May 1, 2021

The momentum behind Q1’s robust equity market rally continued in April and helped push major stock benchmarks to record highs. A surplus of positive economic and corporate data fueled investor optimism throughout the month. This was somewhat offset by lingering inflation concerns and a growing tally of virus cases around the globe. By the end of the month, however, almost all major equity indices we follow were higher.

Canada’s benchmark S&P/TSX Composite Index ended April up 2.2%, with seven of the 11 underlying sectors producing gains during the month. The materials and consumer discretionary sectors led the way with respective gains of 5.5% and 5.1%. Energy and financial services stocks, which account for more than 40% of the benchmark, each climbed 2.4% in April. The healthcare sector saw the biggest drop for the period, falling 9.3%. Canadian small-cap stocks, as measured by the S&P/TSX Small Cap Index, gained 4.1% during the month.

The loonie was 2.2% higher versus the greenback in April, dampening returns in foreign equity 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, advanced 2.8% during the period. Leading the way for the U.S. stock market were the real estate, telecom services and consumer discretionary sectors, with gains of 5.7%, 5.2% and 4.6%, respectively. International stocks, as measured by the MSCI EAFE Index, added 0.4% in April, while emerging markets stocks were flat.

The investment grade fixed income indices we follow were higher in April, as long-term government bond yields steadied after surging in the months prior. Canadian investment grade bonds, as measured by the FTSE Canada Universe Bond Index, rose 0.1% during the month, while the key global investment grade bond benchmark increased by 1.3%. Global high-yield issues advanced 1.0%.Commodities rebounded in April after posting negative returns in March. The price of crude oil climbed 7.5% during the month, while natural gas jumped 12.4%. Gold and silver prices were up 3.1% and 5.4%, respectively.

Canadian GDP expanded 0.4% month-over-month in February. Inflation in Canada picked up in March, as Canadian consumer prices rose 2.2% year-over-year. Canadian employment increased by 303,100 in March, as the nation’s unemployment rate fell to 7.5%. The Bank of Canada held its policy rate at 0.25% at its April meeting and signaled that it may raise rates as early as the second half of 2022.U.S. GDP expanded at a 6.4% annualized rate in the first quarter. U.S. nonfarm payrolls increased by 916,000 in March, as the unemployment rate fell to 6%. The consumer price index rose 0.6% month-over-month in March, as the annual inflation figure surged to 2.6%. At its April meeting, the Federal Reserve kept its policy rate near zero as Fed Chair Jerome Powell reaffirmed the central bank’s aggressive support amid a need for further progress in employment and inflation.

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