandemic fade. After the record-breaking returns of 2021 it’s inevitable the pace of growth will slow in 2022. Household savings, consumer demand and wage growth remain healthy.
Regardless of where we are in the market cycle, it’s important to take a disciplined approach to investing and stay focused on your long-term financial goals. This strategy helps you keep your emotions out of investing, typically buying high and selling low as many investors do. Ongoing monitoring and reviewing of your portfolio also ensure it remains on track.
We are here to support you in achieving your financial goals. Please do not hesitate to contact us.
The information in this letter is derived from various sources, including CI Global Asset Management, CI Financial, Globe and Mail, Daily Mail, Toronto Sun, National Post, Wall Street Journal, Bloomberg, Reuters, TNC News and Statistics Canada at various dates. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources and reasonable steps have been taken to ensure their accuracy. Market conditions may change which may impact the information contained in this document. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances.
Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.