We wish you and your loved ones a very Happy Canada Day. We hope that you and your family are enjoying the beginning of your summer as Ontario continues to loosen public health restrictions. As of this writing the COVID-19 Tracker Canada data states that ~67.16% of Canadian Population has received at least one dose and ~27.71% of Canadian population are fully vaccinated. The data from Centres for Disease Control and Protection indicates that in the US ~54.10 % of the total population has received at least one dose and ~46.3% of the total population are fully vaccinated.
The month of June witnessed continued optimism in the stock markets and the fight-against-the-pandemic with continued progress towards a “return-to-normal”. However, on both fronts, some caution was palpable during the latter half of the month. The caution in stock markets was due to slightly hawkish tone adopted by the US Federal Reserve and the caution in the fight-against-the-pandemic grew as the spread of the highly contagious Delta variant continues. Nevertheless, the worldwide daily new infections have dropped from ~500k per day at the start of the month to ~320k per day as of this writing.
Below we mention a few noteworthy developments over the last month.
Macroeconomic and market developments:
In June, the S&P 500 index, and the S&P TSX both traded higher. This was led by the Information Technology sector on both sides of the border. The cyclical Financials and Materials Sectors took a breather after leading the advance year-to-date.
The economic data released by the Bureau of Labor Statistics in the US indicated continued recovery with inflation increasing from 4.2% in April to 5% in May and the unemployment rate dropping from 6.1% to 5.8%. The corresponding figures for Canada were inflation inching up from 3.4% in April to 3.6% in May and the unemployment rate rising from 8.1% in April to 8.2% in May as per Statistics Canada.
While the US Federal Reserve continued to maintain that most of the inflationary pressures are transitory, the FOMC (Federal Open Market Operations) meeting showed that the median participant of the committee now expects at least two interest rate hikes in 2023.
The news out of the Federal Reserve spooked investors for a brief period, however, their concerns were soon alleviated as Fed Chair Jerome Powell maintained that the Federal Reserve would stay data dependent and will require evidence that inflation is persistent before even considering interest rate hikes.
The US Federal Reserve Board also released results indicating that the large banks have strong capital levels. These results pave the way for the banks to increase their dividends or buyback stocks as restriction placed on them due to COVID-19 were also lifted.
How does this affect my investments?
The stock markets are inherently volatile and short-term market movements are impossible to predict. Historically, market declines have been followed by recoveries and new highs. By staying invested in a diversified portfolio, your portfolio will be well positioned to benefit from a recovery while mitigating the volatility experienced during the period.
If you have any questions about your investment portfolio, your advisor at O’Farrell Wealth and Estate Planning would be happy to discuss them with you.
O’Farrell Wealth and Estate Planning