Archives: Market Commentary

Explore how global political changes in 2024, including major elections, are shaping our investment strategies. Discover how we think this will impact markets and how our funds are positioned for long-term growth.

 

Explore how Veritas Funds performed benchmarks in Q1 2024 amidst a surprisingly strong U.S. economy, and discover our strategic approach to managing emerging risks and generating attractive returns for investors.

Markets enter 2024 with most economic readings in decent shape: inflation is coming down; credit conditions appear to be holding up; and unemployment remains at multi-year lows.  Even so, markets can’t seem to get comfortable with where things stand.

As we enter the fourth quarter of 2023, the global economy is now well into the second-order effects of the inflation cycle, triggered by wage pressures, rising input costs, and higher interest rates as central banks try to contain price increases. On balance, the more time passes at higher inflation and borrowing rates, the more stress it puts on consumers and the economy. In this update, we review our YTD performance, consider the health of the U.S. and Canadian consumer, and outline how we are navigating current market risks.

Looking ahead, labour markets remain tight, consumer spending is healthy and inflation is decelerating.  As encouraging as the economic data may be, we see signs that the global economy is struggling to adjust to cost pressures and higher interest rates.

Hopes for an end to the current cycle of rate hikes spurred a strong start to equity markets in 2023. Much of the rally was due to a resurgent Information Technology sector which contributed more than two thirds of the first quarter index move in the S&P 500 and roughly one third of the return for the S&P/TSX.

Exiting the pandemic, we all hoped that the world would get back to normal, and in many ways it has. The investment landscape of the last twenty years has been atypical, however, with very low interest rates and significant monetary interventions.

With the U.S. 10-year Treasury yield currently 80+ basis points below the U.S. 2-year yield, 2022 has seen the yield curve steepen to a level not seen since the Fall of 1981, at the height of the Volcker inflation-fighting regime in the United States.

For the first year since 2016, the S&P/TSX is on pace to beat the S&P 500 in 2022, with a return of -3.3% through November 15th, versus -15.1% for the S&P 500.

The third quarter of 2022 carried historically high volatility, with daily returns on the S&P/TSX posting an annualized standard deviation of more than 16%.