After a solid start to the month, equity markets turned volatile to close out November as the new omicron variant ignited worries over potential renewed lockdown restrictions around the globe. Major equity indices hit record highs in the first half of the month, fueled by corporate earnings that turned out to be much stronger than anticipated. Stocks were given an extra boost after the U.S. Congress approved an infrastructure spending package early in the period. Investor sentiment turned sour after the U.S. Thanksgiving holiday as news of the new COVID-19 strain spread, causing stocks to tumble.
Canada’s benchmark S&P/TSX Composite Index finished 1.8% lower in November, with six of the 11 underlying sectors showing losses during the month. The health care, energy and real estate sectors were the main detractors for the period, with respective declines of 7.9%, 5.7% and 3.8%. Information technology and materials were the lone sectors producing gains over 1%. Small-cap stocks, as measured by the S&P/TSX Small Cap Index, retreated 3.7% for the month.
The loonie was 3.1% lower versus the greenback during the month, providing a boost to returns of foreign markets from a Canadian investor’s standpoint (note that all returns in this paragraph are in Canadian-dollar terms). U.S.-based stocks, as measured by the S&P 500 Index, climbed 2.5% in November (the benchmark fell 0.8% in U.S.-dollar terms). The top-performing sectors for the period were information technology, consumer discretionary and materials, with respective gains of 7.8%, 5.4% and 2.7%. The financials and energy sectors were the main detractors, each down 2.6% during the month. International stocks, as measured by the MSCI EAFE Index, declined 1.5% in the period, while emerging markets faced losses of 0.9%.Turning to fixed income, Canadian investment grade bonds, as measured by the FTSE Canada Universe Bond Index, gained 0.9% during the month, while the key global investment grade bond benchmark fell by 0.3%. Global high-yield issues decreased 1.1%.Crude oil prices took a major dip over concerns that the omicron variant could curtail demand, falling 20.8% for the month. Natural gas prices retreated 15.8%. The price of gold and silver decreased 0.6% and 4.9%, respectively, during the period.
In Canadian economic news, the consumer price index accelerated to 4.7% year-over-year in October, the highest reading since 2003. Canadian GDP rose 5.4% in the third quarter, rebounding from the Q2 contraction. Canadian employment increased by 31,200 in October, as the nation’s unemployment rate fell to 6.7%.U.S. nonfarm payrolls increased by 531,000 in October, as the unemployment rate fell to 4.6%. The consumer price index increased 6.2% year-over-year in October. The Federal Reserve kept benchmark interest rates anchored near zero at its November meeting. Fed Chair Jerome Powell said the U.S. central bank would start to reduce its bond purchases, scaling back by US$15 billion a month starting in November. Powell stressed that the tapering does not mean policy makers will hike rates any time soon.
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