Financial Digest

Stock markets

After outperforming other equity markets, emerging economies ended the quarter with a slightly negative return. In the United States, stock markets continued to rise. Fueled by corporate profits, European equity markets strengthened, after a slight pullback in August. In Canada, after a poor performance almost entirely attributable to the energy sector, the S&P/TSX Index rebounded 400 points, driven by higher prices for oil and energy stocks, as well as bank issues.

Global growth

For the first half of the year, global growth was 3.5%, the best performance since 2014. The key drivers of this growth were consumer demand and foreign trade. In the United States, gross domestic product (GDP) reached 3.0%, despite the uncertainty as to whether the current administration will be able to implement its agenda. The repercussions of the weather catastrophes that hit some American states are already being felt in the economy, although in the medium term, we can expect an increase in demand for consumer goods.

Policy rate

The Fed intends to raise its benchmark rate in December, but subsequent hikes will depend on the economic fundamentals and inflation. The Bank of Canada raised its policy rate to 1% in September. This second rate hike in the space of a few months signaled the imminent end of the emergency measures implemented in 2015. Except for Japan, most of the G7 central banks will no longer continue such accommodative monetary policies.

Geopolitical tensions

Internationally, tensions with North Korea are still present, and although their impact is felt more directly in the United States, China and Japan, it is raising concerns worldwide. In Germany, Angela Merkel was re-elected for a fourth term. However, she leads a minority government and an extreme right political movement now has seats in the Bundestag. The NAFTA renegotiations may have negative consequences for Canadian exporters.

How are we managing our Private Portfolio Management and Private Security Management approaches?

• We are maintaining a slight overweight position in equities, considering attractive corporate revenue and earnings growth and the slight risk of recession.
• We are reducing our Canadian equity weighting by 5% and increasing our exposure to emerging markets, which are enjoying stronger economic and earnings growth.
• Bond yields remain low.

If you have any questions concerning market conditions or their impact on your portfolio, contact your advisor and ask him all your questions!