Summer is here, and it couldn’t have come soon enough! After what was initially perceived by many as an underwhelming vaccine rollout, Canada has surged into the lead globally with regards to vaccinating its population against COVID19, and with that much of Canada finally entered their long-awaited re-opening phases! Hooray!
With more economies re-opening, stock markets have begun shifting priorities. In Q2 there was a large dispersion amongst equity sectors with cyclical sectors such as financials and energy stocks racing much higher, while growth sectors of healthcare (biotech) and technology were flat. Overall, Global stock markets continued to move higher in Q2 with the S&P 500 (CAD) rising 6.42%, and the main Canadian Index, the TSX
Composite, having a strong quarter, increasing 7.91%, primarily off big gains in energy companies.
The Canadian dollar (CAD) appreciated during the quarter peaking in May at $0.83 before falling quickly back to $0.81 and closing at $0.81 for again of 1.42%. The Loonie continues to move higher in conjunction with oil, and should the price of oil continue to rise, we would expect the CAD to follow suit.
Bonds reversed some of the losses they suffered in Q1, with the Canadian Universe Bond Index rising 1.05% for the quarter, but still down 4.86% for the first half of 2021.
Inflation has become the number one concern for most Canadians, as prices continue to rise while many goods face pent-up demand and order backlogs. We believe that the current level of inflation is “transitory”, however it may take several months yet for economies to normalize and provide a true glimpse of where inflation will stand. Both the US Federal Reserve and the Bank of Canada have stiffened their language regarding inflation, but both have yet to enact any policy change to combat it, even signaling that interest will remain on hold well into 2022. We continue to minimize our bond holdings and replace them with our private investment pools, which benefit from inflation and are uncorrelated to public stocks. The result is a less volatile portfolio with better downside protection than portfolios with traditional fixed income.
From all of us at Gilman Deters Private Wealth, we hope you have a wonderful summer. You’ve earned it!
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