Following strong gains in January, stocks closed lower in February. Here's what you need to know:
Article provided by iA Clarington.
Inflation
The market had priced in rate cuts in the second half of the year, but those expectations have largely vanished, with the market now assuming that the Federal Reserve will keep rates higher for longer.
This was due to a slower decline in inflation than anticipated as well as hot jobs print
Inflation in Canada slowed to 5.9% year-over-year in January, with prices for cellular services and passenger vehicles contributing to the deceleration
The Canadian economy added 150,000 jobs in January, as the nation’s unemployment rate held steady at 5.0%
Bank of Canada signaled it would be taking a conditional pause on any further hikes to let the impact of its aggressive hiking cycle sink in.
U.S. unemployment rate improved to 3.4%
The consumer price index increased 6.4% year-over-year in January
The Fed kicked off February with a 0.25% rate hike, pushing the policy rate to a range of 4.50% to 4.75%. The Fed indicated that policy intervention was starting to work on curbing inflation, but that rates may peak at a higher level
Performance
Canada’s benchmark S&P/TSX Composite Index was 2.6% lower in February
Eight of the benchmark’s underlying sectors were negative during the month. The decline was led by materials, energy and information technology, with losses of 8.8%, 4.8% and 4.7%
Small-cap stocks, as measured by the S&P/TSX SmallCap Index, fell 3.8% for the month
U.S.-based stocks, as measured by the S&P 500 Index, fell 0.5% in February
Energy, utilities and real estate had the steepest declines during the month, with respective losses of 5.6%, 4.3% and 4.0%. Information technology and industrials were the only sectors in the green during February, rising 2.5% and 1.0%
International stocks, as measured by the FTSE Developed ex US Index, fell 0.6% during the month, while emerging markets dropped 4.5%
Fixed Income
The investment grade fixed income indices we follow were down in February
Canadian investment grade bonds, as measured by the FTSE
Canada Universe Bond Index, decreased by 2.0% during the month, while the key global investment grade bond benchmark fell 3.3%
Global high-yield issues lost 1.5%. The losses came on the back of higher yields as investors increased bets on the Fed keeping rates higher for longer
Commodities
Price of natural gas rose 2.3% during the month, while crude oil shed 2.3%
Copper, silver, and gold were all in the red, with respective losses of 3.0%, 12.1% and 4.8%.
This document was prepared by the Investment Products & Platforms Team. The opinions expressed in this document do not necessarily reflect the opinions of iA Private Wealth Inc. Although the information contained in this document comes from sources, we believe to be reliable, we cannot guarantee its accuracy or completeness. The opinions expressed herein are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Nothing contained herein constitutes an offer or solicitation to buy or sell any of the securities mentioned. Specific securities discussed are for illustrative purposes only. The information contained herein does not apply to all types of investors. The information provided herein does not constitute financial, tax or legal advice. Always consult with a qualified advisor prior to making any investment decisions.
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