August 22, 2022

After high levels of volatility for most of the first half of the year, a shift in expectations that peaking inflation and slowing growth could push the Federal Reserve to slow the pace of its rate hikes bolstered equities throughout July. The NASDAQ and the S&P 500 Index registered their best monthly performance figures since July and November of 2020, respectively. Better-than-expected earnings from tech giants such as Microsoft, Google and Amazon also acted as a catalyst for higher stock prices. In other news, U.S. GDP fell at an annualized rate of 0.9% in Q2, following a 1.6% decline in Q1. Two straight negative GDP prints met the unofficial definition of a recession, yet key policy makers, including President Joe Biden and Fed Chairman Jerome Powell, argued that the U.S. is not in a recession. Canada’s benchmark S&P/TSX Composite Index jumped 4.4%, with eight of the 11 underlying sectors producing gains during the month. The industrials and information technology sectors led the way, with respective gains of 10.4% and 10.0%. Health care was the main detractor for the period, with a loss of 8.6%. Small-cap stocks, as measured by the S&P/TSX Small Cap Index, jumped 7.6% for the month. The U.S. dollar depreciated by 0.6% versus the loonie during the month, dampening the returns of foreign markets from a Canadian investor’s standpoint. Note that all returns in this paragraph are in CAD terms. U.S.-based stocks, as measured by the S&P 500, climbed 8.6% in July, while the NASDAQ rose 11.8%. All of the S&P 500’s underlying sectors were in the black. Leading the way were the consumer discretionary and information technology sectors, with respective gains of 18.3% and 13.0%. International stocks, as measured by the MSCI EAFE Index, gained 4.4% in the period, while emerging markets faced losses of 1.2%.The investment grade fixed income indices we follow were higher in July. Canadian investment grade bonds, as measured by the FTSE Canada Universe Bond Index, climbed 3.9% during the month. The key global investment grade and global high-yield bond benchmarks were up 2.1%and 6.6%, respectively, during the same period. Turning to commodities, the price of a barrel of crude oil retreated 6.8% during the month, while natural gas prices surged 51.7%. Copper, silver and gold had a negative month, with respective losses of 3.8%, 0.4% and 2.5%.

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