Market Commentary

In April, sentiment was reinvigorated and risky assets got some much-needed reprieve after the worst meltdown since the global financial crisis. Investors welcomed some tentative signs that the COVID global infection curve may be flattening, which sparked discussions about re-opening the economy. Meanwhile, unprecedented support measures unleashed by both monetary and fiscal authorities also emboldened the risk-on trade and propelled equities higher during the month. At the same time, investors were largely unphased by the raft of grim economic and corporate earnings results that have revealed the extent of the virus-induced economic destruction. As a result, caution is warranted after the historic rebound given both lofty valuations and the lack of visibility on the path forward. 

MAY 2020

Global equity markets made an impressive comeback in April, with MSCI’s gauge of world equities jumping 11% in its best month since 2011. Regionally speaking, gains were widespread across the globe. The S&P 500 led the global charge and ended the month with its biggest monthly gain since 1987. The S&P/TSX followed closely behind as the previously hard-hit resource sectors made a notable rebound during the month. The risk-on mood also spread to overseas markets, with equities in the international developed and emerging market space joining the monthly advance - albeit to a lesser extent. 

Despite the improved market mood, fixed income markets posted positive results in April. Bond yields remained well-anchored by the massive influx of stimulus, with major central banks slashing rates to rock-bottom levels and collectively expanding their balance sheets to ensure that the economic crisis doesn’t morph into a financial meltdown. Meanwhile, credit markets recovered some lost ground as investors sought out the higher yields available in the corporate space, while assertive measures from central banks to support the credit markets saw spreads narrow considerably during the month. 

The US dollar fluctuated and ended the month virtually unchanged. While the revival in risk appetite reduced the appeal of the greenback as a haven, this came up against some dire economic results that revealed the extent of the virus-related damage to the global economy. Performance was mixed versus its major trading partners. The Canadian dollar was surprisingly resilient even as crude prices swung wildly throughout the month, while the pound and Japanese yen also gained. In contrast, the euro slipped on relatively weaker eurozone economic data and as European Union leaders failed to make any notable progress on a longer-term recovery plan, while emerging market currencies also slid lower. 

Crude markets had an erratic month as investors continued to battle a massive supply glut that’s been compounded by the severe collapse in demand stemming from COVID-induced quarantines and curbs on global travel. Taken together, these dual forces and an acute lack of storage space lead to a perfect storm that drove prices to historic lows. Meanwhile, copper jumped on expectations the global economy will bounce back from its virus-driven lockdowns, while stimulus measures out of China also stoked the demand outlook for the red metal. Finally, gold gained in April as major central banks aggressively ramped-up measures to stem the damage from the pandemic, which boosted the allure of bullion as a store of value.  


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