With the first half of 2021 behind us, here is a market update with current global status and sentiments.
Global equity markets ended the first half of the year continuing the strong recovery that began in the back half of 2020. There is no doubt that we are in a better place today vs 12 months, 6 or even 3 months ago. However, there will be continued volatility and sentiment-driven swings are to be expected as we deal with such a global encompassing event as C-19. Manufacturing, Jobs reports, GDP are but a few of the positive indicators that investors have been feeding from that have propelled the S&P 500 Index, Dow Jones Industrial Average, TSX and NASDAQ Composite Index climb to new records to end the first half of 2021. One of the main reasons that your portfolio has performed so well throughout the events of these past 16 months is the ability to be opportunistic and tactical. For example, the bond market was generally very favourable 12 months ago. Today with long-term rates having increased over 300% since then, the environment for bonds has changed…dramatically. Having a portfolio that can react, forecast and use these types of changes as opportunity and as a platform to be tactical is what separates us from the general markets. Below are market highlights from recent months that will continue to lead us into the back half of 2021.
Canada: Canadian GDP falls for the first time in a year.
Canadian gross domestic product shrank 0.3% in April but was ahead of the 0.8% decline expected by economists, according to Statistics Canada.
Ongoing lockdown restrictions, with the closure of non-essential businesses, and a sharp drop in retail trade contributed to the decline.
This was the first drop in GDP since April 2020.
Another strong month of expansion.
Canadian manufacturing activity expanded in June, but at a slightly slower pace than May, according to IHS Markit.
Robust orders, both domestic and abroad, along with an improving job market, has a positive effect on the manufacturing sector. Rising input prices, however, continue to challenge the sector.
The manufacturing sector has benefitted from improving domestic and global demand, making it a key pillar of Canada’s economic recovery.
U.S.A: Positive U.S. jobs data.
The U.S. economy added 850,000 jobs in June, exceeding the 720,000 jobs expected by economists.
Despite the gain, the unemployment rate did tick higher to 5.9% from 5.8%.
Meanwhile, ADP’s latest National Employment Report showed that U.S. private businesses added 692,000 jobs in May, primarily in the service sector, particularly leisure and hospitality.
U.S. initial jobless claims dropped to 364,000 for the week ended June 26, the lowest number since the beginning of the pandemic.
The labour market continues to show improvement, which should contribute to the overall health of the U.S. economy.
Europe: European business optimism soars.
Amid widespread reopenings, particularly within the service sector, European Commission Economic Sentiment Indicator rose to 117.9 in June to its highest level since 2000.
Sentiment among manufacturers was at its highest level ever recorded, while service sector optimism reached a multi-year high.
Consumer sentiment also ticked higher in June, driven by higher expectations for the job market.
In summary: “The Song Remains the Same” (only my fellow Zep fans will catch that one) if we have investments that can navigate the economic environment by using leading indicators to be proactive, forecast and thereby implement tactical strategies.
Our portfolios can then be in a position to draw opportunity in any environment. We are here for you. Please reach out with any questions. We are always happy to help! Best regards, Roger Banks, RRC Banks Financial.