Advisors - September 2, 2021
Monthly Canada Market Wrap: August 2021
Welcome back to the Canadian Monthly Market Wrap from YCharts! Here, we break down the most important market trends for Canada-based advisors and their clients every month. As always, feel free to download and share any visuals with clients and colleagues, or on social media.
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For Canadians who have heard about spiking inflation in the US, you’ve probably witnessed the trend permeate into Canada as well. Inflation in Canada is hitting levels not seen in a decade—though typically the rate is less volatile than its southern counterpart. Canadian inflation has historically been heavily tied to the US. If COVID-19 has taught us anything, it’s that other things like inflation can also spread quickly, and no one is immune.
Also in August, Prime Minister Justin Trudeau called for a snap election that will take place September 20th. The leader of the Liberal party formally dissolved Parliament two years earlier than scheduled in an effort to gain a 170-seat majority in the House of Commons, effectively allowing the ruling party to pass legislation without coalitions with minority parties—of which it is currently 15 seats shy. No doubt inflation, among other topics regarding economic recovery, will be hotly debated.
As the summer heat is blown away by the cool breeze of fall, we’ll take a few moments to soak up these key developments from August:
• Off the YCharts! Canada’s Summer of Shots
• Major Index Returns: EM Index Rallies
• Sector Movement: 5 of 7 Positive, Info Tech Surges
• Hot Stocks of the Month: Defensive Names Back on Top
• Laggards & Losers: Gold Fails to Glitter—Again
• Economic Data: Inflation Hits 18-Year High
Off the YCharts! Canada’s Summer of Shots
But despite high vaccination rates, cases per day are spiking across the world. In some countries like the US and Israel, daily cases have overtaken their “dark winter” levels, even as vaccines are now widely available. With several more contagious variants on the rise, namely delta and lambda, we’re reminded that we’re not yet out of the COVID-19 woods, and that the Greek alphabet is now being leveraged in ways beyond options trading.
Major Index Returns: EM Index Rallies
The S&P/TSX 60 added another 1.4% in July, while the S&P 500 index rose 3% as investors rotated from value back into growth stocks, namely US large and mega-cap names. International Developed Markets finished July up 1.8%, but the big performance came from the heavily China-weighted MSCI Emerging Markets index. Though it extended its July plummet into August, the index rallied strongly to finish up 2.7% thanks to major bounces in Chinese markets. The only major index loser was the Global Aggregate Bond Index, giving up 0.4% as investors continued in risk-on mode.
Sector Movement: 5 of 7 Positive, Info Tech Surges
Info Tech led the way by several kilometers in August, jumping 8.8%. This was a result of exploding growth in names like crypto-asset miner Hut 8 Mining (HUT.TO) and e-commerce provider Lightspeed Commerce (LSPD.TO), who surged 70.4% and 36.0% in the month, respectively. The two losing sectors were Energy and Materials, finishing lower as oil prices tumbled another 11% in August and cyclical data such as new housing starts tapered MoM.
Hot Stocks of the Month: Defensive Names Back on Top
Gildan Activewear (GIL.TO) led all TSX stocks in August as the company posted Q2 sales growth of 225%, enough to make the fitness apparel maker profitable again. Despite investors reallocating back into growth stocks, many also chose to get defensive, sending shares of Brookfield Infrastructure Partners (BIP.UN.TO) higher along with grocer staples Loblaw Companies (L.TO) and George Weston (WN.TO).
Thomson Reuters Corp (TRI.TO), Canadian National Railway (CNR.TO), Power Corporation of Canada (POW.TO), Constellation Software (CSU.TO), Open Text (OTEX.TO), and BCE (BCE.TO) also made the cut for August’s ten best performers.
Laggards & Losers: Gold Fails to Glitter—Again
After owning the Laggards & Losers list in June, gold companies have found themselves on it once again, despite July appearances on our Hot Stocks list. Agnico Eagle Mines (AEM.TO), Franco-Nevada (FNV.TO), Kinross Gold (K.TO), Barrick Gold (ABX.TO), and Kirkland Lake Gold (KL.TO) were all lower in August as the price of gold failed to rise for another month. Many have deemed this situation peculiar given gold’s typical outperformance in inflationary environments. Canopy Growth (WEED.TO) fell 8.1% in August after missing YoY revenue growth estimates and the need for “clearing many hurdles” to meet its EBITDA target, according to one analyst note.
Featured Market & Advisor News
Wall Street Is the Most Bullish on Stocks in Almost Two Decades (WealthManagement.com)
Economic Data: Inflation Hits 18-Year High
Unemployment: July’s Canadian unemployment rate fell 30 bps MoM to 7.5%, tied with March 2021 for the lowest level since the pandemic began. The Canada Ivey Employment index clocked in at 62.1, a drop of 7.5 points from June. Canada Part-time Employment ticked up to 3.58M in July, a net gain of 110,000 part-time workers from June putting it now in line with pre-pandemic levels.
Housing: In July, Canada Housing Starts tapered from its record June where May of 1987 levels were reached, decreasing 7.9%. Housing prices continued cooling for the fourth straight month as the Canada New Housing Price Index rose just 0.4% in July.
Manufacturing: The Canada Ivey PMI fell significantly in July, down 15.5 points to 56.4, its lowest reading since January of this year.
Have a great September! 📈
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