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

Senior Portfolio Manager, Asset Allocation and Alternative Strategies

Global stock markets recover part of their losses

The reopening of economies worldwide and optimism about the development of a COVID-19 vaccine boosted global equity markets. There is still a great deal of volatility, however, notably due to racial tensions in the United States and the likelihood of a second wave of infections.

Focus on the past month

Overview of global equity markets*
  • The benchmark index of the Canadian stock market, the S&P/TSX, rose 2.8% in May, for a return of -11% for the first five months of 2020.
  • In the United States, the S&P 500 gained 4.5% while the Nasdaq climbed 6.8%, bringing their respective year-to-date returns to -5.8% and +5.8%.
  • International stock markets were also in positive territory for the month, with the EAFE Index up 4.1%. Year to date, the index has lost 15.3%.
  • Emerging market equities edged up 0.5% in May (-12% in 2020) and Chinese stocks fell 1.4% (+1% in 2020).

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

Key events


  • The spread of the new coronavirus and its harmful impact on the global economy are still the focus of market attention this month and are overshadowing all other economic data.
  • Investors took a step back to wait and see how the virus will evolve in countries that have started to lift their lockdowns.
  • In response to the COVID-19 pandemic, central banks around the world have injected massive amounts of liquidity into the financial markets, while sharply lowering their key rates.
  • Governments have implemented significant fiscal and financial measures to allow businesses and their employees to earn income despite the forced shutdown of their economies.
  • The price of oil has rebounded following the extension of production cuts and the recovery of the world economy.
  • While economists expected bad news on the employment front in May in Canada and the United States, the opposite occurred. Hundreds of thousands of new jobs have been created on both sides of the border. The reopening of their economies likely had a faster-than-expected impact on hiring, as wage subsidy programs may have prompted companies to rehire their employees as soon as possible.
  • Government of Canada bonds across maturities posted a return of 0.1% in May and have risen 7.0% year to date. (Source: Canaccord Genuity)

Our strategic monitoring

Main risks

Here are some risks that we are closely monitoring in the current environment.

  • The recession caused by the health crisis may turn out to be more serious than expected and lead to an economic depression, especially if a second wave occurs and necessitates the return of strict lockdown measures.
  • The negative and persistent impact of the pandemic on consumer confidence is likely to cause a decrease in consumer spending over a long period, which would perpetuate the recession.
  • An escalation of tensions between China and the United States could jeopardize the already-signed initial phase one trade agreement and postpone the negotiation and signing of a more comprehensive second phase.

Fundamental indicators

Some economic indicators improved in May.

Global Purchasing Managers’ Index

This index remained below 50, which still indicates a contraction in manufacturing activity. The trend has improved, however, and the index is currently above the 40 mark.

U.S. initial jobless claims

Jobless claims fell considerably last month, which is a good sign.

U.S. job creation

To everyone’s surprise, the number of jobs created in the United States largely exceeded economic forecasts, a situation which also occurred in Canada.

François Landry

Vice-President and Chief Investment Officer

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

Our strategies

Until we have a clearer picture of the impact of the current health crisis, we are maintaining a neutral position in the FDP Tactical Asset Allocation Private Portfolio, with 55% equities and 45% bonds.

We have returned to a neutral position on EAFE equities, following the fiscal measures implemented in Europe and the reopening of euro zone economies. Our underweight in Canadian stocks was reduced and we increased our exposure to the Canadian banking sector. Lastly, in a context where tensions between Beijing and Washington are rising, we are maintaining an overweight position in U.S. equities and increasing the weight of emerging market equities to neutral.

François Landry, CFA
Vice-President and Chief Investment Officer

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