Policymakers kept their target rates unchanged during the quarter.
Bond yields were choppy but generally trended higher alongside with robust US economic data and more muted market expectations for rate cuts. Central bankers reinforced their message to hold off on cutting interest rates until there are clearer signs of lower inflation. The market has now priced-in a 25 bps cut by the US Fed only by September with a total of 60 bps cuts by the year-end, a far cry from the 150 bps priced at the beginning of the year.
In Canada, despite a very promising January CPI print, the Bank of Canada left its overnight rates unchanged, while suggesting a looser policy on the horizon. Canadian bonds (FTSE Canada Universe Bond Index) ended the month with a modest gain of 0.5%, marking the first month of positive returns in 2024. Over the first quarter, the Canadian bonds were down 1.2%.
Global equity markets ended a stellar first quarter on a healthy note, with solid growth data boosting hopes for a soft landing. The gains were broad-based among sectors, with more “value” oriented segments of the market that have previously lagged, outperforming in March.
Despite uncertainty surrounding potential Fed rate cuts, economic strength and diminishing recession fears led to the one of the best fist quarters in the US equity market performance, with the S&P 500 posting 10.6% gain, and returning 3.2% in March.
Despite slower domestic growth, Canadian equities benefitted from US tailwinds and higher commodity prices. During the quarter, the S&P/TSX Composite Index posted a 6.6% gain, and was up 4.1% in March.
The price of crude oil also climbed, breaching the US$80 per barrel mark.
Head of Investments
Yelena Stepanyan is the Head of Investments at Embark. A lover of all things related to the financial markets, she is currently the Chair of the Chartered Financial Analyst Society Toronto's Institutional Asset Management Committee.
