Market and Investment Insights

May 2019

NERVOUS MARKETS PULL BACK FROM HIGHS

The 2019 rally was interrupted in May as most key equity market gauges demonstrated low to mid-single digit percentage losses. This came on the back of an announcement from Fed Chairman Jerome Powell where he indicated that the U.S. central bank is not considering a rate cut. Global markets had been pricing in a rate cut which could have been a catalyst to push stocks higher.

A move from President Trump escalated the trade war between the U.S. and China when he announced the tariffs imposed on US$200B of Chinese goods would increase from 10% to 25%. A number of reports have shown these tariffs are being shouldered by U.S. consumers which may lead to readings of higher inflation. Both sides look to be entrenched in their stances which gives uncertainty to whether there will be any resolution to the dispute in 2019.

In other markets, oil prices dropped 16% and natural gas prices fell 5%. Pressures on these resource prices pushed the U.S. dollar up a percent versus the Loonie.

Contributors

  • Our Equity model returned positive numbers with the help of the “Low Volatility” ETF’s we have used to reduce risk. This Canadian position was up 2.2%, the U.S. position up 4.5% and the International position was up 2.4% .
  • CC&L Global Market Neutral Alternative fund performed as expected and provided non-correlated returns during the month; up 3.68% in May and net positive for the year.

Detractors

  • ARK Innovation ETF pulled back 5.6% after nearly hitting an all-time high in April. Our Investment Committee has discussed strategies to reduce the volatility of the growth companies in the fund, and we’ll keep you updated on any changes.
  • Copper prices slid 9% over the month, creating a drag in our Growth portfolio through the iShares Global Base Metals ETF, which was down 3.4%.

All performance numbers sourced from Morningstar Direct.