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Yann Furic
B.B.A., M. Sc., CFA

Senior Portfolio Manager, Asset Allocation and Alternative Strategies

Widespread decline on global stock markets

After a strong start in January, most global equity markets ended the first month of 2020 in negative territory, with the Canadian stock market being one of the only markets to post a notable rise. The global economic slowdown continues and a new threat from China could amplify this trend.

Focus on the past month

Overview of global equity markets*

  • The benchmark index of the Canadian stock market, the S&P/TSX, rose 1.5% in January.
  • In the United States, the S&P 500 ended the month down 0.2%, while the Nasdaq gained 2.0%..
  • Most international stock markets lost ground, with the EAFE dropping at -2.1%.
  • Emerging market and Chinese equities also fell, losing 3.3% and 4.8%, respectively.

* All the percentages in this section are in Canadian dollars. Bloomberg unless otherwise indicated.

Key events

  • The new coronavirus, which appeared in mid-January in China, has quickly spread in that country and other parts of the world. This has led to a marked deceleration in Chinese economic activity and has had a negative impact on supply chains around the world.
  • U.S. job creation was stronger than expected, with 225,000 new jobs filled, when forecasts called for 165,000. Wages were up 3.1% from a year earlier.
  • In Canada, 34,500 persons joined the labour force in January, far exceeding the forecast of 17,500. Wages grew more quickly than expected, at an annualized rate of 4.4%.
  • The companies in the S&P 500 Index posted better-than-forecast results and their earnings grew slightly year over year.
  • The U.S. Senate voted against the impeachment of President Trump, an outcome that surprised no one.
  • The United Kingdom officially withdrew from the European Union on January 31, 2020, but negotiations with a view to new trade agreements between the UK and the rest of Europe have only started and are already raising some concerns.
  • Government of Canada bonds across maturities posted a return of 2.4% for the month. (Source: Canaccord Genuity)

Our strategic monitoring

Main risks

Here are some risks which could negatively impact the economy and the markets.

  • If the talks between Washington and Beijing on an eventual phase two leading to a more comprehensive trade deal do not succeed, we could see an escalation of tariffs, which would further dampen global growth.
  • The spread of the new coronavirus in China is worsening and the fact that other regions of the world are affected suggests the possibility of a global pandemic. If that were to occur, the pace of the global economic expansion would slow further.

Fundamental indicators

U.S. new orders
U.S. new orders rose significantly in January and the ratio of new orders to inventory levels shows an acceleration of U.S. production growth.

U.S. stock market valuation
At more than 18 times forecast earnings for the next 12 months, the valuation of the U.S. stock market remains high, but the price/earnings ratio is lower when technology companies are excluded. Stock markets outside the United States are much more affordable.

François Landry

Vice-President and Chief Investment Officer

Vice-Chairman of the Board of Directors of Professionals' Financial - Private Management

Our strategies


Since the Chinese economy could fall sharply due to the coronavirus, we took a cautious approach by reducing the weight of emerging market stocks in the tactical portfolio.

We maintained the targets of our FDP Tactical Asset Allocation Private Portfolio at 40% bonds and 60% equities.

This decision was based on a number of factors, including the following:
  • Equity and bond risks generally seem more balanced.
  • Central banks remain accommodative.
  • Corporate earnings are better than expected.
  • Employment is still rising in the United States, and North American and European consumers remain confident.

François Landry, CFA
Vice-President and Chief Investment Officer

Yann Furic, B.B.A., M. Sc., CFA
Portfolio Manager, Asset Allocation and Alternative Strategies

Sources: Bloomberg

The opinions expressed here and on the next page do not necessarily represent the views of Professionals’ Financial. 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. Please consult your Wealth Management Advisor.

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