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Advisors - August 2, 2022

Monthly Canada Market Wrap: July 2022

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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Canada Market Summary for July 2022

Canadian equities rebounded in July as smaller, rate-sensitive companies led the charge. The S&P/TSX 60 rose 3.9%, Canadian Large Caps added 4.6%, and Canadian Small Caps surged 8.8% higher. Around the world, the US-domiciled S&P 500 popped 9.2%, and global developed markets as measured by the MSCI EAFE index tacked on 5%.

Only Materials logged a negative July among all sectors. Info Tech’s 10% gain led all TSX sectors, while REITs came in second at 5.8%. Interestingly, Consumer Staples logged the third highest performance among sectors in a month where cyclically-sensitive companies tended to have the most standout performances.

Jump to Equity Performance

Canadian inflation surpassed 8% for the first time since January 1981. June’s inflation number came on the heels of May’s 7.73% print, which was the first to top 7% since March 1983. Nonetheless, the Canadian unemployment rate fell to another all-time low of 4.9%. Lastly, the surging Canadian housing market continued its hot streak as the Canada New Housing Price Index increased for the 30th consecutive month.

Jump to Economic Data

The Canadian treasury yield curve inverted in July and went on to end the month that way. As of month’s end, the 10-Year Benchmark Bond’s yield of 2.61% was higher only than those of the 1-Month Treasury Bill. The 6-Month Treasury Bill rate was also greater than yields on both the 2-Year, 3-Year, and 5-Year Benchmark Bonds. Short-term instruments benefited from the Bank of Canada’s 100 basis point hike in July, bringing its benchmark interest rate to 2.75%. Yields on both the 1-month and 3-month treasury bills ended July above 2% for the first time since March 2008.

Jump to Fixed Income Performance

 

Equity Performance

Major Indexes

Chart of TSX Composite 60 Index Returns for July 2022

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Canadian Sector Movement

Chart of Canadian Equity Sector Performance for July 2022

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Hot Stocks: Top 10 TSX 60 Performers of July 2022

Cameco (CCO.TO): 21.9% gain in July

Magna International (MG.TO): 15.7%

Constellation Software (CSU.TO): 14.0%

Alimentation Couche-Tard (ATD.TO): 13.9%

Saputo (SAP.TO): 12.7%

Canadian Pacific Railway (CP.TO): 12.3%

Canadian National Railway (CNR.TO): 12.0%

Brookfield Asset Management (BAM.A.TO): 11.0%

Shopify (SHOP.TO): 10.9%

FirstService (FSV.TO): 9.7%

Table of the best performing TSX stocks for July 2022

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Laggards & Losers: 10 Worst TSX 60 Performers of July 2022

Bausch Health Companies (BHC.TO): -45.2% decline in July

Barrick Gold (ABX.TO): -11.3%

Shaw Communications (SJR.B.TO): -8.7%

Agnico Eagle Mines (AEM.TO): -6.6%

Wheaton Precious Metals (WPM.TO): -5.3%

Rogers Communications (RCI.B.TO): -4.6%

Teck Resources (TECK.B.TO): -4.3%

First Quantum Minerals (FM.TO): -4.2%

Kinross Gold (K.TO): -4.1%

Suncor Energy (SU.TO): -3.8%

Table of the worst performing TSX stocks for July 2022

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Economic Data

Employment

The Canadian unemployment rate reached another all-time low of 4.9% in June, and the Canada Ivey Employment index remained unchanged at its second-highest level 67.9. As for temporary employment, a loss of 40,000 Canadian part-time workers was recorded in June.

Production and Sales

The Canada Ivey PMI dropped nearly 10 points in June to 62.2, continuing its up-and-down pattern in 2022. Canada Retail Sales rose a healthy 2.3% in May, though Canada Real GDP was flat in the same month.

Housing

Prices of new Canadian homes increased 0.16% in June. June 2022 marked the 30th consecutive month in which the Canada New Housing Price Index has risen, but at the smallest pace since June 2020.

Consumers and Inflation

Canadian Inflation clocked in at 8.13% in June, topping 8% for the first time since January 1983. June’s print also marks the twelfth consecutive increase to the inflation rate. Canada’s Consumer Price Index rose by 0.59% as well.

Gold

The price of gold was C$2,246.70 per ounce as of July 29th, a monthly decline of 4.1%. As a result, the iShares S&P/TSX Global Gold ETF (XGD.TO) dropped 9.0% in June and is now down 18.3% year to date.

Oil

The spot price of WTI crude was under $100 USD per barrel as of July 25th, while the price of Brent in USD declined 9.7% on the month. Retail Sales among Canadian Gasoline Stations reached an all-time high of C$7.754 billion in May, up 54.3% from a year ago.

Cryptocurrencies

The “crypto winter” of 2022 somewhat melted away in July as investors increased their risk appetite. Bitcoin’s price increased 17.6% in July to settle at $23,653 USD as of July 31st. Binance Coin shot 31% higher to $287.36 USD at month’s end. The biggest winner among major cryptocurrencies was Ethereum, whose 54.4% surge in July brought its price to just shy of $1,700 USD. Year to date, Binance Coin is 44.6% lower, Bitcoin is down 49.9%, and Ethereum is 54.3% in the red.

 

Featured Market & Advisor News

BoC governor expects inflation will remain ‘painfully high’ all year (BNN)

Highlights, Lowlights and Insights from 1H 2022 (YCharts)

Fund investors didn’t head for the exits despite market turmoil, report shows (Advisor’s Edge)

Harness Volatility & Create Opportunity (YCharts)

If U.S. recession is at hand, history suggests Canada won’t be far behind (Financial Post)

Economic Update — Reviewing Q2 2022 (YCharts)

 

Fixed Income Performance

Canadian Treasury Yield Curve

Canada 1 Month Treasury Bill Yield: 2.30%

Canada 3 Month Treasury Bill Yield: 2.65%

Canada 6 Month Treasury Bill Yield: 3.04%

Canada 1 Year Treasury Bill Yield: 3.15%

Canada 2 Year Benchmark Bond Yield: 2.92%

Canada 3 Year Benchmark Bond Yield: 2.85%

Canada 5 Year Benchmark Bond Yield: 2.65%

Canada 10 Year Benchmark Bond Yield: 2.61%

Chart of Canadian treasury yield curve as of July 31st 2022

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Global Bonds

Italy Long Term Bond Interest Rate: 3.35%

Canada 10 Year Benchmark Bond Yield: 2.61%

10 Year Treasury Rate: 2.67%

United Kingdom Long Term Bond Interest Rate: 1.86%

Spain Long Term Bond Interest Rate: 2.07%

10-Year Eurozone Central Government Bond Par Yield: 1.67%

Germany Long Term Bond Interest Rate: 0.89%

Japan 10 Year Government Bond Interest Rate: 0.18%

Chart of Canadian and Global bond yields as of July 31st 2022

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Have a great August! 📈

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