Q3 2023 in review

Canada’s stock market experienced a modest decline in the third quarter due to the combination of reaccelerating inflation, concerns that central banks may keep interest rates elevated for an extended period, and signs of slowing global growth. Rising bond yields also weighed on investor sentiment. All of the market’s downturn occurred in the second half of September, which is traditionally a period of seasonal weakness for equities. Despite the recent slump in stock prices, Canada’s market finished September in positive territory on a year-to-date basis. Energy stocks, which rallied behind the strength in crude oil prices, were a key contributor to third-quarter performance. Cannabis-related equities also performed well due to favorable regulatory changes in the United States. On the other hand, financials and gold miners lagged.

After advancing in July, U.S. stocks slid in August and September. Equities initially benefited from better-than-expected employment numbers, inflation data, and corporate earnings. However, investors reacted negatively as the yield on 10-year U.S. Treasuries later climbed to its highest level in 16 years. Yields rose as a resilient economy reduced the likelihood of a near-term interest-rate cut. Elevated yields gave investors an attractive alternative to equities but also resulted in higher borrowing costs. Within the broad-based S&P 500 Index, most sectors declined, notably the defensive utilities sector and interest-rate-sensitive real estate sector. Conversely, the energy sector gained as oil prices rallied, while the communication services sector benefited from a sizable advance.

The world equity markets lost ground in the third quarter. A string of weaker-than-expected economic data and renewed instability in China’s property sector raised the prospect of slowing global growth. The losses were widespread, with few regions, countries, or sectors able to escape the downdraft. On the positive side, Japan produced a narrow gain. On the other hand, the major world indexes were dragged down by underperformance for both Europe and Latin America.

Global bond markets declined in the third quarter. Bond yields rose sharply around the globe, putting downward pressure on bond prices. Central banks such as the U.S. Federal Reserve, European Central Bank, and the Bank of England all raised short-term rates during the quarter. Economically, labor market tightness began to ease in many regions of the globe, but other reports showed strength in consumer spending and an uptick in the year-over-year inflation rate after nearly a year of declines. Intermediate- and long-term bond yields increased the most in the third quarter, with 10-year government bond yields in many countries rising to their highest levels in more than a decade. Regionally, North American bond markets declined the most, while the Asia-Pacific region held up the best despite a loosening of interest-rate limits by the Bank of Japan. From a sector perspective, sovereign government bonds posted the most significant declines, while high-yield corporate bonds outperformed for the quarter.

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FTSE TMX Canada Bond Universe Total Return (CAD$)






Source: Bonds, FTSE Russell; equities, TD Securities, as of September 30, 2023. It is not possible to invest directly in an index. Past performance does not guarantee future results.

The material contains information regarding the investment approach described herein and is not a complete description of the investment objectives, risks, policies, guidelines or portfolio management and research that supports this investment approach. This commentary in this report is provided for informational purposes only and is not an endorsement of any security or sector. The opinions expressed are those of Manulife Private Wealth as of the date of writing and are subject to change without notice. The information in this document including statements concerning financial market trends, are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. This material does not constitute an offer or an invitation by or on behalf of Manulife Private Wealth to any person to buy or sell any security. Past performance is no indication of future results. The information and/or analysis contained in this material have been compiled or arrived at from sources believed to be reliable, but Manulife Investment Management does not make any representation as to their accuracy, correctness, usefulness or completeness and does not accept liability for any loss arising from the use hereof or the information and/or analysis contained herein. Neither Manulife Private Wealth or its affiliates, nor any of their directors, officers or employees shall assume any liability or responsibility for any direct or indirect loss or damage or any other consequence of any person acting or not acting in reliance on the information contained herein. Please note that this material must not be wholly or partially reproduced.

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Manulife Private Wealth

Manulife Private Wealth

Manulife Private Wealth

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