September was a down month for nearly all equity market indices we track, the first negative month after five consecutive positive months.

 

September 2020 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.

 

September was a down month for nearly all equity market indices we track, the first negative month after five consecutive positive months.

The S&P/TSX Composite was down -2.1% in September.  The S&P/TSX Small Cap Index was down -1.4%.  In the US, the large cap S&P500 was down -3.8% and remains up +5.6% for 2020.  The US’ main small cap index, the Russell 2000, was down -3.5% for the month.

EAFE (Europe, Australasia & Far East) stocks were down -1.3% in September, and remain down -11.2% for 2020.  European and British stocks were down -1.0% and +1.6% for the month, respectively.  For 2020 British stocks are still down -22.1%!  Japanese stocks were one of the few bright spots, up +0.2% for September.  Emerging market stocks were down -1.8%.

Bonds were mixed in September.  The major Canadian bond index was up in September; the FTSE/TMX Universe Bond Index was up +0.3% and the FTSE/TMX Short-term Bond Index was up +0.2%.  Those indices are up +8.0% and +4.8% for 2020.  Emerging market bonds were up +0.6% for the month.

Oil was down -5.6% in September, but remains down -34.1% for 2020.  Gold, which has seen a resurgence in interest lately, lost -4.2% for the month but remains up +24.5% for 2020.  The diversified Bloomberg Commodities Index was down -3.4% for the month and remains down -12.4% for the year.

The Canadian Dollar (CAD) lost -2.3% against the US Dollar in September and -0.4% against the Euro.

 

September 2020 Economic Indicator Recap

Below are the readings received in July for 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 declined to 10.2% in August.  The economy added 248,500 jobs during the month, 208,500 of which were full time jobs and 40,000 were part time jobs. Most of the jobs came from the series sector (218,000).

Housing prices across Canada were up +0.6% in August. Victoria was the top performer at +2.3%, followed by Ottawa and Montreal at +2.2% and +1.9%, respectively.  None of the major Canadian housing markets were down for the month of August.

The level of new housing starts rose +6.9% in August to 262,400 units, the highest reading since September 2007.  The majority of the growth came from multifamily urban construction.  The value of building permits in August rose +1.7% to $8.1 billion. Residential construction in Ontario and Quebec accounted for most of the increase in activity.

The inflation rate for August was -0.1%, and +0.1% on an annual basis.  Core inflation which excludes more variable items such as gasoline, natural gas, fruit & vegetables and mortgage interest, was +0.8%.  The cost of transportation, recreation, reading and education declined, while housing, health & personal care rose.

Retail sales were up +0.6% in July; sales rose at car dealers, gas stations, and clothing stores, while sales declined at food & beverage stores, sporting goods stores and general merchandise stores.  Compared to a year ago retail sales were up +2.7%.

Canada’s GDP was up +3.0% in July, the third consecutive monthly gain, but economic activity remains 6% below pre-pandemic levels. Both goods and services sectors were positive as all 20 industrial sectors posted gains.

As expected, the Bank of Canada left its benchmark interest rate at +0.25% at the September 9 meeting.  The BoC continues to purchase at least 5 billion in Federal government securities (bonds) per week (aka quantitative easing).

 

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