Market and Investment Insights

April 2021

Commodity Rallies

Financial markets showed broad‐based strength through the month as the economic recovery continued. Although COVID‐19 cases were rising in some regions, investors showed a higher tolerance when pursuing a reflation trade, boosting prices of cyclical stocks. Vaccine rollouts and pandemic dynamics were a major factor in equity prices during the month, which led to U.S. and U.K. equity markets outperforming their peers.

Prices of copper, an industrial metal typically seen as a bellwether for economic activity, surged towards a 10‐year high of $10,000/tonne on the London Metal Exchange. Rallying commodity prices usually occur during the recovery phase of a business cycle as consumption and capital expenditures spike. The pace at which the price has rallied has led to some manufacturers delaying deliveries or shutting down production as profit margins evaporate. While others with pricing power have increased margins and profitability significantly.

U.S. Treasury Secretary Janet Yellen announced she has been working with other G20 countries to impose a global minimum corporate tax. Yellen hopes the multinational negotiations will stop the “30‐year race to the bottom on corporate taxes”. This proposal has been discussed in the past, although large and growing national debts may be the catalyst to begin enforcement.

Canadian Finance Minister Chrystia Freeland released the 2021 Federal Budget. Key features of the new budget include funding for national childcare, investments in green energy and innovation, and tax changes to close the wealth gap. We invite you to read a more complete summary of the budget prepared by iA Wealth’s Product Research & Oversight team.

Waterways in Argentina and Paraguay have been getting shallower as the South American countries struggle with ongoing droughts. The waterways are crucial when transporting corn and soybean crops to shipping ports. While climate change is a large contributor to the issue, the Paraguayan government has asked neighboring Brazil to release water from the Itaipu hydroelectric dam to help raise water levels. The reduction in crops making it to market has led to rising prices on commodities exchanges, which could lead to inflation in food prices.

 

Portfolio Contributors

  • Vanguard Information Technology ETF shares added 2.86% after receiving a bump up from Apple and Microsoft holdings.
  • iShares Global Water Index ETF gained 3.00% during the month, with returns largely concentrated in holdings of Veolia Environnement SA, a French water and waste management company.

Portfolio Detractors

  • ARK Innovation ETF fell 1.41% in Canadian dollars, largely weighed down by holdings in Teladoc Health Inc.
  • iShares Global Clean Energy ETF lost 6.44% in April with shares of Plug Power continuing to impact performance

 

All performance data generated and retrieved from SIA Charts (siacharts.com)

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Proxy funds used for benchmark indexes:

  • Canadian Universe Bond Index: iShares Canadian Universe Bond Index EFT (XBB.TO)
  • MSCI World Index (CAD): iShares MSCI World Index EFT (XWD.TO)