Market Commentary

Risk appetite lingered-on in April as investors embraced the improved tone in global economic conditions, an impressive string of corporate earnings results, and the dovish pivot from major central banks.  Notably, the latest economic results out of both Europe and China suggest that the worst of the global economic slowdown may finally be behind us, while cautious undertones from the likes of the Bank of Canada, European Central Bank, and Bank of Japan that have echoed the Federal Reserve’s patient and data dependent stance also bolstered investor sentiment last month.

MAY 2019

Global equity market strength extended itself for a fourth consecutive month in April.  Regionally speaking, gains were broad based across the globe, with developed market equities outperforming their emerging market counterparts.  Once again, the S&P 500 led the global charge and breached new record levels, while the S&P/TSX also briefly touched new highs during the month.  In Europe, the number of companies exceeding earnings estimates was the highest in seven quarters and boosted stock prices, while emerging market bourses maintained their winning streak as the revitalized global growth backdrop and optimism on the potential for a US-China trade deal lent support to the gauge of developing market equities.

In fixed income markets, government bond yields shifted higher across the curve and yield curves bear-steepened.  The largest move took place in the long-end, with both the US and Canadian 10 year bond yields backing up to 2.50% and 1.71% respectively after a sharp drop the month prior.  Meanwhile, the move in the short-end was more modest, with 2 year bond yields remaining relatively anchored as the subdued inflation backdrop and the dovish pivot from central banks saw investors firm-up their wagers for rate cuts this year.  Finally, credit spreads tightened further and corporate bonds outperformed their government peers during the month.

The greenback strengthened versus virtually all of its G10 peers and climbed to a 2019 high as several major central banks outside of the US followed the Federal Reserve’s lead and reinforced their accommodative approach, which fuelled currency weakness outside of the United States.  However, the mighty dollar reversed course late in the month and declined as solid economic results in Europe and China helped to assuage global growth fears and quelled demand for the greenback.

Finally, oil prices jumped to a six-month high after America’s vow for tougher restrictions on Iranian exports threatened to squeeze the supply backdrop, while OPEC and its allies reiterated their pledge to reduce crude inventories and keep a lid on output even after calls from President Trump to lower prices.  Meanwhile, gold posted its third straight monthly decline in April as the environment of improved risk appetite diminished the appeal of bullion as a haven, while copper slid lower as investors contemplated the health and fragility of the Chinese economy, the world’s largest consumer of the red metal.