A streak of volatile trading extended into June as investors focused on the highest inflation print in 40 years. Renewed recession jitters contributed to the continuing stock market sell-off, leading to the S&P 500’s first bear market since March 2020. Federal Reserve Chairman Jerome Powell stated at a Senate Committee meeting that a soft landing would be very challenging, while a recession is a possibility due to the central bank’s unconditional commitment to taming inflation. U.S. consumer confidence deteriorated to a 16-month low in June, raising concerns that consumers will curb spending in anticipation of persistently high prices. Amid the myriad of global crises facing markets, the S&P 500 ended the first half of 2022 lower by 20.6% for its worst start to a year since 1970.

Canada’s benchmark S&P/TSX Composite Index was 9.0% lower in June, resulting in a 13.8% decline for the benchmark in Q2. All 11 of the benchmark’s underlying sectors were negative during the quarter, led by health care and information technology, with losses of 49.8% and 30.8%, respectively. Small-cap stocks, as measured by the S&P/TSX Small Cap Index, slid by 21.2% for the quarter.

The U.S. dollar appreciated by 3.0% versus the loonie during the quarter, providing a boost to 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 Index, declined 6.7% in June, and finished the quarter lower by 13.8%. The benchmark’s quarterly loss was led by the consumer discretionary, telecommunication services, and information technology sectors, with respective declines of 24.0%, 18.4%, and 18.0%. International stocks, as measured by the MSCI EAFE Index, lost 12.7% during the quarter, while emerging markets lost 9.6% in Q2.

Canadian investment grade bonds, as measured by the FTSE Canada Universe Bond Index, declined by 5.7% during the quarter. The key global investment grade bond benchmark and global high-yield issues were down 8.3% and 10.5%, respectively, during the quarter.

Turning to commodities, the price of a barrel of crude oil gained 5.5% in the second quarter, while natural gas was 3.9% lower. Copper, silver and gold had a negative quarter, with respective losses of 21.8%, 19.3% and 7.3%.

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