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Advisors - June 2, 2021

Monthly Canada Market Wrap: May 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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May was a positive month for The True North’s fight against COVID-19, as cases per day started trending downward once again. This is due in part to accelerating vaccination efforts, as Canada is now nearly in line with the global full vaccination rate of 5.5%. Though much lower than other countries’s rates, such as the US’s 40% and the UK’s 37.6%, nearly 3 in every 5 Canadians have received at least one dose, setting the stage for an expedited second and final round of jabs.

Canada and World Coronavirus Cases per Day and Vaccination Rates 2021 YTD (12/31/2020 to 5/31/2021)

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Canada reached another major COVID-19 milestone in May, but one that doesn’t directly involve cases or vaccines. The Montreal Canadiens and Toronto Maple Leafs welcomed fans back to watch their beloved hockey teams battle against each other in the Stanley Cup Playoffs. With 2,500 and 550 fans in respective attendance, this marks the first time fans were allowed to gather in a Canadian sporting venue since March 2020. Reports have also suggested that the US/Canada border could reopen after June 22nd — when the latest 30-day stopgap closure is set to expire — as government-stated goals for cases per day and vaccination rates are within sight.

The second quarter of 2021 is in full swing, with summer on the horizon and these key developments having occurred in May:

Off the YCharts! Inflating Inflation

Major Index Returns: Canada, Ex-US Outperform

Sector Movement: 5 out of 7 Winners in May

Hot Stocks of the Month: It’s Golden Hour

Laggards & Losers: Cannabis Burns Out…Again

Economic Data: Manufacturing, Unemployment Retrace

Off the YCharts! Crypto: Inflating Inflation

“To the moon” has been the popular battlecry as of late, referring to runaway growth in meme stocks and cryptos. Unfortunately for consumers, prices on many goods are also “mooning”. The Canada Inflation Rate has soared to levels not seen over the last decade, as have consumer indexes such as Core Consumer Price and New Housing Price.

10-Year Look at Canada Inflation Rate, Canada Core Consumer Price Index, Canada New Housing Price Index, Canadian Dollar CAD to US Dollar USD Exchange Rate from 5/31/2011 to 5/21/2021

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One silver lining in the economic picture is the Loonie’s continued strength, most notably against the USD. Though US inflation is doing its own damage to price tags on American goods, Canadians will enjoy more purchasing power in the US when that border does reopen.

Major Index Returns: Canada, Ex-US Outperform

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

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The S&P/TSX 60 led US and Canadian markets in May, up 3.8%. On Wall Street, the S&P 500 rose 0.7%, while the NASDAQ shed 1.4%. Though US markets ended their May on the 28th in observance of Memorial Day, international exchanges including the TSX were business as usual — Developed Markets gained 3.4% in May, while Emerging Markets used the extra day to finish the month up 2.3%. The Global Aggregate Bond Index added almost 1%.

Sector Movement: 5 out of 7 Winners in May

&P/TSX Capped ETF Sector Movement, May 2021

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Energy led all TSX sectors in May by far and away (that rhymes!), rising 10%. Materials also had another month of strong performance, tacking on 8%. Consumer Staples and Financials were neck-and-neck for third place among sectors, finishing up 4.6% and 4.4%, respectively. Two sectors finished slightly in the red: Utilities, lower for the second straight month, fell 0.5%, and Info Tech dropped 1.3%.

Hot Stocks of the Month: It’s Golden Hour

Top ten TSX stocks for May 2021

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May was nothing short of a golden month for gold companies Kirkland Lake Gold (KL.TO), Kinross Gold (K.TO), Wheaton Precious Metals (WPM.TO), and Agnico Eagle Mines (AEM.TO), as investors scooped up exposure to the precious metal in the wake of rising inflation. Shares of SNC-Lavalin Group (SNC.TO), Imperial Oil (IMO.TO), and Canadian Natural Resources (CNQ.TO) were all also higher in May as inflation along with economic activity, including auto travel, picked back up.

Cameco (CCO.TO), Teck Resources (TECK.B.TO), and CIBC Bank (CM.TO) also made the cut for May’s ten best performers.

Laggards & Losers: Cannabis Burns Out…Again

Worst performing TSX stocks, April 2021

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Let’s give a warm welcome (back) to Canopy Growth Corp (WEED.TO), who was the worst performer for the second straight month as investors further punished the company’s inability to tighten operations and turn a profit. Fellow drug manufacturer Bausch Health Companies (BHC.TO) found itself down as much as 16.1% in May, due to disappointing revenue and EPS results, but managed to crawl back to a 3.6% loss on the Month amid a positive market backdrop.

Dollarama (DOL.TO), Algonquin Power & Utilities (AQN.TO), Manulife Financial (MFC.TO), Constellation Software (CSU.TO), Enbridge (ENB.TO), CCL Industries (CCL.B.TO), Sun Life Financial (SLF.TO), and Inter Pipeline (IPL.TO) round out May’s ten worst performers in what was a rather quiet month for the TSX in terms of negative news.

Financial Market & Advisor News

Highest Number of S&P 500 Companies Citing “Inflation” on Q1 Earnings Calls in Over 10 Years (FactSet)

New on YCharts: FINRA Reviewed Portfolio Reports (YCharts)

Bets against S&P 500 ETF jump to highest this year (InvestmentNews)

Housing boom helps prop up 5.6% annualized growth in Canada (BNN)

5 Things Advisors Should Know About Grayscale Bitcoin Trust (YCharts)

Euro Area Inflation Rate Hits 2% for First Time Since 2018 (Bloomberg)

Economic Data: Manufacturing, Unemployment Retrace

Unemployment: As lockdowns perpetuated, and even inter-provincial borders were slammed shut, April’s Canadian unemployment rate bounced up to 8.1%. 861,800 Canadian males were jobless in April, while 778,500 females found themselves out of work. Canada Part-time Employment fell to 3.36M, a loss of 77,000 part-time workers from March.

Housing: April Canada Housing Starts tapered off from March’s record gain to 20,635, a decline of 5%. The Canada New Housing Price Index jumped 1.9% in April.

Consumers: The Canada Consumer Price Index rose 0.57% in April, while the Canada Inflation Rate checked in at 3.4%, the highest level in exactly ten years.

Manufacturing: The Canada Ivey PMI retreated to 60.6 in April, down 12.3 points from March’s reading, bringing the index essentially back to February’s level.


Have a great June! 📈

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