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Monthly Canada Market Wrap: July 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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With Canada closing in on a 60% full vaccination rate against COVID-19, there has been a slow return to regularly scheduled life while others remain cautious. As both daily cases in Canada and deaths per day flutter at levels as low since the start of the pandemic, Canada has come around to slowly reopening its borders, with fully vaccinated Americans allowed in starting next week followed by much of the world after Labour Day. 

Though a recent surge in the “delta variant” has some countries worried—Canadian health experts are continually warning against reopenings—Saskatchewan has lifted all restrictions, with Alberta planning to do the same by August 16th. The ratio of coronavirus deaths per day to cases per day is similarly declining, signaling the vaccine is achieving its goal of reducing the severity of COVID-19 cases and preventing deaths.

Canada coronavirus and cases per day through July 2021

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Also in July, after a year of fans waiting and athletes aging, we finally get to see the world’s best compete in Tokyo for the summer Olympics. In other sporting news, the Rogers Centre welcomed back the Toronto Blue Jays in July for the baseball club’s first home game in 670 days, giving fans the chance to soak up summer while cheering on Canada’s team.

As everyone tries to enjoy what’s left of summer 2k21, we’ll take a few moments to look at these key developments from July:

Off the YCharts! The Power of Dividends

Major Index Returns: Emerging Markets Fade

Sector Movement: 6 of 7 Positive, Energy Craters

Hot Stocks of the Month: Gold, Grocery Go Up

Laggards & Losers: Energy Runs Out of Gas

Economic Data: Housing Starts Hit 34-Year High


Off the YCharts! The Power of Dividends

If you had put $10,000 into the TSX Composite Index 30 years ago, that investment would be up nearly 5x. Including dividends, that same $10,000 would more than double the return, to 11x. It goes to show that even after three decades—which included a fair share of corrections, bubbles, and crises along the way—it has paid to stay invested and to reinvest those dividends!

30-year view of TSX Composite Total Return with Dividends from July 1991 through July 2021

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Major Index Returns: Emerging Markets Fade

TSX Composite 60, S&P 500 Major Index Returns for July 2021

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Both the S&P/TSX 60 and International Developed Markets finished July up 0.8%, with July’s largest index winner being the S&P 500, rising 2.4% in July thanks to Q2 earnings that beat out expectations for most constituents. The Global Aggregate Bond Index rose 1.3%, but the big story in July was MSCI’s EM index tumbling 6.7%, largely due to the major Chinese stock sell-off, which wiped out the index’s 2021 gains. MSCI’s China index fell 14.2% in July alone, and its Emerging Markets index is 37.5% weighted in China.


Sector Movement: 6 of 7 Positive, Energy Craters

S&P/TSX Capped ETF Sector Movement, July 2021

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After jumping 9% in June, Energy finished July down 11.4% and having sunk as much as 13.7% midway through the month as a result of weak oil prices. Conversely, Consumer Staples was flat last month and led all sectors in July with a 6.4% gain. REITs came in second at 4.5%, while Info Tech, Materials, and Utilities all rose in the mid-2% range.


Hot Stocks of the Month: Gold, Grocery Go Higher

Top ten performing TSX stocks for July 2021

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After owning our Laggards & Losers list in June, gold companies Kirkland Lake Gold (KL.TO), Franco-Nevada (FNV.TO), and Agnico Eagle Mines (AEM.TO) led the TSX in July as the price of gold rose 3.8% in CAD last month. Grocers Loblaw Companies (L.TO), Alimentation Couche-Tard (ATD.B.TO), George Weston (WN.TO), and Metro (MRU.TO) also outperformed in July thanks to a mixture of record Q2 earnings—Loblaw’s and George Weston’s quarterly EPS both nearly doubled YoY—and positive investor day presentations.

Algonquin Power & Utilities (AQN.TO), Thomson Reuters (TRI.TO), and Canadian Apartment Properties REIT (CAR.UN.TO) finish the list for July’s ten best performers.


Laggards & Losers: Energy Runs Out of Gas

Worst performing TSX stocks, July 2021

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Tumbling oil prices caused shares of Suncor Energy (SU.TO), Cenovus Energy (CVE.TO), Imperial Oil (IMO.TO), and Canadian Natural Resources (CNQ.TO) to drop significantly in July. Canopy Growth (WEED.TO) not only found itself back on the Laggards & Losers list, but is also once again the worst TSX performer on news of weak demand and a price target cut by Piper Sandler to $24 USD per share.

Magna International (MG.TO), Cameco (CCO.TO), First Quantum Minerals (FM.TO), Gildan Activewear (GIL.TO), and The Toronto-Dominion Bank (TD.TO) round out July’s ten worst performers.


Featured Market & Advisor News

S&P 500 Is Reporting Second Highest Net Profit Margin Since 2008 for Q2 (FactSet)

What’s the Optimal Rebalancing Strategy? (YCharts)

Alternative investment sales skyrocket in 2021 (InvestmentNews)

Foreign investors gobble up Canadian government debt: StatsCan (Advisor’s Edge)

2008 vs. 2020: What Happens When the Federal Funds Rate is 0% (YCharts)

Canada’s economy rebounds, on track for 2.5% annualized growth (FA-Mag)


Economic Data: Housing Starts Hit 34-Year High

Unemployment: June’s Canadian unemployment rate fell 0.4% MoM to 7.8%, the second-lowest level since March 2020. The Canada Ivey Employment index clocked in at 69.60, its highest reading on record. Canada Part-time Employment spiked to 3.57M in June, a net gain of 264,000 part-time workers from May and just shy of pre-pandemic levels.

Housing: Canada Housing Starts surged to 23,573 in June, a level not seen since May of 1987 and a MoM increase of 6.7%. Interestingly, the Canada New Housing Price Index rose just 0.6% in June as the Canadian housing market remains hot, but that’s its lowest monthly change since January of this year.

Consumers: The Canada Consumer Price Index inched up 0.14% in June, while the Canada Inflation Rate checked in at 3.06%, 0.54% lower than last month’s ten-year high.

Manufacturing: The Canada Ivey PMI continued its rebound, jumping 7.2 points in June to 71.90, a test of highs last seen in March 2021 and April 2018.

 

Have a great August! 📈

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