Since the start of the year, the stock and bond markets have been in constant flux. In our article of June 2, 2021 (What’s in store for the second half of 2021?), we mentioned a strong rotation between management styles and different sectors.
Let’s now look at the numbers to see how this rotational correction materialized in the Canadian stock market during the first two quarters of 2021 as well as in the third, which is still ongoing.
First quarter: heath care, the big winner
- In the first three months of 2021, health care was by far the best performing sector, up almost 38%.
- Ironically, cannabis stocks are part of this sector and they posted the strongest performance.
- The energy and financial sectors ranked second and third, propelled by anticipation of the synchronized reopening of global markets.
- As for technology, it ended the period in negative territory, after an exceptional 2020.
Second quarter: technology takes the lead
In the second quarter, the S&P/TSX index continued to rise, but some sectors suffered a correction.
- Health care fell 11.25% between April 1 and June 30.
- The industrial sector, which was very promising in the first quarter, was also in negative territory.
- Technology took the lead, with a gain of nearly 19%.
- The energy and real estate sectors remained strong.
Late summer reversals
- Since July 1, we have seen a reversal in energy. The spread of the Delta variant as well as the desynchronized recovery of world economies suggest weaker demand for oil.
- This situation also affects the basic materials sector.
- Health scare continued to fall and was the worst performer.
- Among all these reversals, the consumer staples sector showed steady improvement, moving from 9th place at the end of the first quarter to first place as at August 19.
Bitcoin ups and downs
The different sectors of the stock market are not the only ones to have experienced wild swings, with cryptocurrencies such as Bitcoin having also been on a rollercoaster ride.
- On April 15, 2021, Bitcoin closed at US$63,346.
- On July 20, Bitcoin was trading at US$29,608, a 53.26% plunge.
- On August 19, the price had rebounded to US$46,395, a jump of 56.70% from its July low, but still well below its April high.
Rise, fall
Interest rates in Canada and around the world started the year on the rise but they, too, subsequently fell and are now somewhat stable
Big challenge
We thought it would be appropriate to back up our comments with data that clearly illustrate the challenge that 2021 represents for investors.
The markets saw corrections, but they were mainly limited to certain sectors. In addition, the sectors involved are usually identified more with one investment style than another:
- financial and energy sector stocks are predominantly associated with the value and cyclical style of investment;
- technology is clearly associated with the growth style.
The best solution: active management
In such an environment of rapid and dramatic change, active portfolio management is essential. Many experts anticipate an increase in volatility this fall: such a situation underscores the importance of having recourse to experts who advocate this type of management and who will be able to achieve optimal diversification and seek value wherever it can be found.
If you want to learn more about the benefits of active management of your portfolio, talk to your advisor. He can explain to you how our internal and external managers position themselves so as to be able to seize the best market opportunities.
If you want to learn more about the benefits of active management of your portfolio, talk to your advisor. He can explain to you how our internal and external managers position themselves so as to be able to seize the best market opportunities.
Stéphane Girard, MBA, CIM®, Fin. Pl.
Investment and Product Knowledge Specialist
The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. For any questions, don’t hesitate to contact your wealth management advisor or your tax specialist, accountant or legal advisor.
