Monthly highlights of major events which drive financial markets, along with perspectives on what they mean and why they matter.
July In Review
Equity markets shrugged of declines from June and climbed higher in July. As some of the world’s central banks have begun to cut interest rates as inflation has started to cool, now approaching central bank target levels, it seems that a “soft landing” rather than a hard recession is possible and reflected in stock performance. Canadian stocks ended the month up 5.86%, and are up 12.29% year-to-date. All eleven market sectors finished the month in positive territory, with Materials, Consumer Staples, and Real Estate leading the way. Commodities detracted from these gains however, as WTI crude oil, natural gas, and copper all fell 3.39%, 21.63%, and 4.90%, respectively. U.S. stocks continued to perform well, up 1.22% in U.S. dollar terms, with all but two market sectors (Information Technology and Communications Services) positive for the month. Although down in July, Information Technology has risen 25.57% year-to-date, leading all U.S. sectors. Canadian bonds rose 2.37%, as the Bank of Canada (BoC) cut rates for a second time this year. Emerging Market equities gained 0.36%.
Here are some of July's most notable macroeconomic headlines:
Inflation in Canada and the U.S. is receding. In the U.S., the personal consumption expenditure (PCE) price index fell to 2.5% in June from 2.6% in May, signaling easing inflation, though personal spending and income growth were slightly below expectations. Core inflation and producer prices also indicated moderating inflationary pressures, leading to speculation that the Fed might cut rates later in the year. Canada also saw a decline in annual inflation to 2.7% in June, further supporting the BoC’s decision to cut its target overnight rate for the second time this year.
Canada's GDP grew by 0.3%, its fastest pace since January. Growth was driven by strength among oil and gas companies and increased wholesale trade, despite declining construction output and continued contraction in the manufacturing sector. Manufacturing sales rose 0.4% in May, but wholesale sales dropped by 0.8%. In the U.S., mixed signals emerged as the ISM Manufacturing PMI showed contraction for the third consecutive month in June, though industrial production rose 1.6% annually. Economic activity expanded in June, but manufacturing contracted in July. Overall, the U.S. economy grew 2.8% in Q2 2024, driven by consumer spending and business investment, alluding to no rush for the Fed to cut rates.
| Index† | Change (%) | Index Level | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Treasury Bill (FTSE Canada 60 Day T-Bill) | 0.45 | 2.99 | 5.61 | 182.51 |
| Bonds (FTSE Canada Universe Bond) | 2.37 | 1.99 | 6.15 | 1,143.77 |
| Canadian Equities (S&P/TSX Composite) | 5.87 | 12.29 | 18.72 | 23,110.81 |
| U.S. Bonds (Barclays U.S. Aggregated Bond, US$) | 2.34 | 1.61 | 5.03 | 2,196.77 |
| U.S. Equities (S&P 500, US$) | 1.22 | 16.69 | 26.06 | 5,522.30 |
| Global Equities (MSCI World, US$) | 1.79 | 14.05 | 22.94 | 3,571.58 |
| Emerging Marketings (MSCI Emerging Markets, US$) | 0.36 | 8.03 | 13.31 | 1,084.77 |
| Currencies† | Change (%) | Exchange Rate | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| C$/US$ | -0.93 | -4.09 | -4.10 | 0.7242 |
| C$/Euro | -1.96 | -2.16 | -3.31 | 0.6690 |
| C$/Pound | -2.58 | -4.98 | -5.26 | 0.5633 |
| C$/Yen | -7.58 | 2.16 | -0.38 | 108.62 |
| Commodities (US$)† | Change (%) | Price | ||
|---|---|---|---|---|
| 1 Mth | YTD | 1 Yr | ||
| Gold Spot ($/oz) | 3.66 | 14.49 | 19.03 | 2,473.00 |
| Oil WTI ($/barrel) | -3.39 | 9.21 | 14.30 | 77.91 |
| Natural Gas ($/MMBtu) | -21.63 | -23.80 | -39.69 | 2.04 |
†Total Return, as at July 31, 2024. Indices are quoted in their local currency.
Source: Bloomberg
Indices are not managed, and it is not possible to invest directly in an index.
Middle East tensions and rising shipping costs driving volatility in oil prices. Geopolitical conflicts, including the ongoing conflict between Israel and Hamas, pose risks of potentially disrupting oil supplies and pushing prices higher. Attacks on cargo ships in the Red Sea have also increased freight rates, affecting global goods costs. While the price of WTI Crude Oil declined in July, oil prices have risen 9.21% year-to-date. Higher oil prices pose a challenge to central banks' efforts to ease monetary policies, as higher oil prices typically translate to higher prices for a number of goods and services.
Did you know?
The Personal Consumption Expenditure (PCE) measures the value of goods and services purchased by households. It includes spending on durable goods (like cars), nondurable goods (like food), and services (like healthcare). PCE is a key indicator of consumer spending and overall economic health, and it helps gauge inflation by tracking changes in prices over time. The Federal Reserve closely monitors PCE to inform decisions about monetary policy, as high PCE suggests strong consumer demand, while low growth may indicate economic slowdown.
