Market Insights: Market Commentary

• North American equity markets moved higher this week, with investors gaining confidence from coronavirus vaccine trial developments and improving employment and economic data as businesses in several regions re-opened.
• The oil price remained relatively stable, trading around $40 for US WTI oil and around $29 for Canadian oil on Friday.
• The United States remained the country worst affected by COVID-19 globally, with some states such as Florida reporting record numbers of infections and deaths from the disease. As rates of infection remain controlled in most parts of Canada, the two countries agreed to extend the closure of the border for non-essential travel to August 21.
• The Canadian dollar strengthened against the U.S. dollar as the Bank of Canada kept its key lending rate on hold at 0.25%. The central bank forecasts a 7.8% decline in Canadian GDP this year as a result of the pandemic shutdown and indicated that rates would remain low “for a very long time.”
• BNN reported this week that two large cannabis companies, Aphria and Aurora, were in advanced talks about a potential merger, but discussions broke down late last week after they were unable to come to an agreement on board composition and executive compensation.  
• Trade tensions between the U.S. and China heightened as President Donald Trump signed legislation to impose sanctions on China in response to its interference with Hong Kong’s autonomy.

How does this affect my investments?

Equity markets in many developed economies have recovered strongly in mere months since March’s pandemic-induced downdraft, despite uncertain economic conditions and many unknowns related to the virus itself. While the market recovery has been unpredictable, so too is it impossible to know when the next downturn will occur. Studies, in fact, have shown that attempting to “time the market” by selling your investments before a downturn can be counterproductive, as investors often miss out on significant market gains after they have cashed out. Rather, adhering to a personalized long-term investment plan that reflects your objectives, such as the one we developed to meet your needs together, typically yields better results.

With the odds rising of a Democratic sweep in the next U.S. election, we have been asked recently if that will negatively affect the equity markets. We have some specific thoughts on this that we will discuss in quarterly reviews, but we wanted to share this table that shows the S&P 500 Index historical calendar year returns when the Democrats control both the Senate and Congress. We can't always rely on historical indicators, but at least this one is a very positive one.

Sources: CI Investments Inc., Bloomberg Canada, cnbc.com, oilprice.com, BNN, Bespoke Investment Group Globe and Mail.