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MD Financial Management: Chief Investment Officer Message—February Shows Stronger Results For Developed Markets

MD’S MARKET UPDATE: Equities rebound to post stronger returns in February

After a more volatile start to the year, market indices in Canada, the U.S., and Europe, Australasia and Far East (EAFE) all posted strong returns of between 3.7% and 4.6% (in local currency terms), while emerging market equities continued to underperform relative to developed equities.

The Canadian dollar ended the month relatively unchanged in U.S. dollar terms, but continued to depreciate relative to the euro.

The FTSE TMX Universe Bond Index was up 0.2% on the month as the performance of bonds trailed that of equities, with the 10-year Government of Canada bond yield up by 11 basis points to 2.45%.

Commodities experienced a solid month as gold and oil continued to rebound, more than offsetting flat copper prices.

RESULTS ACROSS GLOBAL ECONOMIES: Global growth continues—but at a slower pace

Global Purchasing Managers Indices (PMIs) weakened somewhat in February, with the pace of growth slowing in in Canada, the U.S., and the eurozone. Growth in emerging market countries also weakened, with manufacturing output declines in Brazil, India, and Russia.

Unemployment numbers improved in January in both Canada and the U.S., as rates declined to 7.0% (for Canada, down 0.2%) and 6.6% (in the U.S., down 0.1%). Inflationary pressures remain muted globally with the headline annual rate at 1.5% in Canada and 1.6% in the U.S., below 2% central bank targets.

Social unrest in emerging markets had only a minimal impact on developed market returns for the month; however, geopolitical risk remains heightened due to contagion fears (concern that significant economic changes in one country will spread to other countries).

(in Canadian dollar terms, unless otherwise indicated)

Market Indicator 1-Month Return (%) 1-Year Return (%)
Canada (S&P TSX Composite Index) +3.7 +15.2
U.S. (S&P 500 Index) +3.4 +34.7
Europe, Australasia and Far East (MSCI EAFE Index) +4.6 +29.7
Emerging Markets (MSCI EM Index) +1.9 +1.4
Canadian Bonds (FTSE TMX Canada Universe Bond Index) +0.2 +1.9
Exchange Rate: Canadian Dollar to U.S. Dollar   0.0 -7.4
Gold Price (oz) +6.9 -15.8
Oil Price (WTI) +5.2 +11.5

Sources: StateStreet via StyleADVISOR, PC Bond Analytics, and Bloomberg.


Our investment methodology incorporates continuous oversight to ensure that the combination of underlying funds, and their highly-qualified external investment managers, position portfolios for success—while also managing risk.

If you have questions about the impacts of global economic trends on your investment portfolio, or MD's investment methodology, I invite you to connect with your personal MD Advisor who would be pleased to review with you.

William R. Horton, Jr., CFA
Chief Investment Officer
MD Financial Management Inc.