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Wealth Market Update - August 2021

Dear Client,

We hope you are enjoying the last moments of summer. As restrictions continue to list and with students returning to school, it feels as though life is returning to “normal” in Canada. As per the COVID-19 Tracker data, ~73.05% of the population in Ontario has received at least one dose and ~67.1% of the population is fully vaccinated. Overall Canada's numbers are similar at ~73.06 of the total population having received at least one dose and ~66.36% being fully vaccinated. By contrast, the number for the US stands at ~61.6% of the total population with one dose and ~52.3% of the total population being fully vaccinated as per data from the Centre for Disease Control and Prevention (CDC).

Over the last one-month period, the 7-day average daily infection cases for Canada increased from ~692 per day to ~3k per day and the 7-day average daily infection cases for the US have increased from ~83k to ~135k per day, as of this writing. Despite increasing infection rates, Epidemiologists believe the latest wave will not be as worrisome as previous ones due to improving vaccination rates.

The investor skepticism around second-quarter earnings season, China’s crackdown on its technology companies, and the news flow on the spread of the contagious Delta variant of Covid -19 kept the stock markets volatile for most of the month. Investor enthusiasm returned towards the end of the month as the Feds continued with its moderate tone and corporate earnings fared better than expected.

Macroeconomic and market developments:

  • In August, the S&P 500 index and S&P TSX traded higher; led by the Information technology, the Financials, and the Communications sectors. The Energy sector lagged on both sides of the border while the decline in the Materials sector dragged the S&P TSX ensuring the S&P 500 index performed better than the S&P TSX for the month.

  • As per Bloomberg data (as of Aug 30th), for the second quarter of 2021, ~83% of the S&P 500 companies reported better-than-expected revenues and ~86% reported better-than-expected earnings. For TSX, ~65% of companies beat on revenues and ~60% of the companies beat on earnings.

  • The Chinese stocks listed in the US faced severe selling pressure after the country’s administration issued rules to prevent unfair online competition and indicated it will increase scrutiny across various industries to protect consumers.

  • The economic data released by the Bureau of Labor Statistics in the US indicated that inflation was flat at 5.4% in July while the unemployment rate dropped to 5.4% in July from 5.9% in June. The corresponding figures for Canada were inflation climbing from 3.7% in July to 3.1% in June and the unemployment rate declining from 7.8% in June to 7.5% in July as per Statistics Canada.

  • The US 10-yr government bond yields advanced by ~6.5 basis points since the start of the month, while the Canadian 10-yr bond yields declined by ~1.5 basis points.

  • The US Federal Reserve Chairman, Jerome Powell, said that the central bank could start reducing their monthly bond purchases this year, however, they would not be in a hurry to increase interest rates.

How does this affect my investments?

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