Market Update. Negative Trade News In May Followed By Positive U.S. Federal Reserve News In Early June
After rising for four straight months, Canadian, U.S. and international equity markets took a pause with a down month in May, as investor sentiment turned negative. Change in sentiment resulted from a lack of confidence in the U.S. and China trade deal materializing. That sentiment was proven valid later in the month as trade talks deteriorated.
Investor sentiment changed back to bullish with a strong rally in early June due to the U.S. Federal Reserve (the Fed). Federal Reserve Chairman Jerome Powell signalled that the Fed was willing to act appropriately to sustain the U.S. economy from any potential risks resulting from trade disputes between the U.S. and its largest trading partner, China.
- All WealthBar portfolios outperformed the broader market indices in May. The U.S. S&P 500 Index and MSCI World Index were both down about 6.0%. The S&P/TSX Composite Index was down about 3.0%.
- There is an expectation that the U.S. Federal Reserve could cut interest rates one to two times before the end of 2019.
- The European Central Bank announced that it would keep rates unchanged until the first half of 2020.
- The Canadian economy added more jobs in May at 27,700 compared to the consensus estimate of 5,000.
- U.S., Canadian and global equity markets were technically oversold at the end of May.
- President Trump and President Xi could be meeting later this month at the G-20 meeting in Japan to possibly restart trade talks.
- Oil prices have recently declined 30% from their recent 2019 highs to US$52.00 a barrel, which reduces overall household expenses for the consumer.
See how these events impacted your investments below.
ETF Safety Portfolio was down -0.80% in May and up 2.91% in the past year. The ETF Safety Portfolio was able to minimize its losses from equities with its higher exposure to fixed income and Canadian real estate asset classes.
ETF Conservative Portfolio was down -1.70% in May and up 3.06% in the past year. Lower exposure to Canadian, U.S. and international equities contributed to the portfolio’s lower losses during the month. The portfolio’s fixed income holdings and Canadian REITs contributed to gains.
ETF Balanced Portfolio was down -2.39% in May and up 3.67% in the past year. Investors in the Balanced Portfolio outperformed the broader equity market indices in May due to its allocation and gains from fixed income and income-generating investments.
ETF Growth Portfolio was down -2.95% in May and up 3.72% in the past year. Due to allocations to fixed and Canadian REITs which had gains, the portfolio posted better results than the U.S., Canadian and international equity markets.
ETF Aggressive Portfolio was down -3.23% in May and up 4.38% in the past year. As an equity-centric investment, the Aggressive portfolio was still able to provide good downside protection with its small allocation to fixed income and income strategies.
Private Investment Portfolios
Safety Private Portfolio was down -0.31% in May and up 4.59% in the past year. With meaningful allocation to fixed income, real estate and mortgage asset classes, the Safety Portfolio delivered on its mandate to preserve capital on down equity markets.
Balanced Private Portfolio was down -1.01% in May and up 4.96% in the past year. Diversified with bonds, mortgages, real estate, private equity and private debt, the Balanced portfolio showcased lower correlation and drawdown to the broader market indices.
Aggressive Private Portfolio was down -1.67% in May and up 5.21% in the past year. The Aggressive Portfolio’s Nicola U.S. Tactical High Income holding which is focused on higher yield and lower volatility resulted in lower losses during May versus the U.S. markets.