While December 2018 was the worst December in 25 years, January was the best January in 25 years.   

 

January 2019 Market Performance

All index returns are total return (includes reinvestment of dividends) and are in Canadian Dollars unless noted.

 

*Absolute change in yield, not the return from holding the security.

 

While December was the worst December in 25 years for many markets, January was the exact opposite – the best January.

For the S&P/TSX Composite, January was the best month since May 2009 and the best January in more than 25 years.  Monthly returns of more than +7.5% are pretty rare, in the past 25 years they’ve occurred above 3% of the time.

January was similarly strong for the US markets, with the S&P500 up +7.9% and the Russell 2000 up +11.2%.

EAFE (Europe, Australasia & Far East) stocks were up +5.4% in January, its best month since October 2015.  European stocks specifically were up +5.5%, while British stocks were ‘only’ up +3.6%.

Emerging markets were also up strongly at +7.1%, but not a standout relative to its historical monthly perfomances.

Canadian bonds were also up in January.  The FTSE/TMX Universe Bond Index was up +1.3% in and the FTSE/TMX Short-term Bond index was up +0.7%.

Emerging market bonds were also up in January, although less strongly than most other bond markets were at +0.4%.  REITs performed strongly in January at +7.4%, their best month since January 2015.

Commodities, also recovered much of their December losses in January.  The Bloomberg Commodities Index gained +5.2%, oil gained +18.5% and gold rose a more modest +3.4%.

The Canadian Dollar (CAD) was up in January, gaining +3.7% against the US Dollar and +3.5% against the Euro.

 

January 2019 Economic Indicator Recap

Below are the current readings on the major economic indicators: central bank interest rates, inflation, GDP and unemployment.

Below are the current readings on a few other often followed economic indicators: retail sales and housing market metrics.

A Closer Look at the Canadian Economy

Canada’s unemployment rate remained steady at 5.6% in December with a net 9,300 new jobs added; 18,900 were full time jobs were lost and 28,300 part time jobs were added.

Housing prices across Canada were down -0.1% in January, the fifth consecutive month without a gain.  6 of 11 metropolitan markets were flat or down; Edmonton (-0.8%), Calgary (-0.5%), and Vancouver (-0.3%) were the worst decliners.  Quebec City was the largest gainer at +1.3%.

The level of new housing starts declined -4.9% in December to 213K, while the value of building permits rose +2.6% in November to $8.3 billion.

The inflation rate for December was -0.1%, and +2.0% on an annual basis.  Core inflation which excludes more variable items such as gasoline, natural gas, fruit & vegetables and mortgage interest was+1.7%.

Retail sales declined -0.9% in November; compared to a year ago retail sales were up +0.5.  The annual gain in November was the smallest gain since January 2015.  Sales declined at gas stations for the third month out of the last four. Sales were also down at car dealers and grocery stores. Meanwhile at cannabis stores sales were up +26.2%!

Canada’s GDP declined -0.1% in November, in line with expectations.  Small declines were posted at wholesalers, finance and insurance, manufacturing, construction, transportation, and retail stores.  13 of 20 industrial sectors posted gains.

As expected the Bank of Canada left its benchmark interest unchanged at 1.75% at its January 9th meeting.  Many analysts hade previously predicted that the Bank of Canada would raise interest rates twice in 2019 (0.25% each time), but many are now calling for no change to the benchmark rate in 2019 and some calling for a 0.25% cut.

 

*Sources: MSCI, FTSE, Morningstar Direct, Trading Economics