May 12, 2023

Canada’s main stock index climbed in April as higher oil prices benefited energy shares and new GDP data helped justify the Bank of Canada’s continued interest rate pause. U.S. stock indices rose as well after strong earnings updates from major companies. According to data source FactSet, more than half of S&P 500 companies have reported results so far, with roughly 80% reporting earnings above expectations. In its latest World Economic Outlook, the IMF warns the global economy is heading for its weakest medium-term growth in more than three decades.

Canada’s benchmark S&P/TSX Composite Index was 2.7% higher in April, as all 11 of the benchmark’s underlying sectors were positive during the month. Telecommunication services, health care, and energy led the way with 6.5%, 5.5%, and 4.6% returns, respectively. Small-cap stocks, as measured by the S&P/TSX SmallCap Index, fell 1.3% for the month.

The U.S. dollar appreciated by 0.3% versus the loonie during the month, providing a slight 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, rose 1.7%in April. The benchmark’s gain was led by telecommunication services, consumer staples, and energy, with respective returns of 3.8%, 3.7%, and 3.4%. Industrials and consumer discretionary were the only sectors in thered during April, falling 1.0% and 0.8%, respectively. International stocks, as measured by the FTSE Developed ex US Index, rose 2.6% during the month, while emerging markets dropped 1.0%.

The investment grade fixed income indices we follow were up in April. Canadian investment grade bonds, as measured by the FTSE Canada Universe Bond Index, increased by 1.0% during the month, while the key global investment grade bond benchmark eked out 0.4%. Global high-yield issues rose 0.9%.

Turning to commodities, the price of natural gas rose 8.8% during the month, while crude oil gained 1.5%. Silver and gold had a positive month, rising 3.5% and 1.5%, respectively, while copper declined 5.5%.

Inflation in Canada slowed to 4.3% year-over-year in March, with lower prices for fruits and vegetables driving the deceleration. The Canadian economy added 35,000 jobs in March, as the nation’s unemployment rate held steady at 5.0%. The Bank of Canada expects inflation to return to its two-percentage-point target by the end of 2024, but the central bank signalled interest rates may need to remain high until then.

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