A good week for investors, as capital markets gained almost 2%. Improved optimism over the outlook for the global economy and better than expected economic numbers from the US, sent markets higher reversing last weeks’ declines. Year to date, equity markets are hovering around par, rebounding from their February lows. Crude Oil remains in the spotlight, with investors –and automobile owners waiting for a decision by OPEC countries on output levels. We are not expecting an agreement between Saudi Arabia and Iran to materialize, meaning that oil prices are likely to be under pressure to remain at their current levels. This too will put pressure on the Canadian dollar, which moves in tandem with the direction of oil prices.
Canadian exports have improved, helping to offset the decline in provincial economies dependent on oil (Alberta, Saskatchewan and Newfoundland). A strengthening in the US augers well for Canadian exporters which have benefitted from a lower Canadian dollar. So where do we go from here? It is our view that stock markets will continue to exhibit higher volatility then the period from 2009-2015, and remain range-bound, with valuations at the higher level of price-earnings multiples. In this environment, our defensive approach should perform well, with interest yields from government and corporate bond funds providing monthly distributions to client portfolios. Additionally, the lower equity exposure in our model portfolios means less exposure to market volatility. Overall, this positions clients for solid, risk-adjusted returns. Slow and steady wins the race.