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Canadian stocks declined modestly, pressured by weakness in technology and industrial stocks. Following three consecutive weekly advances, U.S. stocks also declined last week. The news flow was dominated by headlines around the negotiations for another round of fiscal relief from Washington before the U.S. election, which is fast approaching. The 10-year Government of Canada and U.S. Treasury yields rose to the highest level in four months amid expectations that a potential Biden win would lead to a larger relief package to support the U.S. economy. Aside from the speculation about potential election outcomes and policies, U.S. economic data for the week was encouraging to the long-term outlook, showing an improvement in jobless claims and continued strength in the housing market.
Markets behaved in a somewhat orderly fashion last week, oscillating in a fairly narrow band that left equity markets slightly in the red for the week. We’d stop short of labeling last week the "calm before the storm" because we think there are credible reasons for stocks to have a toehold. That said, we think investors would be well served to brace for a bumpier ride as we work our way to, and through, the U.S. election.
Current conditions are prompting a perception among some investors that the U.S. election represents a binary outcome for the market. November 3 may be viewed as a seminal moment in America’s political landscape, but when it comes to investing, it’s the much broader periods of time – not singular moments – that matter most.
In addition to political headlines and reasonably encouraging economic readings, last week brought a few market “anniversaries”, including the 33rd anniversary of the “Black Monday” crash. Here’s a look back at a range of notable days or periods for the market and the accompanying investment conditions that can provide some perspective on what may lay ahead for investors:
One Week: All Eyes on Congress
Seven Months: The Bear Market Turns Into a Bull
Four Years: Politics Pivots to Policy
33 years: Black Monday Sets the Bar for Volatility
Craig Fehr, CFA
Sources: 1. Morningstar Direct
|S&P 500 Index||3,465||-0.5%||7.3%|
|10-yr GoC Yield||
Source: Factset, 10/23/2020 *4-day performance ending on Thursday. Bonds represented by the iShares Core U.S. Aggregate Bond ETF. Past performance does not guarantee future results.
The third-quarter earnings season is in full swing, with almost 20% of the TSX and 40% of the S&P 500 companies reporting earnings throughout the week. Important economic data being released in Canada include the Bank of Canada rate decision on Wednesday and August GDP growth on Friday.
The Weekly Market Update is published every Friday, after market close.
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Market indexes are unmanaged and cannot be invested into directly and are not meant to depict an actual investment.
Past performance does not guarantee future results.
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Special risks are inherent to international investing, including those related to currency fluctuations and foreign political and economic events.
The content of this report is for informational purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation. While the information is believed to be accurate, it is not guaranteed and is subject to change without notice.
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