Market update. Summer slowdown, market calms after North Korea war of words tapers off
For investors watching the domestic front, we saw Canadian assets remained soft in July due to a combination of higher interest rates and the strength of the Canadian dollar. There was a trend of positive economic data over the spring around jobs, GDP, retails sales, home sales, etc. continue through June and July (although the same metrics were soft by a historical standard). Market watchers are expecting a second rate hike by the Bank of Canada before the end of the year.
Energy shares recovered thanks to the price of oil bouncing from $42 to $49 a barrel. Meanwhile, international assets were also stronger in July. That happened as forward-looking global indicators still suggested economic expansion is well-rooted. Canadian investors did not however benefit from these gains due to the stronger performance of the Canadian dollar. This impacted our portfolios from May until recently, effecting significant drawdown.
International markets recover from North Korean jitters
Investors have largely restored confidence and markets have already improved after some volatility in early August. A war of words between North Korea and the US had caused some market volatility earlier in the month.
Trump warned that the US was “locked and loaded” in preparation for a hostile North Korean action, and that if provoked Pyongyang faced “fire and fury like the world has never seen.”
Markets fell slightly, but not precipitously. Indeed, traders reacted rationally by pushing up gold and the Japanese yen. That shows yet again that there are coping strategies for virtually any crisis. We will continue to keep a steady eye on developments and mitigate further volatility for our clients.
Bankers look at a rebalancing the bond market, or not
Central bankers from around the globe will be meeting in Jackson Hole, Wyoming, later in August to discuss a potential interest rates rise. Also on the agenda: whether the time is coming to sell off bonds that have been accumulating in North American and European banks. We will be closely watching the outcome from that meeting.
What to look for in your investments
Irrespective of the investment environment or the state of the economy, the single most important aspect of investing is the goal. Canadian investors can enjoy the advantages of a global balanced portfolio to improve diversification and opportunities for higher returns.
For market watchers concerned about higher volatility, keep the long-term goal in mind. A good strategy is to just hold steady as the markets tend to recover their strength.