29 April, 2022

Weekly Update - Dip-buyers emerge late week to slow declines

Dip buyers powered the Canadian S&P/TSX and the U.S. S&P 500 higher on Thursday as strong user numbers drove Facebook-parent Meta Platforms Inc. to a 18% surge in New York.

 

The late-week advance – the biggest rally in seven weeks – helps a bit to soften what is shaping up to be the worst month for North American stocks since March 2020 as the campaign by central banks to tamp down inflation forced investors to reprice risk assets. Europe’s energy crisis, China’s struggle to suppress Covid and the war in Ukraine also combined to drive major indices in Europe to their lowest since mid-March this week.

 

Gains in Microsoft Corp. on better-than-expected results helped lift sentiment after an early week tech-fueled slump. Google-parent Alphabet posted a rare miss on slower European ad sales and lackluster YouTube performance. YouTube was hit by its rivalry with TikTok and Apple's privacy changes. This comes after a big subscriber loss by Netflix last week.

 

The S&P/TSX also rose at the end of the week with its best day of the year, rebounding from a three-month low early in the week, as stronger-than-expected corporate earnings boosted the shares of energy and mining companies, with gains following five straight days of declines.

 

The energy group rose 3.4% as oil prices settled slightly higher. It was led by a 10.3% gain for Cenovus Energy Inc after the company reported a more than seven-fold jump in quarterly profit that surpassed analyst estimates and nearly tripled its dividend. 

 

Fears that central banks will tip the global economy into a recession have plagued markets all week, while activity slows in China as Covid lockdowns bite. Bond prices retreated but the benchmark U.S. 10-year bond yield – at about 2.84% – remans lower for the week.

 

As markets continue to react and adjust to changing conditions, a continued focus on your long-term goals remains the best course of action. Investing through a well-diversified portfolio has historically provided the best experience through a combination of goals-based returns and reduced volatility over time.

 

  • Short-Term View: Inflation continues to run hot in Canada and elsewhere, forcing central banks and markets to contemplate jumbo-sized rate increases and the resulting impact on equities, bonds and the economy.

  • Longer-Term Thinking: Sticking to your long-term plan through periods of volatility is central to investment success.

  • Logic Over Emotion: Perspective is key. Focus on long-term goals and timeframes.

Our Experts Say...

 

“Central banks are stuck between a rock and a hard place. They need to rein in inflation, a large portion which is out of their control, while supporting economic growth and the financial markets..”

 

Corrado Tiralongo, Chief Investment Officer

IPC Portfolio Services

 

 

 

Over the past 10 years, markets are positive. Perspective is key. Markets do react to short-term increases in volatility – see the grey lines below – but the long-term trend is upward in the blue and red lines.

 

Source: Morningstar Direct. Growth of $100,000 shown. Total returns from Jan. 13, 2012 to April 27, 2022 in local currency. Volatility is illustrated by the rolling 5-day minimum and maximum percentage change for each of the indices shown.